Establishment of National Company Law Tribunal (“NCLT”) and National Company Law Appellate Tribunal (“NCLAT”)

To reduce the burden of High Court and to take up all matters relating to company law and other corporate laws, Supreme Court in Union of India v. R. Gandhi[1] and Madras Bar Association v. Union of India[2] upheld and allowed the constitution of NCLT and NCLAT under Companies Act, 2013.

On 1st June, 2016 Ministry of Corporate Affairs (“MCA”) announced the constitution of NCLT and NCLAT under Section 408[3] and Section 410[4] respectively, of the Companies Act, 2013. The NCLT and the NCLAT will act as a comprehensive and overarching quasi-judicial body which will adjudicate all disputes relating to companies in India.

Company Law Board (“CLB”) was established under Section 10E of the Companies Act, 1956 and the main object of establishing such a specialized forum was to govern all disputes pertaining to corporate law as well as to track the functioning of the companies established under the laws of the land. As per MCA notification, all matters pending in CLB is transferred to the NCLT and CLB shall dispose of such matters or proceedings or cases in accordance with the provisions of the Companies Act, 2013 or the Companies Act, 1956. Further, the constitution of NCLT and NCLAT has dissolved the CLB by virtue of Section 466(1) of Companies Act, 2013 which has been notified. The idea of establishing such quasi-judicial body is to resolve all corporate disputes under one forum.

SALIENT FEATURES

The NCLT shall have 11 (eleven) benches all over India, with the principal bench being at New Delhi. The other benches shall be at New Delhi, Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata and Mumbai.[5] The notification dated 23rd May, 2016 reveals the name of the members adjudicating the matter for that particular bench.

As per Section 409[6] of the Companies Act, 2013, the NCLT shall consist of the president who is or has been a judge of the High Court for a period of 5 (five) years, judicial members and technical members. Further, as per Section 410[7] of the Companies Act, 2013, the NCLAT shall comprise of a chairperson, judicial members and technical members, who shall not exceed more than 11 (elven).

Additionally, it has been announced that Hon’ble Justice S.J. Mukhopadhaya, Judge (Retd.), Supreme Court of India has joined as the chairperson of the NCLAT while Hon’ble Justice M.M. Kumar, Judge (Retd.), has joined as the president of NCLT.

RULES AND POWERS OF THE TRIBUNAL

Judicial matters that were the hitherto under the jurisdiction of the Company Law Board, such as investigation of a company’s accounts, freezing of assets, class action suits, conversion of a public company to a private company shall be governed by NCLT as it has been notified by the MCA but matters relating to winding up of companies, amalgamations, restructuring, merger and acquisitions, capital reduction, and compromises will still be continued to be referred to the High Courts as the relevant provisions under the Company Act, 2013 in that behalf have not yet been notified.

Any person aggrieved by the decision of the NCLT can file an appeal under Section 421 of the Companies Act, 2013 to NCLAT within 45 (forty five) days from the date of the NCLT order. The NCLAT order can be appealed in the Supreme Court within 60 (sixty) days from the date the order passed by the NCLAT.

CONCLUSION

The duplicity of multiple forums has come to an end by the constitution of the tribunals i.e. NCLT and NCLAT, which centralize most corporate matters. These tribunals shall have a positive impact in the corporate world as it is believed to to streamline and aid speedy disposal of cases.

However, it is pertinent to note that the NCLT shall be on vacation from 6th June, 2016 to 1st July, 2016. But, if any urgent hearing is required then vacation bench has been constituted which shall function on the designated days as specified in the notification.

[1] Union of India v. R. Gandhi, 11th May,2010.

[2] Madras Bar Association v. Union of India, May 14, 2015.

[3] The Central Government shall, by notification, constitute, with effect from such date as may be specified therein, a Tribunal to be known as the National Company Law Tribunal consisting of a President and such number of Judicial and Technical members, as the Central Government may deem necessary, to be appointed by it by notification, to exercise and discharge such powers and functions as are, or may be, conferred on it by or under this Act or any other law for the time being in force.

[4] The Central Government shall, by notification, constitute, with effect from such date as may be specified therein, an Appellate Tribunal to be known as the National Company Law Appellate Tribunal consisting of a chairperson and such number of Judicial and Technical Members, not exceeding eleven, as the Central Government may deem fit, to be appointed by it by notification, for hearing appeals against the orders of the Tribunal.

[5] http://pib.nic.in/newsite/PrintRelease.aspx?relid=145890

[6] Section 409 (1) The President shall be a person who is or has been a Judge of a High Court for five years.

(2) A person shall not be qualified for appointment as a Judicial Member unless he—

(a) is, or has been, a judge of a High Court; or

(b) is, or has been, a District Judge for at least five years; or

(c) has, for at least ten years been an advocate of a court.

Explanation.—For the purposes of clause (c), in computing the period during which a person has been an advocate of a court, there shall be included any period during which the person has held judicial office or the office of a member of a tribunal or any post, under the Union or a State, requiring special knowledge of law after he become an advocate.

(3) A person shall not be qualified for appointment as a Technical Member unless he—

(a) has, for at least fifteen years been a member of the Indian Corporate Law

Service or Indian Legal Service out of which at least three years shall be in the pay scale of Joint Secretary to the Government of India or equivalent or above in that service; or

(b) is, or has been, in practice as a chartered accountant for at least fifteen years; or

(c) is, or has been, in practice as a cost accountant for at least fifteen years; or

(d) is, or has been, in practice as a company secretary for at least fifteen years; or

(e) is a person of proven ability, integrity and standing having special knowledge and experience, of not less than fifteen years, in law, industrial finance, industrial management or administration, industrial reconstruction, investment, accountancy, labour matters, or such other disciplines related to management, conduct of affairs,

revival, rehabilitation and winding up of companies; or

(f) is, or has been, for at least five years, a presiding officer of a Labour Court, Tribunal or National Tribunal constituted under the Industrial Disputes Act, 1947.

[7] Section 410: The Central Government shall, by notification, constitute, with effect from such date as may be specified therein, an Appellate Tribunal to be known as the National Company Law Appellate Tribunal consisting of a chairperson and such number of Judicial and Technical Members, not exceeding eleven, as the Central Government may deem fit, to be appointed by it by notification, for hearing appeals against the orders of the Tribunal.

– Archana Balasubramanian / Rupal Shah

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