Important Institutions

Introduction

• The National Company Law Tribunal (NCLT) is a quasi-judicial body in India that adjudicates matters related to corporate law.
• It was constituted by the Central Government under Section 408 of the Companies Act, 2013 with effect from 1^st June 2016 and is an essential part of the legal framework governing companies in the country.
• The primary objective of NCLT is to provide a specialized forum for the resolution of disputes and matters pertaining to company law and Insolvency and Bankruptcy Act, 2016 (IBC).
• The tribunal plays a crucial role in ensuring corporate governance and protecting the interests of shareholders, creditors, and other stakeholders.

What is the Historical Background of NCLT?

• The Eradi Committee (2000) headed by Justice V. Balakrishna Eradi first recommended the constitution of an NCLT.
• Before the establishment of NCLT, the Company Law Board was the primary quasi-judicial body that dealt with corporate matters in India.
  • It was set up under the Companies Act, 1956, to address disputes related to company law.
• NCLT was set up to replace the erstwhile Company Law Board and the Board for Industrial and Financial Reconstruction (BIFR).
  • BIFR was set up under the Sick Industrial Companies (Special Provisions) Act, 1985 in India.
• As the Indian economy underwent several changes and witnessed a surge in corporate activities, there was a growing realization that a specialized tribunal was needed to handle complex corporate disputes, insolvency cases, and matters related to company law.
  • The Companies Act, 2013, which replaced the Companies Act, 1956, brought about several changes in the regulatory framework for companies in India.
  • One of the major changes in the new act was the establishment of the NCLT.
• The NCLT became operational with the objective of consolidating the jurisdiction of various forums that were dealing with corporate disputes, including the Company Law Board (CLB) and the Board for Industrial and Financial Reconstruction (BIFR).

What lies within the Jurisdiction of NCLT?

• Under Company Law:
  • Section 280 of the Companies Act, 2013 deals with the Jurisdiction of NCLT to dispose of any suit, proceedings or claim by or against the company.
  • It adjudicates matters related to the merger and amalgamation of companies, ensuring that the process is conducted in accordance with legal provisions.
  • Cases involving oppression and mismanagement of a company, as specified in the Chapter XVI of Companies Act, 2013 fall within the jurisdiction of the NCLT.
• Under IBC Act:
  • The NCLT is a crucial forum for initiating and overseeing the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016.
• Winding – Up of Company:
  • The tribunal handles matters related to the winding up of companies, whether voluntary or compulsory under Chapter XX.
• Limited Liability Partnerships (LLPs):
  • Apart from companies, the NCLT also exercises jurisdiction over LLPs.
  • The tribunal can adjudicate disputes and matters related to the incorporation, functioning, and dissolution of LLPs.
• Class Action Suits:
  • The NCLT has the authority to entertain class action suits, which allow a group of shareholders or depositors to collectively bring a lawsuit against a company for alleged wrongful acts.
  • This provision is significant as it empowers minority stakeholders and promotes corporate governance and transparency.
• Compromise and Arrangements:
  • The tribunal reviews and approves compromises and arrangements between a company and its creditors or members under Chapter XV of the Companies Act, 2013.
• Adjudication of Cases Arising from Regulatory Authorities:
  • The NCLT serves as an appellate forum for cases arising from the decisions of various regulatory authorities.
  • This includes appeals against the orders of the Registrar of Companies (RoC), the Securities and Exchange Board of India (SEBI), and the Competition Commission of India (CCI), among others.

What is the Structure of NCLT?

• The NCLT operates through various benches located across different cities in India.
  • These benches are designated to hear matters falling within their respective territorial jurisdictions.
• The President of the NCLT, along with 16 Judicial and 9 Technical members, presides over the benches.
  • The Judicial Members typically have a background in law and serve as the judicial wing of the tribunal.
  • The Technical Members bring their expertise in fields such as finance, accountancy, and business to provide a holistic understanding of complex corporate matters.
• The NCLT operates in a quasi-judicial capacity, meaning it combines elements of both judicial and administrative functions.

Does NCLT have Powers of Civil Court?

• While NCLT has the authority to hear and decide matters related to companies, it does not have the comprehensive jurisdiction of a civil court.
• Civil courts deal with a broader range of civil disputes, including matters related to property, contracts, family law, and other civil issues.
  • NCLT's jurisdiction is specifically focused on corporate and company-related matters.
• However, it has some powers similar to that of a civil court:
  • Summoning
  • Inspection and Inquiry
  • Attendance of Witnesses
  • Contempt of Court