This article is written by Sharanya Ramakrishnan, pursuing a Diploma in General Corporate Practice: Transactions, Governance, and Disputes from Lawsikho. The article has been edited by Tanmaya Sharma (Associate, LawSikho).
Table of Contents
Introduction
The laws of procedure, under regular civil process, although provided for remedies such as appeals, revisions, reviews, also enabled the parties aggrieved to file numerous applications and raise frivolous objections due to which important matters were pushed to the background. All the proceedings in the court were certainly delayed, which led to frustration and discontent among litigants. In view of the huge pendency, courts were unable to provide attention and give precedence to cases arising under certain special legislations. Therefore, there was a need to transfer some selected areas of litigation dealt with by traditional courts to special Tribunals. As Tribunals are free from the fetters of procedural laws and laws of evidence, they can provide easy access to justice in a “cost-affordable” and “user-friendly” manner.
Considering the above, in order to handle the rising corporate civil disputes, the National Company Law Tribunal (hereinafter referred to as “the Tribunal”) was established under Section 408 of the Companies Act, 2013 (hereinafter referred to as “the Act”). It is a body that has powers and procedures analogous to those vested in a court of law. It has the duty to determine facts objectively, decide matters as per the principles of natural justice and draw inferences from them in the form of orders. Such orders can alter a situation, correct a wrong, or impose costs/penalties and may affect the legal rights, duties, privileges of the specific parties.
The National Company Law Tribunal Rules, 2016 (hereinafter referred to as “the NCLT Rules, 2016”) provide the general procedures and practices for working of the Tribunal. The Tribunal is empowered to devise its own procedure for dealing with the cases that are filed before it. The Tribunal also has the discretion to require or dispense with any step provided thereunder.
This article endeavours to explain the general practice and procedure followed by the Tribunal while dealing with cases filed before it. It analyses the relevant provisions of the Act and the NCLT Rules, 2016 to help understand the working of the Tribunal.
Territorial jurisdiction
Every petition, application, reply, or any related documents shall be filed to the Registry of the Tribunal or such Bench(s) having territorial jurisdiction. For instance, as per Section 60(1) of the Insolvency and Bankruptcy Code, 2016, the territorial jurisdiction of NCLT comprises the place where the registered office of the corporate person is situated.
Preparation of petition/application
Procedure (Rule 20)
- Every application or petition presented to the Tribunal shall be in English. However, in cases where it is in some other Indian language, the same shall be accompanied by a copy translated in English.
- The application or petition shall be fairly and legibly type written, lithographed or printed.
- The cause title shall contain the words “Before the National Company Law Tribunal” and shall also mention the Bench to which it is presented.
- Immediately after the cause title, every proceeding must stipulate the legal provision under which it is preferred.
- The petition or application shall be divided into paragraphs and numbered consecutively such that each paragraph shall state a specific or definite fact, allegation or point.
- The beginning of the application or petition shall contain details regarding the full name, age, parentage, description of each party and address. In cases where a party sues or is being sued in a representative character, the same shall also be mentioned.
- The names of the parties shall be numbered consecutively and a separate line shall be allocated to the name and description of each party.
- The aforesaid numbers shall not be modified. In cases where a party dies during the pendency of any petition, his legal heir(s) or representative(s) shall be indicated by sub-numbers.
- In cases where new parties are brought in, they shall be numbered consecutively as per their respective categories.
Matters to be set out in the address for service (Rule 21)
The address for serving of summons shall be filed along with every petition or application and it shall contain the following details:
- The name of the road, street, lane, Municipal Division, Municipal Door and other numbers of the house;
- The name of the town or village;
- The post office, postal district and PIN Code; and
- Any other details to help identify and locate the addressee such as mobile number, e-mail address, etc.
Presentation of petition or application
1. Who can file?
Every petition or application shall be presented by the petitioner or applicant either:
- in person; or
- by his duly authorised representative; or
- by an advocate duly appointed on this behalf. (Rule 23)
The Tribunal may also permit a joint petition to be filed by two or more persons if it is satisfied, having regard to the cause of action and the nature of the relief prayed for, that they have a common interest in that matter. However, the Tribunal may permit such a joint petition only if it is specifically permitted under the Act. (Rule 23A)
2. How to file a petition or application? (Rule 34)
- Every petition or application shall be filed in triplicate in Form No. NCLT 1 with necessary attachments accompanied by Form No. NCLT 2 was verified by an affidavit in Form No. NCLT 6.
- Interlocutory applications shall also be filed in Form No. NCLT 1 with accompanying documents in Form No. NCLT 3 was verified by an affidavit in Form No. NCLT 6.
3. Documents accompanying the petition or application (Rule 23)
A petition or application shall be accompanied by documents:
- as prescribed in “Annexure B” of NCLT Rules, 2016.
- index of documents in triplicate.
4. Endorsement or verification (Rule 26)
- The name and signature of the authorised representative shall be indicated at the foot of every application or petition.
- Every petition or application shall be signed and verified by the party concerned.
5. Production of authorisation for and on behalf of an association (Rule 31)
In cases where a petition or application is to be filed by or on behalf of an association, the person who signs or verifies the same shall, along with such petition or application, produce a true copy of the resolution authorising such person to do so for verification by the Registry.
The Registrar may at any time call upon such person to produce such further materials as he may consider necessary to satisfy himself as regards the said authorisation.
6. Advertisement (Rule 35)
- The advertisement of every petition or application shall be made in Form No. NCLT 3A, unless the Tribunal otherwise orders or the NCLT Rules, 2016 otherwise provide.
- Additional compliances for an advertisement:
- If an advertisement is made by the company, the same should also be placed on its website.
- The advertisement shall be made at least 14 days before the date fixed for hearing, at least once in a vernacular newspaper in the principal vernacular language of the district in which the proposed company is situated and at least once in the English language in an English newspaper circulating in that district.
- Affidavit stating that the advertisement is as per the terms of this Rule shall be filed with the Tribunal at least 3 days preceding the date of hearing along with proof of advertisement.
- The contents of the advertisement are as follows:
- The date on which the petition or application was filed;
- The name and address of the petitioner or applicant and his authorised representative, if any;
- The nature and particulars of the petition or application;
- The date fixed for the hearing;
- A statement stipulating that any person who intends to oppose the petition or application or whose interest is likely to be affected by reason of such filing shall send a notice of his intention to the concerned Bench as well as to the petitioner or his authorised representative, if any specifying the nature of interest and grounds of opposition, such that it reaches the concerned person at least 2 days prior to the day fixed for hearing.
7. Notice to the opposite party (Rule 37)
NCLT shall issue a notice in Form No. NCLT 5 accompanied by a copy of the application with supporting documents to show cause against the petition or application on the date of hearing as specified therein.
8. Service of notice and processes issued by NCLT (Rule 38)
Notices or processes by the Tribunal may be served:
- by electronic means to a valid e-mail address as provided in the petition or application; or
- by physical modes, as may be determined by the Tribunal:
- by hand delivery by means of a process server or respective authorised representative; or
- by registered post or speed post with acknowledgement due; or
- by courier; or
- by the party himself.
9. Filing of reply and other documents by the respondent (Rule 41)
- The respondent may file his reply along with copies of the documents on which he relies to the petition or application either in person or through an authorised representative, with the Registry as stipulated by the Tribunal. A copy shall also be served on the applicant.
- In the reply filed, the respondent shall explicitly admit, deny or rebut the facts detailed by the applicant in his petition or application and may also specify any additional facts as may be found necessary.
10. Filing of rejoinder (Rule 42)
In case the respondent states such additional facts in his reply, the Tribunal may allow the petitioner or the applicant to file a rejoinder rebutting to what is stated in such reply. A copy of the same needs to be served to the respondent.
Framing of issues
If the Tribunal thinks fit, it can frame issues, which have to be decided in order to decide the case.
Admission and denial of documents/discovery and production of documents
Akin to a civil suit, the Tribunal may, before framing issues, establish from the parties or their authorised representatives, whether they admit or deny documents accompanying the petition or the application or reply, if any, and shall record such admission or denial. The following rules provide for discovery, production, and return of documents:
- An application for a summons to produce documents shall be on plain paper and shall stipulate the document the production of which is sought, the relevancy of the document and in the case where producing a certified copy would serve the purpose, whether an application was made to the proper officer and the result thereof. [Rule 131(2)]
- The summons for producing a document in the possession of a public officer other than a court shall be in Form No. NCLT 15 and shall be conveyed to the concerned Head of the Department or such other authority as the Tribunal may specify.[Rule 131(3)]
- The Tribunal may also issue summons suo moto, for producing public documents in the custody of a public officer. (Rule 132)
- An application for return of the documents shall be numbered and such an application shall not be entertained after the destruction of the records. (Rule 134)
Filing of affidavit of evidence [Rule 39(1)]
If the petition contains facts that need to be proved, the Tribunal may direct parties to give evidence, if any, by affidavit in Form No. NCLT 7.
Cross-Examination of any deponent [Rule 39(2)]
When a party gives evidence of any person, the opposing party, as a principle of natural justice, should have a right to cross-examine the witness. As a result, the Tribunal may, if it considers necessary for just decision of the case, order cross-examination of the deponent on points of conflict either through information and communication technology facilities like video conferencing or otherwise as decided by it.
Summoning the witness and method of recording evidence (Rule 52)
- If any party to the proceedings presents a petition or application for summoning of witnesses, the Tribunal shall issue a summons for the appearance of such witnesses unless it considers that their appearance is not necessary for a fair decision of the case.
- When the Tribunal issues summons to any witnesses to give evidence or produce any document, such person shall be eligible for such travelling and daily allowance as would enable him to meet such travelling and other expenses as may be determined by the Registrar. Such allowances shall be paid by the party as determined by the Registrar.
Hearing of petition or application (Rule 44)
The Tribunal shall notify the date and place of hearing of the petition or application by way of general or special order as may be directed by the President or any Member of the Tribunal. However, if the applicant wishes to withdraw his petition or application, as the case may be, he shall file an application to the Tribunal. On doing so, the Tribunal on hearing such applicant or if it considers necessary, the opposite parties, may permit such withdrawal on imposition of costs as it may deem fit in the interests of justice.
Rights of a party to appear before the Tribunal (Rule 45)
- The parties to the case may appear before the Tribunal, either in person or through an authorised representative.
- The authorised representative shall appear before the Tribunal only on filing of Vakalatnama or Memorandum of Appearance in Form No. NCLT 12.
- The Central Government, Regional Director, or Registrar of Companies or the Official Liquidator can authorise an advocate or an officer (who shall either be an officer not below the rank of Junior Time Scale or a company prosecutor) to represent them in the proceedings before NCLT.
Effects of non-appearance of the applicant (Rule 48)
Non-appearance of the applicant on the date of hearing of the petition of application shall entail any of the following two consequences:
- The Tribunal may dismiss the application for default; or
- The Tribunal may decide it on merit.
In case of such dismissal, if the applicant within a period of 30 days from the date of dismissal files an application to the Tribunal showing sufficient cause for such non-appearance, the Tribunal, on being satisfied, shall set aside the order of dismissal and restore such application or petition. On the other hand, the decision shall not be re-opened where the case was disposed of on merits.
Ex-parte hearing and disposal of petition or application (Rule 49)
If the respondent fails to appear on the date of the hearing, the Tribunal can take any of the following actions:
- Adjourn the hearing; or
- Hear and decide the petition or application ex-parte.
In cases where the hearing and the decision was made ex-parte, such respondent may by application satisfy the Tribunal that the notice was not properly served or that he was prevented by any sufficient cause from appearing when the petition or application was called for hearing. The Tribunal, on being satisfied may make an order setting aside the ex-parte hearing as against him upon such terms as it thinks fit.
The decision of the Tribunal (Section 422 of the Act)
The Tribunal shall strive to decide every petition or application made to it as expeditiously as possible and it shall make an endeavour to dispose of the same within 3 months from the date of its presentation.
In cases where the petition or application is not disposed of within the said 3 months, the Tribunal is required to record the reasons explaining the delay. The President shall on taking into consideration such reasons, extend the limit for a further period not exceeding 90 days.
Order of the Tribunal
- The Tribunal shall, on receipt of a petition or application, pass such orders as it thinks fit after providing the parties to the case, a reasonable opportunity of being heard. (Rule 146)
- The Tribunal may choose to pass such orders regarding costs incidental to the proceedings, as it may deem fit. (Rule 149)
- The Tribunal after hearing the applicant and respondent shall pronounce the order either at once or reserve the order. If the order is reserved, it shall be passed within a period of 30 days from the date of the final hearing. [Rule 150(1)]
In the case of Kamal K. Singh vs Union of India, The Bombay High Court issued a writ of certiorari for quashing and setting aside the admission order of NCLT, Mumbai Bench on the ground that the order was not pronounced in accordance with Rules 150 to 152 of the NCLT Rules, 2016.
- An order of the Tribunal shall be executable as a decree of civil court and provisions of the Civil Procedure Code, 1908 shall apply as provided in Section 424(3) of the Act.
- Every order of the Tribunal shall be in writing and shall be signed and dated by the President or Members constituting the Bench, who heard and pronounced the order. [Rule 150(2)]
- A certified copy of the order shall be given to the concerned parties. [Rule 150(3)]
- Every order shall bear the seal of the Tribunal. [Rule 150(5)]
- The order of the Tribunal may be rectified in case there is a clerical or arithmetic mistake therein either by the Tribunal suo moto or on an application made to it by any party. Such an application shall be made in Form No. NCLT 9 within 2 years from the date of the final order. (Rule 154).
Preservation of record (Rule 103)
All the relevant documents and records pertaining to petitions or applications handled by the Tribunal shall be stored and preserved in the manner provided by the NCLT, Rules, 2016 and the remaining physical records set aside in a record room shall be preserved for a period of 5 years after passing of the final order.
However, in case of an electronic record of the petitions or applications handled by the Tribunal including directions and orders passed by it, the same shall be kept by the Registry of the Tribunal for a period of 15 years after passing of the final order.
Representation before NCLT (Section 432 of the Act)
As stated above, a party to any proceeding may either appear in person or through an authorised representative. The following persons can be authorised to appear before the Tribunal for presenting the case :
- Chartered Accountants;
- Company Secretaries;
- Cost Accountants;
- Legal practitioners;
- Any other person, such as the officer of the company.
Certain additional provisions regarding authorised representatives are stated as under:
- Consent for engaging another legal practitioner (Rule 120)
In case a legal practitioner proposes to file a Vakalatnama or Memorandum of Appearance in any pending case where there is already a legal practitioner or authorised representative on record, he can do so only:
- with the written consent of the legal practitioner or authorised representative on record; or
- in case of refusal of consent, with the approval of the Tribunal on an application made to it for revocation of the Vakalatnama or Memorandum of Appearance after service of such application on the counsel already on record.
- Restrictions on appearance (Rule 121)
A legal practitioner or authorised representative is restricted from appearing in a case or proceeding for any person whose interest is conflicting to that of his former client by reason of him:
- tendering advice in connection with the institution of any case or proceeding before the Tribunal; or
- drawing pleadings in connection with any such matter; or
- acting for a party during the progress of any such matter.
He can however make an appearance with the prior permission of the Tribunal.
- Limitation on party’s right to be heard (Rule 122)
In case a party has engaged a legal practitioner or authorised representative to appear for him before the Tribunal, he may be prevented from making a presentation before it.
- Empanelment of specially authorised representatives by the Tribunal (Rule 123)
The Tribunal is empowered to establish a panel of specially authorised representatives. It may draw up a panel of legal practitioners or company secretaries or chartered accountants or cost accountants or valuers or other experts as may be required for assisting the Tribunal in several proceedings that are before it. The president may require any of the persons from this panel to render assistance in the proceedings before the Bench. The remuneration and other compensation and allowances payable to such persons shall be determined in consultation with the Tribunal.
General powers of Tribunal
- Power to exempt from compliance of NCLT Rules, 2016 (Rule 14)
The Tribunal may, on an application made to it, exempt the parties from compliance with any of the requirements of these Rules and provide directions in matters of practice and procedure as it may consider just and prudent.
- Power to extend the time for doing any act (Rule 15)
The Tribunal has the power to extend the time appointed by these Rules or fixed by any order for doing any act upon such terms as it may think fit.
- Inherent powers (Rule 11)
The Tribunal has inherent powers to make such orders as may be necessary for meeting the ends of justice or to thwart abuse of the process of the Tribunal.
Conclusion
The NCLT Rules, 2016 provide a detailed framework of the procedures and practices to be followed by the Tribunal while dealing with cases filed before it. The Tribunal’s procedures and method to oversee the preparation of cases and their hearing is simpler and more informal than those followed by the court of law. As a result, the Tribunal may be better at finding facts, using flexible standards, and implementing discretionary powers as compared to the traditional courts. Lastly, it not only reduces the burden on the High Courts but also endeavours to provide speedy justice.
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