I am very happy to see the judgment of the Supreme Court on National Company Law Tribunal.  I have read the judgment of Justice Jayasimha Babu of Madras High Court regarding the constitution of National Company Law Tribunal and Appellate Tribunal in the Writ Petition preferred by Madras Bar Association many times. It was vehemently argued before the Madras High Court that the powers and jurisdiction of Court is taken away by the executive from time to time by constituting Tribunals. In my opinion, the Madras High Court could have stayed the constitution of National Company Law Tribunal as it takes away a very important jurisdiction of the High Court and the powers exercised by the High Court for years traditionally. I don’t think that giving a reason as to staying the constitution of National Company Law Tribunal is a difficult thing and especially in view of the functioning of the Company Law Board and the experience. Despite all this, laudably, the Madras High Court has upheld the power of executive in constituting National Company Law Tribunal though it stayed the certain provisions of the Companies (Second Amendment) Act, 2002. The Madras High Court has highlighted most important issues like independence, impartiality and quality of presiding officers while delivering the judgment on Constitution of National Company Law Tribunal. As everybody knows, the judgment of Madras High Court is upheld by the Supreme Court with elaborate observations in order preserve the independence and impartiality of an adjudicatory forum like National Company Law Tribunal. Though, we tend study the difference between Tribunals and Courts academically, there is no much difference between Tribunals and the Courts logically. The only difference may be that the Tribunals are constituted by a special enactment which may follow special procedure and need not follow Civil Procedure Code. As such, the basic principles like independence, impartiality and quality of presiding officers is to be preserved at any cost. In my opinion, it is part and parcel of basic structure of Constitution of India.

I am a critic of judiciary to some extent and a person to see the needed legal reforms in India aiming at effective and speedy justice. But, when it comes to exercise of powers by the High Court under Companies Act, 1956, I was of the opinion that the High Court or the Company Court is doing well despite many inevitable complications. Constitutional Courts have laid down wonderful principles regarding interpretation of provisions of Companies Act, 1956. After constitution of Company Law Board, if we see the difference between the powers exercised by the Company Law Board and the High Court, in my opinion, High Court is doing well compared to Company Law Board. High Court faces so much work pressure and had to listen and pass orders in many matters. It is not the case when it comes to Company Law Board. Many feel that the remedy before the Company Law Board was not effective and there are so many reasons as to why the litigation before Company Law Board was not effective and it is also addressed indirectly in the judgment of Madras High Court and the judgment of Supreme Court on constitution of National Company Law Tribunal.

The object behind introducing a Companies Bill is really good and I don’t think that it is a big exercise. What is important is that providing an effective reddressel to the companies or the shareholders when they approach the court or the tribunal for the protection of their corporate rights.  With the proposed Companies Bill, most of the powers of High Court are taken away with the constitution of National Company Law Tribunal and the Appellate Tribunal. There is a specific bar on the jurisdiction of Civil Courts in entertaining a company matter. I have read the paper statements that the Ministry of Corporate Affairs is planning to approach the bench of the Supreme Court again asking for a review on the ground that the members of ICLS are not allowed to be presiding officers of the National Company Law Tribunal. As I have read, according to the Ministry of Corporate Affairs, the members of ICLS are most talented and suited to deal with the company related issues. It is emphasized that there is so much procedure to be followed to introduce the Companies Bill again in the Parliament subsequent to the judgment of Supreme Court on NCLT.

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I am not on the issue of the intelligence of the members of ICLS at all with due respect to the members of ICLS, but, I have some doubts like:

  1. Why the Companies Bill is sought to be introduced in the Parliament knowing fully of the proceeding before Supreme Court?
  2. Why Company Law Board could not be effective as opined by many companies and shareholders?
  3. Was there any complete assessment as to why the Company Law Board could not provide an effective remedy?
  4. Is Ministry of Corporate Affairs convinced that the Company Law Board is successful in achieving its object?
  5. How come the Ministry of Corporate Affairs is convinced that the National Company Law Tribunal can effectively exercise most of the powers under the provisions of Companies Act, 1956 where there is no much difference in wording between the provisions dealing with the powers of Company Law Board under Companies Act, 1956 and the powers of National Company Law Tribunal under the proposed Companies Bill barring the bar on Civil Court’s jurisdiction?
  6. Was there any thinking as to the implementation of the orders of the Company Law Board or the proposed National Company Law Tribunal as the orders of the Company Law Board were violated directly in many cases?
  7. Was there any discussion with the Law Ministry or the concerned people regarding the powers of Contempt of National Company Law Tribunal in view of the general application of provisions of Contempt of Courts Act?
  8. Will it not cause a great hardship to the companies or the corporates if only there is one Appellate Tribunal in Delhi?
  9. Did the Ministry of Corporate Affairs take note of filing fictitious forms with the ROC under MCA scheme and procedure for removal of those forms?

Constitution of National Company Law Tribunal and its effective functioning is very important for the corporate world. It is not an easy thing for the Ministry of Corporate Affairs to ensure proper functioning of National Company Law Tribunal in view of our experience with Company Law Board as I believe and heard from many shareholders. The judgment of the Madras High Court and the Supreme Court in the Appeal on constitution of National Company Law Tribunal is really laudable; as otherwise, there would have been an irreparable damage to the corporate world. The issue is really challenging for the Ministry of Corporate Affairs and it will be interesting to follow as to  when the Companies Bill is introduced, changes are made to the bill subsequent to the judgment of Supreme Court and the finally the functioning of the National Company Law Tribunal.

Note: The views expressed are my personal and I have no intention to insult any profession or institution.

Author:

V.DURGA RAO, Advocate, Madras High Court.

Email: vdrao_attorney@yahoo.co.in

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