Analysis of ministry of corporate affair’s notification on rules for investigation of NCLT and NCLAT’s members

The Ministry of Corporate Affairs on July 28, 2020 notified The National Company Law Tribunal and National Company Law Appellate Tribunal (Procedure for investigation of misbehavior or incapacity of Chairperson, President and other Members) Rules, 2020. This has been done by exercising the Powers conferred to the Central Government under Section 469, read with sub-section (4) of the section 417 of the Companies Act, 2013.

A. The Applicability of the Rules

As the name rightly suggests, the Rules deal with the rules and procedures to be followed to investigate complaints against members of the Tribunal on grounds of misbehavior or incapacity.

The rules laid down shall be applicable to the President, Technical and Judicial Member of National Company Law Tribunal (“NCLT”) and the Chairperson, Judicial and Technical Member of the National Company Law Appellate Tribunal (“NCLAT”).

However, the scope of application is limited to the members of the Tribunal and does not extend to the sitting judge of the High Court who has been appointed as the Member, President or the Chairperson of The NCLT or NCLAT. They shall continue to be governed under Article 217 of The Constitution of India until they hold the office as a judge of High Court. Hence, a divide has been created for applicability of such investigation rules between the sitting judge of High Court who has been appointed as a member and other members of the Tribunal.

B. Procedure for investigation in line with the Due Process of Law

1. Written Complaint to the Central Government

Firstly, a written complaint has to be filed with the Central Government clearly alleging definite charges of misbehavior or incapacity in performing the functions associated with his office. The role of the Central Government remains limited to making a “preliminary scrutiny” of the complaint.

2. Complaint to be placed before a Committee

If upon preliminary scrutiny the Central government considers it necessary to investigate the allegations, the complaints along with the supporting documents are transferred to a committee. As per the rules the Committee is chaired by the Cabinet Secretary and shall also include Secretaries of Corporate Affairs and the Department of Legal Affairs. Further, the Committee is empowered to devise its own methods and procedures such as recording of evidence of complaint and collecting relevant material for enquiry.

3. President and Chief Justice of India’s role

The findings of the committee are then submitted to the President as early as possible and is to be done within a period specified by the president.

If the President holds the opinion that there exists reasonable grounds for making inquiry into the truthfulness of the allegation of incapacity and misbehavior of member, a reference is to be made to the Chief Justice of India requesting him to make nomination of a Supreme Court Judge who shall conduct inquiry.

An order is then passed by the President appointing the Judge nominated by the CJI for the purpose of conducting inquiry of the matter.

4. Judge’s Role

The following shall be forwarded to the Judge by the President-

    • Articles of charges against the member along with statement of imputations,
    • Statement of witness (if any), and
    • Material documents relevant to the inquiry.

 The appointed Judge must complete the inquiry within the time specified by the President.

Further, under the prescribed rules the Principle of Natural Justice is adhered to and the member is given an opportunity of presenting a written statement of defence within the prescribed time.

In situations where physical or mental incapacity causing inability to discharge duties of office is alleged, and the member denies such allegations, a Medical Examination is conducted. If the member refuses to undergo the medical examinations, the Medical Board would submit report to the Judge stating the details of the examination which the member refused. The Judge has the authority to then presume that the member was suffering from such alleged physical or mental incapacity.

The Central Government as well as the member are allowed to present their case to the Judge by appointing an advocate of their choice.

C. Suspension and Inquiry Report

Keeping in view the gravity of the case, the member of the tribunal against whom inquiry is ongoing and the Final order is yet to be passed, may be suspended by the Central government with concurrence of the CJI. However, under such suspension the payment of subsistence allowance shall continue. But the question that remains is the rationale and adequacy of such payment in lieu of suspension based on mere allegations.

Finally, after the investigation is concluded, the Judge is to submit their report to the President elaborating his findings and reasons on each charge in addition to their observations on the whole charge.

D. Conclusion

The Ministry of Corporate Affair’s intent of balancing the rights of the accused members along with the rights of the complainant is truly reflected in the Rules framed. The process established by law to inquire the truthfulness of allegations of incapacity and misbehavior seems fair, just and reasonable along with adherence to Due Process of law and Principles of Natural Justice. However, the only concern that remains unaddressed is the non-addressal of possibility and redressal mechanism in case of any prejudice or bias carried out against such member during the inquiry process.

Reference:

1. ‘Ministry of corporate affairs notifies investigation rules for cases against NCLT judges’ by Gaurav Noronha on Economic Times dated July 30, 2020.

2. ‘MCA notifies rules for investigation of misbehavior against NCLT, NCLAT Judges’ on TaxMann dated July 30, 2020.

3. ‘National Company Law Tribunal and National Company Law Appellate Tribunal (Procedure for investigation of misbehavior or incapacity of Chairperson, President and other Members) Rules, 2020 by Ministry of Corporate Affairs dated July 28, 2020.

4. Section 469 and Section 417 of The Companies Act, 2013.

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