All You Need to Know About National Company Law Tribunal

Background and Constitution:

In the year 2000, the Eradi Committee, Chaired by Shri Justice V. Balakrishna Eradi, was constituted by the Central Government, comprising  of experts, to examine the law prevalent at that time, relating to winding up proceedings of companies and to remodel it in line with the latest developments and innovations in corporate law and governance and to suggest reforms in the procedure at various stages followed in the insolvency proceedings of companies to avoid unnecessary delays in line with the international practice in this field.

Based on the recommendations of this Expert Committee, Chapter XXVII was incorporated in Companies Act, 2013. NCLT in the Company law is a quasi-judicial body meant to adjudicate the corporate and civil dispute arising under the Company law. The NCLT full form being National Company Law Tribunal, it has huge importance in company law matters. The forum provides for an expedient delivery of dispute resolution with regards to Companies Act, 2013. The significance of the NCLT in company law can be equated with the ITAT in income tax law, both established under the Companies Act, 2013 and Income Tax Act, 1961 respectively. NCLT and NCLAT were constituted keeping in mind the expert committee report. However, there is considerable difference between NCLT and NCLAT.

NCLT in Company Law is provided under Section 408 of the Companies Act, 2013, which reads as under:

408. Constitution of National Company Law Tribunal

The Central Government shall, by notification, constitute, with effect from such date as may be specified therein, a Tribunal to be known as the National Company Law Tribunal consisting of a President and such number of Judicial and Technical members, as the Central Government may deem necessary, to be appointed by it by notification, to exercise and discharge such powers and functions as are, or may be, conferred on it by or under this Act or any other law for the time being in force.

The need to incorporate a separate body to adjudicate matters relating to insolvency and winding up of companies was necessitated and consequently the Central Government vide Notification No. S.O. 1932 (E) dated June 1, 2016, constituted the National Company Law Tribunal (“NCLT”) to exercise and discharge the powers and functions as conferred by or under the Act.

The NCLT was formed as a quasi-judicial body to adjudicate matters concerning corporate disputes that were of civil nature arising under the Companies Act, 2013.

The NCLT has a Principal Bench at New Delhi. The Ministry of Corporate Affairs have set up Benches across India in a phased manner.

Each bench of NCLT is headed by a President and comprises of Judicial Members and Technical Members.

Functions:

The provision to move the NCLT (National Company Law Tribunal) in company law matters has reduced the burden of the regular courts considerably. Litigants move the NCLT in company law matters for the resolution of complex disputes involving company and corporate matter.

The NCLT can take matters pertaining to:

1. Section 245 – Class action
2. Section 7(7) – Deregistration of Company
3.  Section 241 – Oppression and Mis-Management
4. Section 213 – Investigation Powers
5. Section 130 – Reopening of Accounts
6. Section 58 – Refusal to Transfer Shares
7. Section 13 to 18 – Conversion of Public Company to Private Company
8. Section 97 and 98 – Convene an Annual General Meeting
9. Section 242 – Winding up of Company
10. Section 221 – Freeze the assets
11. Section 2(41) change the financial year of a registered company

National Company Law Appellate Tribunal:

The National Company Law Appellate Tribunal (“NCLAT”) was formed by the Government under Section 410 of Companies Act, 2013, which reads as under:

410. Constitution of Appellate Tribunal

The Central Government shall, by notification, constitute, with effect from such date as may be specified therein, an Appellate Tribunal to be known as the National Company Law Appellate Tribunal consisting of a chairperson and such number of Judicial and Technical Members, not exceeding eleven, as the Central Government may deem fit, to be appointed by it by notification, for hearing appeals against the orders of the Tribunal.

Functions of the National Company Law Appellate Tribunal:

1. NCLAT is the appellate tribunal for hearing appeals against the orders passed by NCLTs under Section 61 of Insolvency and Bankruptcy Code, 2016 (“IBC”).
2. NCLAT also hears appeals against the orders passed by Insolvency and Bankruptcy Board of India under Section 202 and Section 211 of IBC.
3. NCLAT can also hear and dispose of appeals against any direction issued or decision made or order passed by the Competition Commission of India.
4. NCLAT can also dispose of appeals against orders of the National Financial Reporting Authority.

The decisions of the NCALT can be appealed to the Supreme Court of India, on a point of law.

There are at present, a Principal Bench of NCLAT at New Delhi and another Bench at Chennai.

Thus, it is quite obvious that there is difference between NCLT and NCLAT. As far as NCLT is concerned it is the primary body where parties in dispute agitate, whereas NCLAT is an Appellate body where decisions of NCLT is challenged by the aggrieved party.

NCLT Rules 2016:

The National Company Law Tribunal Rules, 2016 were notified on July 21, 2016. (NCLT Rules 2016).

The NCLT Rules 2016 defines the Powers and Functions of the President, registrar and Secretary of NCLT. It also details the procedure to be followed for institution of proceedings, petitions and appeals and issuance of orders and disposal of cases and matters incidental thereto.  The Rules also describe the procedures in respect of matters earlier dealt by quasi-judicial bodies, courts and tribunals.

NCLT and NCALT: Distinction between them!

There are a few difference between NCLT and NCLAT. Here they are:

• Provisions of Companies Act, 2013:

NCLT was constituted pursuant to Section 408 of Companies Act, 2013 whereas NCLAT was constituted as per Section 410 of Companies Act, 2013.

• Benches:

NCLT has 16 Benches across India where NCLAT has only 2 benches in India, one principal bench at New Delhi and other in Chennai.

• Jurisdiction:

NCLT has Original Jurisdiction whereas NCLAT has Appellate Jurisdiction.

• Cases handled:

NCLT does not deal in cases involving Competition Law or appeals from the National Financial Reporting Authority (“NFRA”). NCLAT is designated as appellate forum for orders passed by NFRA and Competition Commission of India as per powers granted to it under Companies Act, 2013. NCLAT has replaced the Competition Appellate Tribunal.

The above briefly explains the formation, functions, jurisdiction and working of the NCLT and NCLAT. These two quasi-judicial bodies have been doing their bit to get speedy redressal for corporate disputes which would otherwise have had not been possible before. It would be great to see if such separate regulatory bodies are able to deliver quick response to corporates which will foster investors’ confidence and create an ecosystem where justice will be delivered adequately and, in a time, bound manner.

NCLT: What are its merits and demerits?

It is always better to gain complete knowledge about the advantages and disadvantages of NCLT prior to moving before the legal authority. Obviously, the quasi-judicial authority has numerous branches throughout the country that enables the petitioners to seek legal remedy within their local jurisdiction. The body ensures speedy disposal of company matters and help reduce the heap of cases. There are no specific disadvantages of NCLT. So, you can approach before the authority for your company related issues unhesitant.

However, professional advocates can guide you to the best legal solution when dealing with a corporate-related issue. So, visit your nearby lawyer to seek necessary advice, to represent you or to even find an alternative resolution with respect to your NCLT case status.