National Company Law Tribunal

By Anirudh AgrawalHidayatullah National Law University

Contact: 9754401224

National Company Law Tribunal

• The Tribunal is established under Section 408 of The Companies Act 2013. The section provides the Central Government the power to constitute a Tribunal known as National Company Law Tribunal.

• It shall consist of a President and such number of Judicial and Technical members, as the Central Government may deem necessary.

• A quasi-judicial body• Adjudicates issues relating to companies in India• It was constituted on 1 June 2016 by the Central

Government• The NCLT currently has eleven benches.

NCLT- Essential Features

NCLT State wise Jurisdiction

NCLT – A New Era to Corporate Adjudication

Upon constitution of NCLT, the powers and jurisdiction of following agencies in respect of corresponding aspects shall vest with NCLT:i. State High Court(s) ii. BIFR/ AAIFRiii. CLB

Government Notifications

• Provisions for constitution of NCLT and NCLAT were notified on 1st June 2016. when the powers of CLB are transferred to NCLT. 

• NCLT is to exercise the Jurisdiction, powers and authority of the Adjudicating Authority conferred by or under Part II of the Bankruptcy and Insolvency Code from 1st December 2016.

• The NCLT will now have direct jurisdiction over the matters of liquidation proceedings with effect from 15th December 2016.

• All the pending cases on High Court relating to winding up (excluding voluntary winding up), arbitration, compromise, arrangements and reconstruction stands transferred to the NCLT with effect from 15th December 2016.

Benefits of NCLT

• It will avoid multiplicity of litigation before various Forums (High Courts, CLB, BIFR, AAIFR).

• More concrete and precise decisions as the tribunal consist of technical experts.

• There will be a mixture of judicial and equitable jurisdiction while deciding matters.

• Reduction in period of winding-up.• Reduction in pendency of cases, expeditious disposal of cases.

Power and Procedure of NCLT

• Expeditious disposal by Tribunal and Appellate Tribunal (Section 422): Every case presented before NCLT shall be disposed off in a speedy manner & efforts shall be made to dispose the matter within 3 months from the date of its presentation

• Procedure before Tribunal and Appellate Tribunal (Section 424):NCLT shall not be bound with the provisions of CPC and shall be guided by the principles of natural justice subject to the provisions of the new Act and its related rules. It shall exercise the same powers that of a civil court under CPC.

• Civil court not to have jurisdiction (Section 430):No Civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which NCLT or NCLAT is empowered to determine either in terms of the New Act or by any other law in force.

• Appeal to NCLAT (Section 421): No Appeal shall lie from an order of NCLT passed by consent of parties. Appeal shall be filed within 45 days from the date on which copy of order of NCLT is made available.

Power and Procedure of NCLT

• Appeal to Supreme Court (Section 423): An Appeal from order of NCLAT to the Supreme Court within 60 days from the date of communication of the order of NCLAT on any question of law arising out of such order.

Conclusion

Given the rather unsatisfactory functioning of the Company Law Board in discharge of the judicial functions transferred to it, the jury is still out on whether the NCLT will achieve the stated objective of quick and effective resolution of the matters transferred or to be initiated before it.

Further, the following matters must also be considered. First, with the Supreme Court’s judgement in Madras Bar Assn. v. Union of India, (2015),

Section 409(3) (a) and (e) and 411(3) of the Companies Act, 2013 relating to constitution of NCLT, have been held invalid on various grounds inter alia that appointment as members (in the manner contemplated in such sections) is diluting the independence of the Judiciary. The NCLT must be carefully constituted to meet with the specific criteria set out by the Supreme Court.

Second, given the way in which the benches of the NCLT have been structured, matters pending in State A’s High Court may need to move to an NCLT bench in State B. This may create complexities in relation to manner and quantum of stamp duty payable.

There are likely to be further teething issues while trying to achieve an effective transition.