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This article is written by Chandana pursuing B.Com LLB (Hons) from The Tamil Nadu Dr. Ambedkar Law University (SOEL). This article deals with rules on the National Company Law Tribunal to clarify the fate of cases.

Introduction

High courts were burdened with a huge number of pending cases before it and there was too much of delay in deciding winding up matters, matters like mergers or amalgamations. Complaints filed by the shareholders against oppression and mismanagement are some of the reasons they felt the need to establish a special court. The Companies (Amendment) Act, 2002 National Company Law Tribunal and National Company Law Appellate Tribunal were formed. All the matters which were initially pending before various high courts now shall stand transferred to NCLT. On the introduction of National Company Law Tribunal Rules, 2016 established procedures for the institution of a suit before NCLT, an institution of appeals before NCLT.

Rules on National Company Law Tribunal to clarify the fate of cases

National Company Law Tribunal Rules, 2016

Inherent Powers of the tribunal

Rule 11 of NCLT rules, 2016 states tribunal shall have inherent powers to make orders which shall be necessary for meeting ends of justice or to prevent the abuse of process of the tribunal, nothing in these rules shall limit or affect the internet powers of the tribunal.

Powers and functions of President and Registrar

Rule 16 of NCLT Rules, 2016 lays down the functions of President:

  1. presiding over the consideration of cases by the tribunal;
  2. Directing the registry in performance of its function;
  3. Preparing the annual reports on various activities of the tribunal.
  4. Transfer the cases from one bench to another bench.

Rule 17 of NCLT Rules, 2016 provides the functions of Registrar:

Registrar shall be the person who will receive an application either for amendment of appeal or the petition.

  • fresh summons or notices regarding services and for short date summons and notices.
  • substituted service of summons or notice.
  • seeking orders concerning the admission and inspection of documents.

Procedure for Institution of a suit in NCLT

Rule 20 of NCLT Rules, 2016 states:

  • Every appeal, petition, application, caveat petition, objection, counter which is filed before the tribunal shall be in English, and if applicant files in any other language there shall be a copy of it translated in English.
  • The cause title shall state “Before the National Company Law Tribunal” and in addition, it shall specify to the bench it refers.
  • Full details of parties shall be set out. 
  • And proceedings of the case shall start immediately after the cause title the provision of law under which it is preferred.
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Presentation of appeal or petition

Rule 23 of NCLT states:

  • Every petition, application, caveat, interlocutory application, document and appeal shall be presented in triplicate by either the appellant or respondent or by any person who is authorised by the representative or any advocate who is appointed in this behalf to submit in the prescribed form with a necessary fee which is to be filed at the filing counter and in case of non-compliance of this may constitute a valid ground to refuse to entertain.
  • After presenting the application, it is to be accompanied with the necessary document which is to be duly certified by the authorised representative or advocate.
  • It shall be accompanied by an index in triplicate along with details of the parties and fee paid thereon.

General Procedure

Rule 34 of NCLT (Rules) 2016 states when there arises a situation which is outside the scope of NCLT (rules) 2016 as set out, then the tribunal shall have alternative options to decide the case.

  • the tribunal shall record the reasons in writing and shall follow the principles of natural justice in determining the procedure for particular cases.
  • Form No: NCLT 4 shall be filed for the general heading, notices, and in the advertisement before the tribunal.
  • Form No: NCLT 1 shall be filed for every petition and application and all the attachment relating to that shall be filed in Form No: NCLT 2.
  • From No: NCLT 1 shall be filed for all interlocutory application and all the attachment relating to that shall be filed in Form No: NCLT 3.
  • Form No: NCLT 6 shall be filed for filing an affidavit.
  • Form No: NCLT 5 shall be filed for the purpose of issuing notices to the other side.

Application for execution

Rule 56 of NCLT (Rules) 2016 states:

For the execution of orders passed by the tribunal, the holder of an order shall make an application to the tribunal in Form No: NCLT 8.

Effect of non- compliance

Rule 58 of NCLT (Rules) 2016 states if either of the party does not comply with the rules of NCLT it doesn’t make the proceedings invalidate unless the tribunal is of the opinion failed to comply with such rules results in miscarriage of justice. of the case.

Power to regulate the procedure

Rule 51 of NCLT (Rules) 2016 states that the tribunal shall regulate its own procedure which shall be in accordance with natural justice principles while discharging its functions.

Procedure in respect of matters earlier dealt by other quasi-judicial bodies, courts and tribunals

Rule 64 of NCLT( Rules) 2016 states about the matter earlier dealt by Company Law Board

  • If any case is pending before CLB when NCLT was established or either;
  • CLB has been dissolved on the establishment of NCLT.

Then it said that all the cases which are pending on the date or on such benches shall be transferred to the tribunal and such benches of the tribunal shall exercise territorial jurisdiction.

  • All the decisions or actions taken under the CLB shall be valid except in cases when the orders are reserved by CLB or its bench and in such cases, the tribunal shall reopen the matter and rehear as if the hearing had not taken place.
  • Tribunal may call upon the parties to produce further evidence in the interest of justice.
  • Matters that are pending before the principal bench of CLB as on the date of establishment of the tribunal shall be dealt by a bench consisting of not less than two members of the tribunal.
  • Tribunal shall deal with all the cases which are transferred from CLB to the tribunal.
  • By filing a petition or application in the Form NCLT 1, parties with the approval of the tribunal shall withdraw the proceedings which have been continually before the CLB and serve the petition in parties, Central Government, Regional Director, Registrar of Companies, official liquidator and serious fraud investigator.
  • If the tribunal grants permission in filing a petition or application in physical form, the same shall be done with necessary documents and papers.

Need for the National Company Law Tribunal Rule, 2016

Below are a few reasons as to need for the establishment of NCLT Rule, 2016:

  1. The primary reason is to reduce the burden of high courts.
  2. The establishment of NCLT and NCLAT helps in solving disputes faster which in turn helps the businessman in doing their business at ease.
  3. Aggrieved parties who are dissatisfied with decisions and orders were given by the company law board can now appeal to NCLAT instead of high courts.
  4. Businessmen and individuals felt there need to be standard jurisdiction to resolve the dispute within concerned time and with less cost.
  5. Shareholders and other individuals were of the opinion along with resolving the dispute faster, it also helps in having an efficient free flow of management.
  6. Companies act, 2013 was alone, not sufficient to resolve the disputes.

Procedure before the formation of National  Company Law Tribunal

Before the formation of National Company Law Tribunal, the disputes concerning company were governed as per the procedures laid down in the:

  1. Companies Act, 1956;
  2. Companies (Court) Rules 1959;
  3. Companies law board regulation 1991.

1. Companies Act, 1956

Constitution of Board of Company Law Administration

  • S. 10E of the Companies Act, 1956 states the Central Government shall constitute the board of company law administration.
  • The board shall be discharged with such powers and functions as conferred on them.
  • The members of the board as appointed by the Central Government shall be not more than nine.

Powers of Company law board

  • The members were given exclusive powers as any acts done by the board cannot be called in question on the grounds of defect in the constitution, the existence of any vacancy among the members of the board as per section 10E(4) of Companies Act, 1956.
  • Company law board shall have the same powers as CPC, 1908 while deciding any proceedings, such as:
  1. Discovering and inspection of documents or other material objects producible as evidence;
  2. Enforcing the attendance of witnesses and requiring the deposits of their expense;
  3. Compelling the production of documents;
  4. Examining the witnesses on oath;
  5. Granting of adjournments;
  6. Reception of evidence on affidavits.

Appeals against the orders of Company Law Board

  • Any person who has been aggrieved by the order of the company law board within sixty days ( may extend time on certain circumstances) from the date of order of CLB shall file an appeal to the high court. 
  • The essential point to take into consideration is that an appeal cannot be filed to the high court if the appeal is related to question in fact.
  • The appeal would lie in a high court in whose jurisdiction the registered office of the company is situated.

2. Companies (Court) Rules 1959

Form of proceedings

Regulation 3 of Companies (court) rules 1959 states:

Every proceeding shall be dated and shall be instituted in the matter of Companies act, 1956 and in the matter of company to which it relates.

Application how made

Regulation 10 of Companies (court) rules 1959 states application shall be made in the form of petition or judge’s summons.

3. Company law board regulations, 1991

Power of the Chairman to specify matters which may be dealt with by a bench

Rule 4 of Company Law board regulation, 1991 states that:

  • Matters which are falling under section 250, 269 and 388B of Companies act, 1956 and Section 2A of Monopolies and Restrictive Trade Practices act shall be dealt by the principal bench which comprises one or two members. 
  • It said that the principal bench shall be at New Delhi.
  • And all the matters pending as on April 1, 2008, shall be disposed of by Principal bench and Additional principal bench.

Jurisdiction of the bench

Rule 7 of Company Law Board Regulations, 1991 states proceedings shall be instituted before the bench within whose registration office of the company is situated.

Procedure for filing petition 

Rule 14 of Company Law Board Regulations, 1991 states:

  • Petition to the bench shall be prepared in the Form No 1 in Annexure ll and it shall be sent by the petitioner to the concerned bench officer.
  • The petitioner shall send an advance notice along with the copy of the petition to the respondent.

Rights of the party to appear before the bench

Rule 19 of Company law board regulations, 1991 states:

  • Every party to the proceedings shall appear before the bench in person or any person authorised by him.
  • The party to proceedings shall appoint either an advocate or Secretary who is in whole-time practise or practising Chartered accountant or practising cost and work accountant to act as a representative of such party.
  • A company to a proceeding shall appoint and authorise its director or Company secretary to appear in any proceedings before the bench.

Conclusion

NCLT is the successor to the company law board. With the establishment of NCLT, there will be a speedy remedy in resolving the company law disputes and will be disposed of expeditiously. Appeals can be made by an aggrieved party from any decision or order passed by NCLT within the period of forty-five days of the receipt of an order or decision to NCLAT.

Reference


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