The Government of India has, after fourteen years since their introduction, constituted the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) under the Companies Act, 2013 to provide for a single judicial forum to adjudicate all disputes concerning the affairs of Indian companies. The tribunals have been made effective from 1st June 2016.
♦ DISSOLUTION OF COMPANY LAW BOARD:
After the introduction of NCLT the Company Law Board shall cease to exist. Section 466 of the Companies Act, 2013 states that Company Law Board constituted under the Companies Act, 1956 shall stand dissolved on the constitution of the Tribunal and the Appellate Tribunal.
♦ DIFFERENCE BETWEEN NCLT AND NCLAT:
The NCLT has primary jurisdiction whereas NCLAT has appellate jurisdiction. NCLAT is a higher forum than NCLT for taking the decision and NCLAT reviews decision of NCLT and checks it on a point of law or facts. Facts finding and evidence collection is the primary task of Tribunal whereas Appellate Tribunal decide cases based on already collected evidences and witnesses.
The NCLT has eleven benches, two at New Delhi and one each at Ahmedabad, Allahabad, Bengaluru, Chandīgarh, Chennai, Guwahati, Hyderabad, Kolkata and Mumbai. The NCLT will comprise a President and judicial and technical members, as necessary. Justice M.M. Kumar, former Chief Justice of the High Court of Jammu and Kashmir has been appointed the president of the NCLT. The NCLAT, the appellate body, will consist of a Chairperson and a maximum of eleven judicial and technical members. Justice S.J. Mukhopadhaya, a retired judge of the Supreme Court of India, has been appointed the chairperson of the NCLAT.
While the tribunals have been set up to deal with all company related disputes (except any criminal prosecution for offences under the Companies Act), the powers currently provided to the NCLT and the NCLAT under the recent notifications are limited. It is expected that further notifications will soon be issued to allow the NCLT and the NCLAT to exercise complete powers prescribed under the Companies Act.
♦ FEATURES OF NCLT:
♦ MANNER OF SELECTION:
|President/Chairperson||Shall be appointed after consultation with Chief Justice of India||Shall be appointed after consultation with Chief Justice of India|
|Judicial Members||Shall be appointed by selection committee||Shall be appointed after consultation with Chief Justice of India|
|Technical Member||Shall be appointed by selection committee||Shall be appointed by selection committee|
The NCLT has been given wide powers under the Companies Act to adjudicate:
|1.||Company Law Board||Cases initiated before the Company Law Board (CLB) under the Companies Act, 1956 (Old Act)|
|2.||District Court or High Court||All proceedings pending before district court or High Court any under the Old Act including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies (which, upon the relevant notification being issued, shall stand transferred to the NCLT)|
|3.||Board for Industrial and Financial Reconstruction (BIFR), the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA)||All inquiries/proceedings pending before the Board for Industrial and Financial Reconstruction (BIFR), including those pending under the Sick Industrial Companies (Special Provisions) Act,1985 (SICA), which would be abated, upon relevant notification being issued, and referred to the NCLT within 180 days from the date of abatement|
|4.||Appellate Authority for Industrial and Financial Reconstruction (AAIFR)||Appeals or any other proceedings pending before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR), including those pending under the SICA, which would be abated, upon relevant notification being issued, and referred to the NCLT within 180 days from the date of abatement|
|5.||Oppression and Mismanagement||Fresh proceedings pertaining to claims of oppression and mismanagement of a company, winding up of companies and all other powers prescribed under the Companies Act.|
♦ APPEAL BEFORE NCLAT:
Time period to dispose of the Application or Petition Tribunal or the Appellate Tribunal, as the case may be, for the disposal of such application or petition or appeal within three months from the date of its presentation before the Tribunal or the filing of the appeal before the Appellate Tribunal
If not dispose of within 3 month Tribunal or, as the case may be, the Appellate Tribunal, shall record the reasons for not disposing of the application or petition or the appeal, as the case may be, within the period so specified.
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NCLT and Debt Recovery Tribunal (DRT) will be the adjudicating agencies for the recently-passed Bankruptcy Code. While NCLT will resolve insolvency cases of companies and limited liability partnerships, DRT will handle cases of individual bankruptcy.
The establishment of NCLT/NCLAT shall offer various opportunities to Practicing Company Secretaries as they have been authorized to appear before the Tribunal/ Appellate Tribunal. Therefore, Practicing Company Secretaries would for the first time be eligible to appear for matters which were hitherto dealt with by the High Court secretaries mergers, amalgamations under Section 391-394 and winding up proceedings under the Companies Act, 1956.
♦ PROCEDURE FOR COMPOUNDING OF OFFENCE:
An offense shall be compoundable by the tribunal where the maximum amount of fine exceeds INR 50,000/-. If the offense does not exceed the above specified amount, the same amount shall be compoundable by the regional director or any other director authorized by Central Government.
Application shall be made to the Registrar of Companies.
Registrar of Companies shall forward the application made to the Tribunal.
The applicant shall make reference to the Tribunal for compounding by way of petition in Form No.9 and shall be accompanied with documents as prescribed in Annexure B.
If the offense which is to be compounded is punishable with imprisonment or fine or with imprisonment or fine or with both, then permission of Special Court is required.
The tribunal may compound the offense and determine the amount which needs to be paid by the company/director/officers for compounding of offense.
The amount shall be paid in accordance with the directions provided by the Tribunal.
If the offense is compounded, the company shall intimate the Registrar of Companies within 7 days from which the offense is so compounded.
♦ SCOPE OF SERVICES FOR PRACTICING COMPANY SECRETARIES (PCS) UNDER NCLT:
Areas opened up for company secretaries in practice under NCLT are briefly stated hereunder: –
|1.||Compromise and Arrangement*||Advising and assisting corporate sector on merger, amalgamation, demerger, reverse merger, compromise and other arrangements right from the conceptual to implementation level.|
|a||Timely detection of sick company||Assist in identifying the sickness of the company as defined under the Act and place the matter before the Board of Directors of the company to take necessary action for making reference to the Tribunal for revival and rehabilitation of the Company.|
|b||Making a reference of sick industrial company to NCLT||Assist and advise the Sick Company in making reference to the Tribunal, preparing scheme of rehabilitation, seeking various approvals from the Tribunal as may be required.|
|2.||Winding up||Act as Representative in winding up case before the Tribunal. In the earlier position allowing only government officers to act as Official Liquidators, now professionals like Practicing Company Secretaries have been permitted to act as Liquidator in case of winding up by the Tribunal|
|3.||Reduction of Capital||Act as Representative in cases of reduction of capital before the Tribunal.|
|4.||PCS as Member of NCLT||Appointment as a Technical Member of NCLT provided he/she has 15 years working experience as secretary in whole-time practice.|
|5.||Appearance before National Company Law Appellate Tribunal||Practicing Company Secretary has been authorized to appear before National Company Law Appellate Tribunal.|
* Ministry of Corporate Affairs is yet to notify the provisions of compromise and arrangement under the new Companies act, which means that cases related to mergers and restructuring will continue to be referred to the high courts as per the provisions of the older act.
♦ PRACTICAL CHALLENGES :
The main reason for the challenge was the constitutionality of the tribunal as it involved the wholesale transfer of jurisdiction of the High Courts in company matters to a quasi-judicial body. It was argued that such transfer will result in vesting of intrinsic judicial functions in a quasi-judicial body, which was vulnerable to executive interference. As per the enactment on and from the commencement of the relevant sections of the companies (amendment) Act, 2002, the Board of Company Law (CLB) constituted under Section 10E of the Companies Act, 1956 shall stand dissolved. Though the Act of 2013 has paved the way for establishment of Tribunals, however, pending notifications of the sections and rules in relation to reconstructing and absence of transitional provisions has led to concern within industry and professionals engaged in restructuring in the corporate world.
♦ CLASS ACTION:
A much awaited reform brought into effect along with the introduction of the NCLT, is the statutory remedy of class action proceedings. Class action proceeding is one where a group or class of people similarly affected can initiate a proceeding collectively. This allows reducing time and costs and also inspires confidence amongst the parties as they act collectively. Currently, class action proceedings were initiated in form of representative’s suits, minority action for oppression & mismanagement, proceedings before the consumer forums or through public interest litigation. However, none of these provided a holistic remedy.
Dearth of such a remedy was felt particularly in the wake of the Satyam Scam, where the public shareholders in India had no remedy as opposed to the bondholders in the United States. With the notification of Section 245 of the Companies Act, 2013, members and depositors in a company have the additional remedy in form of class action proceedings which could be initiated before the NCLT. The recent surge in shareholder activism in India makes the introduction of class actions remedy highly interesting. It is a critical tool now in the hand of minority shareholders who may question the decisions made by the management and the intent thereof.
♦ LIMITATION ACT (SECTION-433):
The provisions of the Limitation Act, 1963 shall, as far as may be, apply to proceedings or appeals before the Tribunal or the Appellate Tribunal, as the case may be.
♦ HOW DO WE HELP?
We as professionals ensure that all the compliances with respect to procedure to be followed while making an appeal before the NCLT and the NCLAT are complied with. We do liaising with the National Company Law Tribunal, Registrar of Companies, Stock Exchanges and various corporate bodies in order to ensure that the procedure is followed as per the law and the appeal before the Tribunal is done in a systematic manner and within the prescribed time.
In view of vast opportunities emerging with the establishment of National Company Law Tribunal, the Company Secretaries and other professionals should standardize their competencies with the global benchmarks to provide value added services in assisting the Tribunal in dispensation of justice and speedier disposal of matters like merger, amalgamation, restructuring, revival and rehabilitation of sick companies. Keeping in view of the pendency of legal matters and need for specialized knowledge of the persons discharging the responsibility of adjudicating the matters involving intricate issues relating to the subjects, the process of setting up of specialized tribunals has gained acceptability over a period of time.