INTRODUCTION OF NCLT

TRIBUNALS

Tribunals in India are a part of the Executive branch of the Government which is assigned with the powers and duties to act in judicial capacity for settlement of disputes. Part XIV of the Constitution of India makes provisions for establishment and functioning of the Tribunals in India. They are quasi-judicial bodies that are less formal, less expensive and enable speedy disposal of cases. There are tribunals for settling various administrative and tax-related disputes, including Central Administrative Tribunal (CAT), Income Tax Appellate Tribunal (ITAT), National Company Law Tribunal (NCLT), Customs, Excise and Service Tax Appellate Tribunal (CESTAT), National Green Tribunal (NGT), Competition Appellate Tribunal (COMPAT) and Securities Appellate Tribunal (SAT), among others. Tribunals were added in the Constitution by Constitution (Forty-second Amendment) Act, 1976 as Part XIV-A, which has only two articles viz. 323-A and 323-B. Article 323A provides that a law made by the parliament may provide for establishment of an Administrative Tribunal for the Union and a separate Administrative Tribunal for each state or two or more states. Article 323 B empowers the parliament or state legislatures to set up tribunals for matters other than those mentioned under Article 323A.

BACKGROUND

In recent times the Government of India has been emphasizing on easing the process of carrying out business in India. Thus, various legal reforms have been carried out and the constitution of the NCLT and the NCALT is one more step in this direction.

The National Company Law Tribunal (NCLT) & The National Company Law Appellate Tribunal (NCLAT) were established on 1st June, 2016 under the Companies Act, 2013. The NCLT & NCLAT are quasi-judicial bodies in India that adjudicate issues relating to Indian Companies. The constitution of the aforesaid Tribunals is in exercise of the powers conferred by Sections 408 and 410 respectively of the new Companies Act, 2013.

CONSTITUTION OF BENCH:-SECTION 419

The NCLT has eleven benches in the following jurisdiction:

COURSE OF IMPLEMENTATION OF NCLT

The genesis of setting up of specialized tribunals can be traced in the Supreme Court judgment in Sampath Kumar case. In this case while adopting the theory of alternative institutional mechanism, the Supreme Court refers to the fact that since independence, the population explosion and the increase in litigation had greatly increased the burden of pendency in the High Courts, therefore, to reduce the burden of High Courts and to fulfill the growing need for empowering the Company Law Board, they felt the need to constitute a high- power Tribunal, which could take up all matters relating to Company Law and other Corporate Laws at one Forum.

Hence, in the Companies (Second Amendment) Act, 2002 provides for the setting up of a National Company Law Tribunal and Appellate Tribunal to replace the existing Company Law Board (CLB) and Board for Industrial and Financial Reconstruction (BIFR).

The setting up of NCLT as a specialized institution for corporate justice is based on the recommendations of the Justice Eradi Committee, a committee set up to examine the existing law relating to winding up proceedings of companies in order to re-model it in line with the latest developments and innovations in the 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 tune with the international practice in this field.

The setting up of the NCLT and NCLAT are part of the efforts to move to a regime of faster resolution of corporate disputes, thus improving the ease of doing business in India.

The Ministry of Company Affairs (MCA) on 1st June, 2016 notified the Constitution of National Company Law Tribunal (NCLT) & The National Company Law Appellate Tribunal (NCLAT) in exercise of powers conferred under section 408 and 410 of the Companies Act, 2013.

Need for NCLT & NCLAT

The constitution of NCLT & NCLAT was a step towards improving and easing all the judicial matters relating to the Company law under one roof. Some of the most important reasons for NCLT & NCLAT’s birth are as follows:

• Simple Window: The most important benefit that the tribunals will act as a single window for settlement of all Company law related disputes effectively. It shall avoid unnecessary multiplicity of proceedings before various authorities or courts.
• Speedy Process: The NCLT and the NCLAT are under a mandate to dispose of cases before them as expeditiously as possible. In this context, a time limit of three (3) months has been provided to dispose of cases, with an extension of ninety (90) days for sufficient reasons to be recorded by the President or the Chairperson, as the case maybe. The speedy disposal of cases will save time, energy and money of the parties.
• Reduction of Work of High Court: The number of pending cases with High Court is too high and now the matters in respect to compromise, arrangement, amalgamations and winding-up transferred to NCLT. Accordingly, NCLT and the NCLAT will reduce the work of overburdened High Courts. Hence, with the constitution of NCLT & NCLAT, we hope that not only the Corporate entities but also all the stakeholders associated with those entities are benefitted.
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• It shall avoid multiplicity of litigation before various Forums (High Courts, CLB, BIFR. AAIFR). Thus there will be a consolidation of Corporate Jurisdiction.
• There shall be at least 11 benches of the NCLT, thereby providing justice almost at one’s doorstep.
• This tribunal shall comprise of technical experts who will provide more concrete and precise decision.
• There will be mixture of judicial and equitable jurisdiction while deciding matters.
• There shall be reduction in period of winding up from 20-25 years to 2 years.

Reduction in pendency of cases, expeditious disposal of cases