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National Company Law Tribunal and National Company Law Appellate Tribunal- An Analysis of its Setup

Prashanth S.J,

IV year, National Law Institute University,

Bhopal. prashanth_sj@yahoo.co.in

Business decisions require speedy determination and the long drawn legal battles in the Court of Law stifle business impetus. The Companies (Second Amendment) Act, 2002, has brought a relief to Companies, litigants and the Courts by creating two specialised bodies to bring about speedy disposal of the colossal cases pending before the High Court and the Companies Law Board. These specialised bodies called the National Company Law Tribunal [NCLT] and National Company Law Appellate Tribunal [NCLAT] has provided a glimmer of hope in Company litigation. The setting up of these bodies was first envisaged in the Balakrishna Eradi Report which dealt with examining the existing laws relating to winding up of Companies, revival of sick companies along with laws relating to recovery of debts, insolvency of companies and to suggest recuperative measures for the ailing corporate sector on these issues So far the disputes in Company matters had been divided between the High Court [HC] and the Company Law Board [CLB]. Disputes relating to reduction of capital, merger, and amalgamation and winding up were with the HC and the power of rectification of register, complaints regarding refusal to transfer/ transmit securities, rectification of register of Members, oppression and mismanagement was handled by the CLB. This paper is an endeavour to analyse the Constitution, Working, Powers and Procedure of the National Company Law Tribunal [NCLT] and National Company Law Appellate Tribunal [NCLAT] and also analysis the changes brought about in the Companies Act to revive Sick Industries. I. THE NATIONAL COMPANY LAW TRIBUNAL The CLB constituted under Section 10E of the Companies Act, 1956[hereinafter referred to as Act] has been dissolved by the introduction of Section 10 FA and the NCLT has been constituted under Section 10FB of the Act. All matters pending before the CLB on or before dissolution have now been transferred to the NLCT [S 10FA (3)]. In case of orders passed by the CLB before dissolution, appeal can be filed before the HC as per Section 10F. Orders passed by the CLB prior to dissolution can be enforced through Court as per provisions of Section 635(4), even after dissolution. A. Constitution of the Tribunal The NCLT consists of a President and other Judicial and Technical Members the total constitution not exceeding 62 Members. The CLB had only 9 Members who were appointed by the Central Government the increase in number of Members comes as a welcome change. Like CLB the Members of NCLT are to be appointed by the Central Government [s10FC]. However there are

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critics who argue that the interference of the Central Government in the affairs of the Tribunal would be detrimental to the interest in the affairs of the tribunal. B. President of the Tribunal The President of the Tribunal is a person who has been, or who is qualified to be, a Judge of the High Court [s10FD (1)] the President will be considered as a Judicial Member [Explanation to s10 FD (3)] the tenure of the President is fixed at 3 years, but is eligible for reappointment [s10FE]. The age of superannuation is at 67 years. C. Judicial Members Judicial Members are appointed as per Section 10FD. Such Judicial Members should have the following qualifications- (a) He has for at least 15 years, held a Judicial office in the territory of India; or (b) Has at least ten years been an advocate of a High Court, or has partly held Judicial office and

has been partly in practice as an advocate for a total period of fifteen years; or (c) Has held for at least fifteen years a Group ‘A’ post or an equivalent post under the Central

Government or a State Government [including at least three years of service as a Member of the Indian Company Law Service (Legal Branch) in Senior Administrative Grade in that service]; or

(d) Has held for at least fifteen years a Group ‘A’ post or equivalent post under the Central Government including at least three years of service as a Member of the Indian Legal; Service in Grade 1 of that service). [Section 10FD(2)]

The tenure of the Judicial Members is for three years and is eligible for reappointment. [[s 10 FE] the age of superannuantion is 65 years. D. Technical Members A person can be appointed as a Technical Member if he (a) Has held for at least fifteen years a Group ‘A’ post or an equivalent post under the Central

Government or a State Government [including at least three years of service as a Member of the Indian Company Law Service (Accounts Branch) in Senior Administrative Grade in that Service]; or

(b) Is, or has been, a Joint Secretary to the Government of India under the Central Staffing Scheme, or any other post under the Central Government or a State Government carrying a scale of pay which is not less than that of a Joint Secretary to the Government of India for at least five years and has adequate knowledge of, and experience in, dealing with the problems relating to Company Law; or

(c) Is or has been, for at least fifteen years in practice as a Chartered Accountant under the Chartered Accountants Act, 1949 (38 of 1949); or

(d) Is, or has been, for at least fifteen years in practice as a Cost Accountant under the Costs an Works Accountants Act, 1959 (23 of 1959); or

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(e) Is, or has been, for at least fifteen years working experience as a Secretary in whole time practice as defined in clause (45A) of Section 2 of the Act and is a Member of the Institute of the Company Secretary of India constituted under the Company Secretaries Act, 1980 (56 of 1980); or

(f) Is a person of ability, integrity and standing having special knowledge of, and professional experience of not less than twenty years in science, technology, economics, banking, industry, Law, matters relating to industrial finance, industrial management, industrial reconstruction, administration, investment, accountancy, marketing or any other matter, the special knowledge of, or professional experience in, which be in the opinion of the Central Government useful to the Tribunal; or

(g) Is, or has been, a Presiding Officer of a Labour Court, Tribunal or National Tribunal constituted under the Industrial Disputes Act, 1947 (14 of 1947); or

(h) Is a person having special knowledge, and experience of not less than fifteen years in, matters relating to labour.

The provisions relating to superannuation, tenure, reappointment is the same as that of the Judicial Members, as given under Section 10FE. Technical Members are of two types 1. Those having experience in Company Law and related matters, i.e. those appointed under

clauses (a) to (f) of Section 10 FD (3) ; and 2. Those having experience in labour matters, i.e. those appointed under clause (g) to (h) of

Section 10FD (3). This distinction is for hearing the matters relating to rehabilitation of sick industrial company and winding up, as in those cases, both categories of Technical Members must be on the Bench hearing winding up petition. Only a Technical Member who specialized in labour matters can be only Member of Special Bench hearing matters relating to rehabilitation of sick industrial company and winding up petition. He cannot be a Member of any other bench. E. Member Administration One of the Judicial Member or Technical Member shall be designated as Member Administration by the Central Government. The Member Administration shall exercise financial and administrative powers as may be vested in him under the rules that may be made by the Central Government. [s 10FF] He can also delegate his authority to any other officer of the Tribunal, but such delegation is under the condition that such officer in the exercise of his delegated powers continues to Act under the direction, superintendence and control of the Member Administration. [Proviso to s 10FF]

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F. Benches of the Tribunal The benches of the Tribunal shall be constituted by one Judicial Member and one Technical Member i.e those Members who are appointed under s 10 FD (3) (a) – (f). The Technical Members appointed under s 10 FD (3) (g)- (h), i.e. those Technical Members who have special knowledge in labour matters are not the part of the bench. They shall comprise of the Special Bench hearing matters relating to sick industrial company and winding up [s 10 FL (l)]. The President can also constitute benches comprising of a single Member by a general or special order. Such single Member bench shall exercise the jurisdiction, powers and authority of the Tribunal in respect of such class of cases or such matters pertaining to such class of cases, as may be decided by the President. Such single Member bench can refer to the President matters that the Member feels ought to be heard by bench consisting of two Members. [Proviso to s 10FL] The President shall for the disposal cases relating to rehabilitation, restructuring or winding up of the companies, constitute one or more Special Benches consisting of three or more Members. Such a Special Bench shall be comprise of a Judicial Member, a Technical Member as refereed to under clauses (a) to (f) s 10 FD and one Technical Member appointed under s 10 FD (g) – (h) [s 10FL (2)]. After winding up order is passed further a bench consisting of a single Member may conduct proceedings. [Proviso s 10FL]. Majority shall decide any difference in opinion between the Members. If the Members are equally divided then one or more of the other Members of the Tribunal shall refer the case to the President of the Tribunal for hearing on such point or points of difference. Then, the majority of Members of the Tribunal who have heard the case, including those who first heard it shall by majority decide the point or points of difference [s 10 FL (3)]. There shall be a Principal Bench at New Delhi [s10 FL (5)] which shall in addition to the powers of the Tribunal have the power to transfer proceedings form any bench to another bench of the Tribunal in the event of inability of any bench from hearing the proceedings for any reason. Such transfer shall be made after recording reasons for doing so in writing. [s 10FL (6)]. II. SPECIFIC POWERS OF THE TRIBUNAL The Tribunal enjoys certain powers not enjoyed by the Appellate Tribunal such as- A. Rectification of mistakes The Tribunal at any time within two years from the date of the order, with a view of rectifying any mistake apparent on the face of the record amend any order passed by it under Section 10FM(1). The Tribunal shall make such amendment if the mistake is bought to its notice by the parties. [s 10FM(2)]. The Appellate Tribunal has the power of review [s10 FZA2) (f)] but no power to rectify its mistakes.

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B. Delegation of Powers to Manage Industrial Company The Tribunal may, by general or special order, delegate, subject to such conditions and limitations as may be specified in the order to any Member or officer or other employee of the Tribunal or other person authorized by the Tribunal to manage any industrial Company or industrial undertaking or any operating agency, such powers and duties under the Act as it may deem necessary. C. Power to Seek Assistance of Magistrate to Takeover Assets of Sick Industrial Company Section 10FP(1) provides that the Tribunal or any operating agency on being directed by the Tribunal may, in order to take into custody or its control all property, effects and Actionable claims to which a sick industrial Company is or appears to be entitled, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any property, books of accounts or any other documents of such sick industrial Company, be situate or be found, to take possession thereof, and the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, shall on such request being made to him, a) Take possession of such property, books of account or other documents: and b) Cause the same to be entrusted to the Tribunal or the operating agency. For the purpose of securing compliance with the provisions of the of sub-section (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use or caused to be used such force as may be, in his opinion, be necessary. [s 10FP(2)] Provisions of s 10FP(3) are very interesting, it lays that any act of the District Magistrate or the Chief Metropolitan Magistrate done in pursuance of the sub-section (1) and (2) shall not be called in question in any Court of Law or before any authority on any ground. whatsoever. This sub-section confers such wide powers on the Chief Metropolitan Magistrate and the Judicial Magistrate that any arbitrary or excessive use of such powers will go unchecked. Some restraint on this power must be incorporated or else the Courts will be helpless and the tyranny will prevail. D. Limitation The provisions of the Limitation Act, 1963 are not applicable to the Tribunal although they are applicable to the Appellate Tribunal. [s 10 GE] This provision may lead to many practical problems and needs urgent amendment. III. NATIONAL COMPANY LAW APPELLATE TRIBUNAL A. Constitution of the Appellate Tribunal The Central Government shall by notification constitute an Appellate Tribunal called the National Company Law Appellate Tribunal consisting of a Chairperson and not more than two Members, to be appointed by the Government, for hearing the appeals under this Act[s 10FR (1)]

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The Chairperson of the Appellate Tribunal shall be a person who has been a Judge of the Supreme Court or Chief Justice of the High Court [s 10FR(2)]. The other Members of the Appellate Tribunal shall be persons of ability, integrity and standing having special knowledge of and professional experience and of not more than twenty five years in science, technology, economics, banking, industry, law, matters relating to labour, industrial finance, industrial management, industrial reconstruction, administration, investment, accountancy, marketing or any other matter, the special knowledge of, or professional experience in which, would be the opinion of the Central Government useful to the Appellate Tribunal.[s 10FR (3)]. The Members of the Appellate Tribunal are mere Technical Members and not Judicial Members unlike the Tribunal. The tenure of the Chairperson and the Members is for three years and they can be reappointed. The age of suprerannuation of the Chairperson is 70 years and that of the Members is 67 years. [s10FT]. One interesting point is to be noted here, the words in Section 10FE(1) is “not more than two Members”, so it appears that the Appellate Tribunal can function even if no Member is appointed, as long as the Chairperson is appointed, moreover the Appellate Tribunal can function even if only one Member is appointed. But this may cause difficulty in case of a deadlock. In any case the provision needs urgent amendment. B. Appeal from order of the Tribunal All appeals from the Tribunal shall lie to the National Company Law Appellate Tribunal. But no appeal shall from an order or decision made by the Tribunal with the consent of the parties. [s 10FQ(2)]. The limitation period to file an appeal is prescribed as 45 days from the date on which a copy of the order or decision of the Tribunal is received by the appellant [s 10FQ (3)]. Such appeal shall be made in the prescribed form and accompanied by fee as may be prescribed [s 10FQ (3)]. The Appellate Tribunal may condone the delay in filing appeal if it is satisfied that the appellant was prevented by sufficient cause from not filing the appeal in time [s 10 FQ (2)]. On receipt of an appeal, the Appellate Tribunal shall, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against [s 10FQ(4)]. Copy of ever order in appeal shall be sent to the Tribunal and parties to the appeal [s 10 FQ (5)]. Section 10FQ(6) provides that the appeal should be heard expeditiously and endeavor shall be made to dispose of the appeal finally within six months from the date of the receipt of the appeal. C. Benches of the Tribunal There is no provision for forming benches of the Appellate Tribunal. It appears that all Members of the Tribunal will constitute a bench.

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D. Power to Punish for Contempt The appellate Tribunal has the same jurisdiction, powers an authority in respect of contempt of itself as the High court has. The Appellate Tribunal shall exercise this power subject to the Contempt of courts Act, 1971, subject to certain modification 1. The reference therein to a high court shall be construed as including a reference to the Appellate

Court 2. The reference to the Advocate general in Section 15 of the said Actshall be construed as

reference to such Law officers as the Central Government may specify E. Limitation The provisions of the Limitation Act, 1963(36 of 1963) shall, as far as may be, apply to an appeal made to the Appellate Tribunal [s 10GE]. IV. PROVISIONS COMMON TO NATIONAL COMPANY LAW TRIBUNAL AND

THE NATIONAL COMPANY LAW APPELLATE TRIBUNAL A. Salary, Allowance, Conditions of Service of Chairperson, President and other Members. Salary, allowance, conditions of service of Chairperson, President and other Members of the National Company Law Tribunal will be prescribed by Rules. Such terms cannot be varied to their disadvantage after their appointment [s 10FG]. The similar provisions are applicable in respect of National Company Law Appellate Tribunal s10FW. B. Vacancy in post of the Chairperson or President In case of any vacancy of Chairperson in the Appellate Tribunal the senior most Member of the Appellate Tribunal shall Actas Chairperson until a new Chairperson is appointed [s 10FS(1)]. The Central Government can also nominate a person to Actas the Chairperson in the absence of a Chairperson [s10FS (2)]. In the case of a temporary vacancy of the President one of the Members of the Appellate Tribunal, as the Central Government by notification, authorize in this behalf shall discharge the functions of the Chairperson until the date on which the Chairperson resumes his duties. Similar provisions relating to the President and Members of the Tribunal are given in 10FH. C. Matters to continue from the stage vacancy of Member or President is filled If for any other reason other than a temporary absence, any vacancy occurs in the in the office of the Chairperson or a Member, the Central Government shall appoint another person to fill the vacancy and the proceedings may be continued from the stage at which the vacancy is filled. Similar provision relating to President and the Members are found in s 10FH. D. Resignation of Chairperson, Member or President The President or a Member of the Tribunal can resign by giving a three months notice in writing under his hand addressed to the Central Government. The Central Government can relieve him

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earlier or till his successor is appointed or until the expiry of the term of the office, whichever is the earliest. [s 10FI] similar provisions relating to the Chairperson of the Appellate Tribunal is found in s 10FU. E. Removal and Suspension of Chairperson, President or Member The Central Government may in consultation with the Chief Justice of India; remove from office the President or any Member of the Tribunal, who a) Has been adjudged insolvent. b) Has been convicted of an offence involving moral turpitude c) Has become physically or mentally incapable of Acting as the President or Member of the

Tribunal d) Has acquired such financial or other interests as is likely to affect prejudicially his functions as

President or Member of the Tribunal e) Has so abused his position as to render his continuance in office prejudicial to public interest. [s

10FJ(1)] The President or the Member shall be removed from the office as specified in clauses (b) to (e) after giving him reasonable opportunity of being heard. F. Enquiry before Removal for Misbehavior or Incapacity The President or Member of the Tribunal can be removed on grounds of misbehavior or incapacity only after an enquiry is made by a Judge of a Supreme Court. During the enquiry the President or Member will be informed of the charges against him and a reasonable opportunity of being heard in respect of those charges will be given. [s 10FJ(2)]. The President or the member can be suspended during the enquiry [s 10FJ (3)]. Procedure for enquiry can be regulated by the Central Government [ s 10FJ (4)] Similar provisions relating to the Chairperson and Members of the Appellate Tribunal are given under s 10FV (1) – (4). G. Officers and Employees of Tribunal and the Appellate Tribunal The Central Government shall provide the Appellate Tribunal with such officers and the employees a it may think fit. The officers and other employees of the Tribunal shall discharge their functions under the general superintendence of the Member Administration. The salaries and allowances and other terms an conditions of service of the officers and other employees of the Tribunal shall be prescribed by Rules [s 10FK]. Similar provisions have been made in respect of Appellate Tribunal, but the officers and employees of the Appellate Tribunal shall function under the general superintendence of chairperson of the Tribunal [s 10GA]. H. Selection Committee The Chairperson and Members of the Appellate Tribunal and President and Members of the Tribunal shall be appointed by the Central Government on the recommendations of a Selection Committee consisting of Chief Justice of India as its Chairperson and secretaries of four specified

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ministries as Members [s 10FX (2)]. The joint secretary of the Ministry of Department of Central Government dealing with Companies Act shall be conveyor of the selection committee. [s 10 FX(2)]. The Selection Committee will recommend a panel of three names for each vacancy [s10FX(4)]. The Selection Committee will check if the proposed person has interest which is likely to prejudice his function as Member, President or Chairperson [s 10FX(5)] no appointment of the Chairperson and Members of the Appellate Tribunal and President and Members of the Tribunal shall be invalidated merely by reason of any vacancy or defect in the constitution of the Selection Committee [s 10FX(6)]. I. Chairperson Members, President and Employees to be Public Servants Chairperson Members, President and employees of Tribunal and the Appellate Tribunal shall be deemed to be public servants within the meaning of Section 21 of the Indian Penal Code [ s 10FY]. J. Protection for Act Done in Good Faith No suit, prosecution or other legal proceedings shall lie against the Appellate Tribunal or its Chairperson, Member, officer or other employee or against the Tribunal, its President, Member, officer or other employee or operating agency or Liquidator or nay other person authorized by the Appellate Tribunal or the Tribunal in discharge of any function under the Actfor any loss or damage caused or likely to be cause by any Action which is done in good faith or intended to be done in pursuance of this Act[s 10FZ]. V. PROCEDURE AND POWERS OF THE TRIBUNAL AND APPELLATE

TRIBUNAL A. Self regulation The Tribunal an the Appellate Tribunal shall not be bound by procedure laid down in the code of civil procedure, 1908, but shall be guided by the principles of natural justice and subject to the other provisions of this Actand any rules made by the Central Government, the Tribunal and the Appellate Tribunal shall have power to regulate their own procedure [s 10FZA(1)]. B. Powers of the Tribunal and Appellate Tribunal The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging its functions under the Act, the same powers as are vested in a civil court under the code of civil procedure, 1908 while trying a sit in respect of the following matters-

1. Summoning and enforcing the attendance of any person and examining him on oath. 2. Requiring the discovery and production of documents 3. Receiving evidence on affidavits 4. Subject to the provisions of s 123 ad 124 of the Indian Evidence Act, 1872 requisitioning

any public record or document or copy of such record or document from any office 5. Issuing commissions for the examination of witnesses or documents 6. Reviewing its decisions

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7. Dismissing a representation for default or deciding it exparte 8. Setting aside any order of dismissal of any representation for default or any order passed by

it exparte. 9. Or any other matter which may be prescribed by the Central Government.

C. Enforcement of Order Any order made by the Tribunal or the Appellate Tribunal may be enforced by that Tribunal in such manner a if it were a decree made by a court in a suit pending therein, and it shall be Lawful for the Tribunal or the Appellate Tribunal to send in case of its inability to execute such order, to the court within the local limits of whose jurisdiction In case of an order against the Company, the registered office of the Company is situate. In case of an order against any other person, the person concerned voluntarily resides or carries on business or personally works for gain. [s 10 FZA (3)]. D. Proceedings are Judicial Proceedings All proceedings before the Tribunal or the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of Section 193 and 228, and for the purpose of Section 196 of the Indian Penal Code, 1860 and the Tribunal and the Appellate Tribunal shall be deemed to be a Civil Court for the purpose of Section 195 and Chapter XXIV of the Code of Criminal Procedure, 1973 E. Vacancy in Tribunal or Appellate Tribunal not to Invalidate Acts or Proceedings No act or proceeding of the Tribunal or Appellate Tribunal shall be questioned or shall be invalid merely on the ground of existence of any vacancy or defect in establishment of the Tribunal or Appellate Tribunal [s 10GC] F. Right to Legal Representation The applicant or appellant may either appear in person or authorize one or more charted accountants, company secretaries or cost accountants or legal practitioners or any officer to present his case or its case before the Tribunal or Appellate Tribunal as the case may be.[s 10GD]. G. Appeal to Supreme Court Any person aggrieved any decision of the appellate Tribunal may file an appeal to the Supreme Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him on any question of law arising out of such decision of the appellate Tribunal. The Supreme Court may, if satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days [s 10GF] H. Bar to the jurisdiction of the Civil Courts No civil court shall have jurisdiction to entertain any suit or proceedings in respect any matter which the Tribunal or the appellate Tribunal is empowered to determine by or under the Companies

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Act. Further no injunction can be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the Companies Actor nay other law for the time being in force. [s 10GB] VI. REVIVAL AND REHABILITATION OF SICK INDUSTRIES A. Revival Of A 'Sick Company'

The Second Amendment Act, 2002 has inserted a new Part VI A in the Companies Act, 1956. It contains provisions relating to revival, rehabilitation and winding up of sick industrial Companies. The National Company Law Tribunal has been conferred the power of revival, rehabilitation and winding up of a sick industrial Companies under this part. Sec 2(46 AA) has been introduced in the Companies Act, 1956. It defines a 'Sick Company' defined as, one whose accumulated losses in any financial year are equal to or more than fifty percent of its average networth during one financial year, immediately preceding such financial year or a company who fails to repay its debt within any three consecutive quarters on demand, for its repayment by a creditor or creditors. This is a marked change from the provisions of Sec 3 (1) (o) of The Sick Companies (Special Provisions) Act, 1985 (SICA) which defines a sick company as one which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth and is registered for not less than five years. This change in definition will result in a Sick Company getting the attention earlier thereby improving the chances of its revival. The provision regarding the default in payments by the company for three consecutive quarters will not only allow the Board of Directors of company but also Banks and Financial institution to refer the company to the Tribunal for its revival even if the company is registered for less than 5 years. This provision will even bring the companies registered for less than five years under the ambit of 'Sick Company'. The newly introduced Section 423 A provides that where the company has become a sick company the Board of Directors of such company shall make a reference to the NCLT within 180 days which is further extendable by 90 days this has been increased form the 60 days period as given in SICA. A Government Company under S 424 A with the prior approval of the Central Government can also make a reference to the Tribunal. The application to the Tribunal under S 424 A is to be accompanied by a certified copy of accounts audited by the body of auditors prepared by the Tribunal and not by the Board of Directors (as provided in SICA), thus removing the scope for manipulation of accounts by the directors of the company and there by preventing them from misusing the provisions of SICA. The certificate by the auditors must indicate (i) the reasons of the net worth of such company being fifty per cent or les than fifty per cent; or (ii) the default in repayment of its debt making such company a sick company.

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S 424 A also provides that the Central Government or the reserve bank or a State Government or a Public Financial Institution or a State Level Institution or a Sheduled Bank, if it has sufficient reasons for believing that any industrial company has become, for the purposes of this Act, a sick industrial company, can make a reference under S 424A. Such reference shall not be made if— (a) the government of any State unless all or any of the industrial undertakings belonging to such

company are situated in such State. (b) or a Public Financial Institution or a State Level Institution or a Sheduled Bank unless it has by

reason of any financial assistance or obligation rendered by it, or undertaken by it, with respect to such company, an interest in the company.

While referring the Company to the Tribunal the Company is required to submit a scheme of revival and rehabilitation to the Tribunal under the newly added Section 424 A. S 424 B enables the NCLT to make or cause to be made an enquiry by an operating agency for the purposes of determining whether the Industrial Company has become a Sick Industrial Company. For the purposes of this enquiry a special director may be appointed by the Tribunal for safeguarding the financial or the interests of the company or in the public interest. The Special Director so appointed shall file his report in sixty days to the Tribunal. Section 424 C provides that after the completion of enquiry the Tribunal if satisfied that the company has become a sick industrial company may allow the company to make its net worth exceed the amount of losses or make the repayment of debt within a reasonable time. Whether this is not possible the Tribunal may direct the operating agency to prepare a scheme proving for such measures in relation to such company [s 424 C] Section 424 D(1) provides that the operating agency shall prepare a scheme within a period of sixty days form the date of the order of the Tribunal. The scheme prepared by the operating agency shall provide for one or more measures specified in S 424D(1) (a)- (h). The Tribunal will then examine the scheme prepared and send a copy to the company and publish it in the daily newspapers if the Tribunal considers it necessary for inviting suggestions and objections[s424 D (3) (a)] . The scheme will then be sanctioned within sixty days by the Tribunal and will take effect from such date as specified by the Tribunal. However this period can be extended by a period of ninety days for reasons to be recorded in writing.[s424D(4)]. The Tribunal shall have the power to review any sanctioned scheme on the recommendations of the operating agency.[s 424D(5)] Under Section 424 D (11) creditors of a Sick Company may also prepare and submit a scheme for revival or rehabilitation of a sick company provided it has been approved by atleast three fourth in value of creditors of the company. If the scheme is approved by the tibuanl then it shall be binding on all the creditors of the company.[s424D(13)] S 424E(1) contains provisions relating to rehabilitation of sick industrial company by giving financial assistance, provides that the sanctioned scheme may provide for financial assistance by way of loans, advances, or guarantees or reliefs or concessions or sacrifices form the Central Government, State Government, any sheduled bank or other bank, a public financial institution or a state level institution or any institution or any authority etc.

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Section 424G(1) provides that after making inquiry by the Tribunal and after consideration of all relevant facts an circumstances and after hearing the parties concerned, if the Tribunal is of the opinion that the sick industrial company is not likely to become viable, it may record its findings and order winding up of the company. For the purposes of winding up the Tribunal may appoint a official liquidator.[s424G (2)] The Tribunal also has the power to cause to be sold the assets of the sick industrial company as it deems fit.[s 42G(3)] The winding up of a company as far as may be concluded within one year from the date of order of winding up.[s424G(4)] S 424 L provides penalty provisions and interalia provides that if any person violates the provisions of these Sections or any scheme or order of the Tribunal or appellate Tribunal or makes a false statement or gives fake evidence or attempts to tamper the records of reference or appeal, he appeal, he shall be punishable with simple imprisonment for a term which may extend to three years or shall be liable to fine not exceeding ten lakhs rupees. B. Rehabilitation and Revival Fund. To overcome the paucity of funds S 441A provides for a Revival and Rehabilitation Fund to be collected by a cess which will be levied at the rate of .005% -1% on the annual turn over or the gross receipts of the company. The fund shall be applied by the Tribunal for the purposes of [s441 D] 1. Making interim payment of workers dues pending the revival or rehabilitation of the sick

industrial company. 2. Payment of workers dues to the workmen, referred to in S529 (3), of the sick industrial

company. 3. Protection of assets of the sick industrial company 4. Revival or rehabilitation of sick industrial company. The fund is not free from the clutches of the Government, as it is transferred to the Consolidated Fund of India. The Parliament may, by way of delegation create a body, which will release funds to Tribunal from time to time. This procedure may result in avoidable delays, as the Tribunal will have to interact with agency created for managing the funds. Another flaw which is apparent in this provision, is the levying of cess on the annual turn over of the company instead on the Profit of the company i.e. even the company that is incurring losses has to contribute to the fund. C. Transfer of winding up proceedings to the Tribunal The newly introduced S 647A provides that all proceedings including proceedings relating to arbitration, compromises, arrangements and reconstruction an winding up proceedings pending before any District Court or High Court shall be transferred to the Tribunal and the Tribunal may proceed with the matter either de novo or from the stage it was transferred. But, cases relating to winding up of companies subject to supervision of the district court/ High Court, if already commenced shall continue to be under the supervision of the District Court/ High Court.

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D. Statement of winding up Section 439A(1) has made it compulsory for every company to file a statement of its affairs, to the Tribunal, along with the petition of winding up. Further, Section 439A (2) provides that where the company opposes a petition for its winding u, it shall file a statement of its affairs to the Tribunal. Such statement of affairs shall include details, such as the last known address of all director an name and address of company secretary: the details of location of assets of her company and their value and the details of debtors and creditors with the address and such other details as the Tribunal may direct. VII. CONCLUSION The establishment of NCLT will prove to be a great help to the corporate world. With the change in definition of a Sick Company a lot more companies have come under the ambit of a Sick Company and thereby can get the needful attention on time. With the establishment of fund and change in definition of Sick Company and winding up procedures, the time period for revival and winding up will reduce. But the fund for revival of companies might come to a naught if the amount is deposited with the Central Government, efforts should be made to put this into a separate Fund thereby avoiding bureaucratic interference. In all efforts are being made by the central government to achieve its proposed objectives through of avoiding multiplicity of suits, protection of rights of the workers and to reduce the time period for winding up of a Sick Company. Now what is required is to see that the provisions of this Act are strictly implemented and the objectives are achieved. References Companies Act, 1956. Companies (Amendment) Act, 2002.