NCLT

GROUP - 4
Members:
Deepti Tripathi-140101049
Saptadip Saha-140103146
Chandan Kumar Jha 140103048
Chaitanya Renduchintala-140101131
Kumar Aniket-140102067
Amruth Pawan-140101017 (ABSENT)
Neha Kasana- 140103108 (ABSENT)

National Company Law Tribunal:
Relevance or a paper tiger
SINGLE WINDOW CLEARANCE FOR
CORPORATE RE-STRUCTURING
NCLT
INTRODUCTION

With the Supreme Courts approval, the Companies Act, 2013 provides for the
constitution of the National Companies Law Tribunal and the National Company
Law Appellate Tribunal to replace the Company Law Board, Board for Industrial
and Financial Reconstruction and Appellate Authority for Industrial and Financial
Reconstruction

The Companies (Second Amendment) Act, 2002 provided for a single National
Company Law Tribunal (NCLT) for combining the jurisdiction of various bodies
administering the Companies Act, 1956 (1956 Act)

The proposed Tribunal was challenged in Thiru R. Gandhi, President, Madras Bar
Association vs. Union of India, wherein the Madras High Court held that certain
aspects of the tribunal were against the basic structure of the constitution and thus
unconstitutional.

Supreme Court of India on 11th May, 2010 ruled that the provisions of Companies
(Second Amendment) Act, 2002 for NCLT are constitutionally valid subject to
amendments being made to make the Tribunals members independent

NCLT
CLB
High
Court
BIFR
The creation of a single forum (NCLT) which is dedicated to corporate
matters is a welcome move, and removes the problem of multiple regulators.
INTRODUCTION contd.

The National Company Law Tribunal will have
jurisdiction and powers vested in
The Corporate Law Board,
under the Companies Act, 1956
The Board for Industrial and
Financial Reconstruction(BIFR)
and the Appellate Authority for
Industrial and Financial
Reconstruction (AAIFR)

High Courts primarily in relation
to winding-up, amalgamation,
restructuring and appeals from
CLB
INTRODUCTION contd.
Structure
President and Every Member of Tribunal shall hold office as such for a term of Five years
and shall be eligible for reappointment for another term of Five Years
Existing CLB
offices to be
converted in NCLT;
Procedure revamp under Companies Act, 2013

An application under Section 230 for Compromise / Arrangement / Amalgamation, have
to disclose following to the NCLT :-

All material facts relating to the Company ;
Latest Financial position of the Company & Latest Auditors report
Any investigation and proceeding against the Company,
If Reduction of Share Capital is part of scheme

IMPORTANT JUDGEMENTS
S.P.SAMPATH KUMAR vs. UNION OF INDIA (1987): The genesis of setting up of
specialized tribunals can be traced in the Supreme Court judgement in Sampath
Kumar case.

Madras Bar Association vs NCLT : Madras Bar Association challenged creation of
NCLT & NCLAT. It said :

'Parliament does not have the legislative competence to vest intrinsic judicial
functions that have been traditionally performed by the High Courts for nearly
a century in any Tribunal outside the Judiciary.'

ROADBLOCKS TO SUCCESS
The Tribunal is a quasi-judicial body and there is a chance that its independence might
be compromised. To ensure this does not happen, no tribunal member will remain
associated with a ministry or a civil service department after appointment and all
administrative support will be provided by the law ministry
The tribunal is a specialized body which requires highly competent and experienced
members. Given the shortage of judges in already existing courts, finding judicial
members will be an uphill task
According to the Act, the NCLTs decisions can be appealed at the National Company
Law Appellate Tribunal (NCLAT) and thereafter at the Supreme Court. There is a
possibility that such lengthy appeal process will take away the intended purpose of
speedy justice by the Tribunal
ROADBLOCKS TO SUCCESS contd.

It will be a long and complicated task of identifying and recruiting tribunal members
and transferring cases from the High Courts, CLB and BIFR to these new tribunals

The number and geographical spread of benches needs to be carefully considered
as access to justice should not be hampered by logistics. But again, considering the
crunch in numbers of qualified members, this could be a daunting task

The existing judicial system takes a long time to provide justice. Addition of one more
layer might end up complicating and delaying the process further

The Act does not contain provisions dealing with processes, time lines etc. More
clarity is expected to be provided in this regard.

CONCLUSION
The National Company Law Tribunal has been established as an alternative to the
Company Law Board, the Board for Industrial and Financial Reconstruction, the Appellate
Authority for Industrial and Financial Reconstruction and the Courts of Law, in order to
deliver speedy and effective justice in matters pertaining to company law and insolvency.
It cannot be confirmed yet as how efficacious the substitution from the previous formal
method of dispute resolution will be in comparison to the working of the proposed
National Company Law Tribunal since it is still not in effect, but The National Company
Law Tribunal, however, if implemented would have certain definite benefits such as
removing the burden of legal work from the shoulder of the Company Courts as well as
the other institutions which are required for the smooth working and speedy conveyance
of justice. The National Company Law Tribunal would exercise its original jurisdiction to
resolve disputes before it

To ensure the intended efficacy of the Tribunal, it must be guaranteed its independence
and should have a proper provision and mechanism with respect to dealing with
timelines

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