The National Company Law Tribunal: Journey Up to Now and the Way Forward
In BW Legal World Saturday Solutions weekly webinar an eminent panel of lawyers discussed the journey of the NCLT so far and the changes that can help it achieve its purpose and hold aloft.
The National Company Law Tribunal (NCLT) is a quasi-judicial body in India that adjudicates matters relating to Indian Companies. It has been constituted by the Central Government under s.408 of the Companies Act, 2013. The major functions of the NCLT are: registration of companies, transfer of shares, deposits, power to investigate, freezing assets of a company, and also to convert companies from public limited to private limited.
In BW Legal World Saturday Solutions weekly webinar an eminent panel of lawyers discussed the journey of the NCLT so far and also proposed ideas for its way forward.
Appointment of Members of the Tribunal and Tenure for Re-appointment
Under s.413 of the Companies Act, 2013 it is stated that No person shall be appointed as a Member unless he has completed 50 years. Subsequently, s.413 (1) of the Companies Act, 2013 provides that “the President and every other Member of the Tribunal shall hold office as such for a term of five years from the date on which he enters upon his office, but shall be eligible for re-appointment for another term of five years”. Whereas, talking about the age limit, Dr. U.K Chaudhary, Senior Advocate, Supreme Court of India said that NCLT was not a forum meant only for the retired people. It is a forum where there should be induction of fresh blood. He further said that one should appoint a person as a member and let the person continue until the retirement or until the person is found to be unbecoming of a judge.
Insolvency and Bankruptcy Code (IBC) -Boon or Bane
The IBC has really changed the Indian economy’s business reform initiatives. The time-restricted resolution process has also been a great asset.
However, the Acting President of the National Company Law Tribunal, Mr. Bhaskar P. Mohan said that s.9 of the IBC is causing a lot of delays in the disposal of the matters. The genuineness of the documents gets questioned and becomes a concern.
Appointment of the Judicial Members
As stated in s.409 (2) of the Companies Act, 2013, a person shall not be qualified for appointment as a Judicial Member unless he—
- is, or has been, a judge of a High Court
- is, or has been, a District Judge for at least five years
- has, for at least ten years been an advocate of a court.
To this, Ms Pallavi Pratap the Managing Partner of Pratap & Co, added that some sort of mechanism should be devised to keep the technical and the judicial members at par. There should be more appointments especially judicial appointments from High Court Judges other than the retired High Court judges who are in numbers right now.
Pre-Packaged Insolvency Resolution Process (PPIRP)
PPIRP is an alternative process to Corporate Insolvency Resolution Process (CIRP). In June 2020, Dr. M.S. Sahoo, Chairperson, Insolvency and Bankruptcy Board of India (IBBI) made recommendations on the pre-pack insolvency resolution process. During this COVID-19 pandemic, a lot of MSMEs have suffered. Thus, PPIRP is quite a big reform for the MSMEs facing financial difficulties.
Furthermore, with the COVID-19 pandemic still going on, the legislature needs to find an adequate balance between implementing the scheme as soon as possible and implementing it effectively, remarked Mr. Divyam Agarwal, Partner, J. Sagar Associates.
IBC Has Taken Primacy Over the Company Law Matters
The Company law matters are being neglected because of the IBC matters when the Company Law tribunal was made to address and resolve the disputes in an already existing company.
Providing a solution for the same Mr Sajan Poovayya, Senior Advocate of the Supreme Court of India, made a pertinent point that because we have a common tribunal, we should just simply make sure that it is manned better and manned more in number.
Two Benches of the NCLT Having Different Views on the Same Cause
In response to this issue, Mr Krishnendu Datta, Senior Advocate, Supreme Court of India said that the view that a coordinate bench is binding on another coordinate bench applies to tribunals. He mentioned 3 judgments he came across where the Supreme Court has also taken the same view and stated that variance in views should stop. The view of one bench has to be respected and followed by the other bench unless they set aside an appeal.
In summary, the speakers lauded the journey of NCLT and agreed that provided with the required support, it will prosper into a flourishing tribunal.
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