In this blog post, Pramit Bhattacharya, Student Damodaram Sanjivayya National Law University writes about the newly constituted National Company Law Tribunal (NCLT). In fact, the NCLT was constituted just a day back with the Government providing the notification. This post looks into the notifications which has been provided by the Government. The post also highlight how the Apex Court upheld the constitutional validity of the NCLT and NCLAT.

On 1st June 2016, the National Company Law Tribunal and its appellate body was set up by the government, which implemented some of the provisions of the Companies Act, 2013, and will also help in implementing the bankruptcy code. Retired Judge S. J. Mukhopadhaya will act as the Chairman of the National Company Law Appellate Tribunal and retired Judge M. M.  Kumar would act as the president of the National Company Law Tribunal. All the pending cases before Company Law Board will get transferred to NCLT. According to the notification released, the NCLT will have 11 benches initially. Two benches will be at New Delhi and one each at Allahabad, Ahmedabad, Bengaluru, Chennai, Chandigarh, Guwahati, Hyderabad, Kolkata and Mumbai. According to the provisions stated under the Companies Act, 2013, the NCLT will not only replace the Company Law Board, but it’ll also handle various matters relating to companies which are presently pending in the High Courts across the country, the Appellate Authority for Industrial and Financial Reconstruction and the Board for Financial and Industrial Reconstruction.  In total, the NCLT will have 21 benches and 63 members.

The Debt Recovery Tribunal (DRT) and the National Company Law Tribunal will be the two adjudicating bodies which will look into the matters of debt recovery and will govern the Bankruptcy Code. The powers of the two Tribunal have been separated so that they do not overlap. The DRT will look into the cases of individual bankruptcy while the NCLT will look into matters of the insolvency of limited liability partnerships, companies, and corporates.

NCLT gets a nod from the Supreme Court

The constitutional validity of the NCLT was upheld by the Apex Court in May 2015, which paved the way for setting up of the NCLT. With the NCLT coming into existence, a lot of reforms will tale place with regards to the framework for resolving insolvency matters in the corporate field. In the judicial pronouncement of Madras Bar Association v The Union of India,[1] the issue was decided by the Supreme Court. The Madras Bar Association filed a writ petition challenging the constitutional validity of the NCLT and the NCLAT. The petitioners stated that the provisions of the Act, which were related to NCLT and NCLAT were violative of Article 14 of the Constitution. The Apex Court rejected the contention of the petitioners and stated that the legislature has the power to enact a law which transfers the jurisdiction exercised by a court in regards to a specific issue to any tribunal, set up for that specific purpose. The Court also opined that all courts are tribunals, and any tribunal to which the jurisdictional power is transferred should be a judicial tribunal. Therefore, the tribunals should be governed by members who are equal in capacity, status, and rank with the members of a court. The tribunal should also have a secured tenure and independence.

Effect of the Judgment

 The decision of the Apex Court will have certain positive effects. The setting up of the Tribunal may improve India’s ranking in World Bank’s list of doing business. The setting up of the Tribunal will also open up a lot of opportunities for various professional like CS, CWA and CAs as they would also be now eligible to appear before the Tribunal.

The Apex Court asked the governments to make certain amendments to the provisions relating to the NCLT. The Court stated that only those members who are not below the level or rank of additional secretary are eligible to be appointed in NCLT branches. With the NCLT being constituted the powers of four different tribunals, namely the Company Law Board (CLB), Board for Industrial and Financial Reconstruction (BIFR), Appellate Authority for Industrial and Financial Reconstruction (AAIFR), and Official Liquidator (OL) will be merged and given to the NCLT.

Recent Notification

With the constitution of the NCLT some provisions of the Companies Act, 2013 came into force. They are-

  • Sub-section 7 of Section 7 except clause (c) and (d) which talks about the power of the Tribunal in case the company was incorporated by furnishing any incorrect or false information and suppressing some material fact.
  • Second proviso to sub-section 14 of the Act. It talks about the situation where a public company is converted into a private company, and it further states that such conversion would not take place without the approval of the Tribunal.
  • Sub-section (3) of Section 55 of the Act talks about the approval of the Tribunal in case a company is not able to redeem its preference shares or pay dividend, and in place of redemption or dividend wants to issue further preference shares which are equal to the due amount.
  • Clause (b) of sub-section (1) of section 61 which talks about approval of the Tribunal in case the company wants to consolidate and divide its existing share capital.
  • Sub-section (4) to (6) of section 62.
  • Sub-section (7) to (9) of section 71 which talks about right of debenture trustees and debenture holders to approach the tribunals in certain situations.
  • Section 75 of the Act.
  • Section 97 of the Act which states the power of the Tribunal to call an Annual General Meeting in certain situations.
  • Section 98 of the Act which talks about the power of the Tribunal to call any other meeting of a company other than the annual general meeting.
  • Section 99 of the Act, which states the penalties to be sanctioned in the case the directions of the Tribunal, is not complied with.
  • Sub-section (4) of section 119 which talks about the power of the Tribunal to inspect the minute books of the company.
  • Section 130 of the Act which talks about the reopening of books of accounts of a company on the order of a Court or the Tribunal.
  • Section 131 of the Act which talks about the approval of the Tribunal in case of voluntary revision of the financial statements of the company or the Board’s Report.
  • Sub-section (4) and (5) of section 140 of the Act.
  • Sub-section (4) of section 169 which gives the power to the Tribunal to sanction costs in case the right conferred under this provision is abused.
  • Section 213 which authorizes the Tribunal to carry out investigation into the company’s affairs in certain cases.
  • Section 218 which talks about protection of employees during the investigation and the role of the tribunal in it.
  • Section 221 of the Act which talks about freezing of assets of the company on inquiry and investigation and Section 222 which talks about imposition of restriction upon issue of securities. These two sections also state the penalty in the case of contravention of the directions of the Tribunal. The minimum penalty under both the section are one lac rupees and may extend up to the amount of twenty five lac rupees. There are other penalties also which have been mention under the provisions.
  • Sub-section (5) of section 224 which talks about role of the Tribunal in the case of report of any kind of fraud which has taken place in a company.
  • Section 241 which talks about application to Tribunal for relief in cases of oppression.
  • Section 242 which grants the Tribunal with its powers.
  • Section 243, 244 and Section 245 of the Act.
  • Sub-section (2) of section 399.
  • The NCLT will have all the powers of the High Courts in matters of demergers, mergers, winding up, amalgamation, etc.
  • NCLT will have the power to entertain all the proceedings which will be transferred to it by the Company Law Board or the High Courts or any other tribunal or court as provided in Section 434 of the Companies Act, 2013.
  • Under Section 441 of the Companies Act, 2013, the Tribunal will also have the power to compound certain offenses.
  • Section 466 of the Companies Act, 2013 states that the NCLT will replace the CLB and on constitution of the NCLT the CLB will stand dissolved.
  • Section 415 to 433 of the Companies Act, 2013 talks about the governing of the NCLT.

Concluding Remarks

The constitution of the National Company Law Tribunal with its functions, powers, and wide reach due to the number of benches will have a great impact in the field of Company Law. This is because it is not just a revamped version of the conventional Company Law Board. It is an alternative to the CLB and three other Tribunal as mentioned earlier. The functions and powers of the NCLT are also very different from the functions and powers of the conventional CLB. At this moment, it cannot be ascertained that how efficient this alternative will prove because at this stage the NCLT is just in the infancy phase.  But if implemented properly, the NCLT would have many benefits. First of all, it’ll remove a lot of burden from the shoulder of the Courts and other institutions. The procedure will also become more streamlined. The power of the Tribunal of exercising original jurisdiction over matters will also be beneficial as it’ll ensure that there is speedy conveyance of justice and smooth working of the justice system. Last but not the least, to make the idea a success, the independence of the NCLT must be preserved.

Rules related to NCLT

NCLT Website



References Used-

[1] WRIT PETITION (C) NO. 1072 OF 2013

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  1. The HC still has jurisdiction over matters in relation to winding up, sanctioninf of schemes of amalgamation. The provisions of S.434 (1) (a), (b) and (2) of CA, 2013 have not been notified and not 434 (1) (c).

  2. whether NCLT approval required fopr consolidation of share capital which is being approved by the board in its meeting held on 18 may 2016 and postal ballot notice date 18 may the result of which will be declared on 23 june. so whether a company is required to obtain NCLT approval since the notification came after the board decision