It has been more than 15 years that we first heard about National Company Law Tribunal [NCLT] & National Company Law Appellate Tribunal [NCLAT]. Way back in 2001.
Why did it take so long for a body like this to be a reality?
Why did it not see any light of the day so far?
What caused the delay?
What were the legal difficulties that NCLT had to face?
What are the decided case laws that we need to refer?
What are the sections and provisions pertaining to NCLT?
What will be the constitution of NCLT?
Who will be the members & what will be their eligibility criteria & tenure?
What will be the powers enjoyed by NCLT?
What will be the mechanism available for the aggrieved parties?
What will be the advantages & challenges before NCLT?
What will be the Scope & Opportunities for Company Secretaries with NCLT?
The aforesaid pointers are important to be understood considering that hopefully NCLT will soon be a Reality!
Sections and provisions applicable
Chapter XXVII of Companies Act, 2013
Section 407 to Section 434 of Companies Act, 2013 and rules there under
Sections related to NCLT are not yet enforced
Establishment of NCLT
A Committee known as the Eradi Committee was constituted to review law relating to Insolvency and Winding up of Companies and laws like The Sick Industrial Companies (Special Provisions) Act, 1985
Eradi Committee made various recommendations which were incorporated in the Companies (Amendment) Bill, 2001
Companies (Amendment) Bill, 2001 was then passed and became the Companies (Amendment) Act, 2002
The Companies (Second Amendment) Act, 2002 paved way for setting up of the NCLT and NCLAT
Delay in establishment of NCLT and NCLAT
Things were not easy for NCLT as NCLT had to go through various litigations and that absorbed a lot of time and efforts eventually leading to this a big delay.
Madras High Court in R. Gandhi vs. Union of India, held that NCLT is against the basic structure of the constitution as it has been awarded with all the powers which are conferred to the High Court.
Subsequently, Hon’ble Supreme Court in Union of India vs. R. Gandhi/ Madras Bar Association upheld the Constitutional validity of NCLT.
Also there were issues pertaining to the qualification and eligibility criteria of the ‘would be technical members’ of NCLT.
Though these issues were finally resolved, the establishment of NCLT and NCLAT was delayed.
Constitution of NCLT and NCLAT
Section 408 and 410 state that NCLT and NCLAT shall constitute of-
President/chairperson and Members of NCLT and NCLAT how appointed
Qualifications of President and Members of NCLT – Section 409
|President||Judicial Member||Technical Member|
|Is/has been Judge of High Court ≥ 5 years||Is/has been Judge of High Court
|Member of Indian Corporate Law Service /Indian Legal Service ≥ 15 years
(at least 3 years to be in the pay scale of Joint Secretary to GOI or equivalent post)
|Is/has been District Judge ≥ 5 years||Is/has been PCA ≥ 15 years|
|Has been Advocate of court ≥ 10 years||Is/has been PCWA ≥ 15 years|
|Is/has been PCS ≥ 15 years|
|Person with proven ability, integrity and standing having special knowledge and experience ≥ 15 years (in specified areas)|
|Presiding Officer of Labour Court/ Tribunal/ National Tribunal ≥ 5 years (under Industrial Disputes Act, 1947)|
Qualifications of Chairperson and Members of NCLAT – Section 411
|Chairperson||Judicial Member||Technical Member|
|Is/has been Judge of Supreme Court||Is/has been Judge of High Court||Person with proven ability, integrity and standing having special knowledge and experience ≥ 25 years (in specified areas)|
|Is/has been Chief Justice of High Court||Is a Judicial Member of Tribunal for ≥ 5 years|
Term of office of President, Chairperson and other Members – Section 413
|National Company Law Tribunal|
|5 years from the date of entering office||Additional 5 years||67 years||–|
|Judicial Member||65 years
|Minimum age 50 years
|National Company Law Appellate Tribunal|
|5 years from the date of entering office||Additional 5 years||70 years||–|
|Judicial Member||67 years
|Minimum age 50 years
What are the remedies for person aggrieved by the order of NCLT/NCLAT?
Order of NCLT- Section 421
Order of NCLAT- Section 423
Appeals from the appellate tribunal will not go to the High Court. Thus, reducing the burden of the High Courts
Powers of NCLT
1. Alteration in MoA for change in place of the registered office from one state to another
2. Extension of time or condonation of delay in filing the particulars of a charge or modification of a charge or limitation of payment or satisfaction of a charge
3. Petition to pass an order directing immediate inspection of minute books
1. Winding Up
2. Compromise/ Arrangement
3. Reduction of Capital
4. Revival of Defunct Companies
5. Variation of rights
1. Revival and rehabilitation of Sick Companies
3. Refusal to transfer/transmit shares
4. Restriction on Transfer of securities
5. Call AGM/EOGM
1. Class action suits [Section 245 of Companies Act, 2013]
2. Deregister a Company and determine other incidental matters
3. Remove auditor of the Company [Section 140 of Companies Act, 2013]
4. Reopening of books of Accounts
5. Revise books of account
6. Additional powers in case of non-payment of deposits [Section 74 of Companies Act, 2013]
7. Powers in case of Fast Track Merger
Advantages of NCLT
1. Avoid multiplicity of litigation and ambiguity
2. Speedy disposal of cases
3. Reduction of undue hardships
4. Reduction of burden on High Courts
Challenges before NCLAT
Only time will tell
Scope and Opportunities for Company Secretaries
Compromise and arrangement
Reduction of Share Capital
Appearance before National Company Law Appellate Tribunal
National Company Law Tribunal will bring with itself wide ranging opportunities.
Need is to understand & appreciate the same.
In order to meet the standards, it is of utmost significance to continuously work towards enhancing our knowledge & skills and then deliver the quality results.
Author is a Company Secretary and can be reached at [email protected]