National Company Law Tribunal (“NCLT”) and National Company Law Appellate Tribunal (“NCLAT”) were established as a part of reforms in India’s Company Law and as a part of reforming Companies Law. On June 01, 2016, the Ministry of Corporate Affairs (“MCA”) published a notification regarding the constitution of the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) with effect from June 01, 2016. It came as a big-ticket reform as the Companies Act, 1956 was enacted prior to India opening its markets in 1991 and the periodic amendments to the 1956 Act could not satisfy the current needs of Industry, market regulators. NCLT and NCLAT were established as per powers granted to MCA under Section 408 and Section 410 of Companies Act, 2013, respectively. These sections explain the meaning of NCLT and NCLAT in a clear way and we can look at these sections to get an overview of NCLT and NCLAT.
Section 408 of Companies Act, 2013 defines NCLT and it specifies that the Central Government shall constitute a Tribunal to be known as the National Company Law Tribunal composing of President and other Judicial and Technical members, to exercise and discharge powers and functions as prescribed by the Act or any other power delegated to them by way of any other enactment or a Notification by Ministry Of Corporate Affairs. Similar to NCLT, NCLAT was established as per Section 410 of Companies Act which states that the Central Government, by way of notification shall constitute an Appellate Tribunal to be known as the National Company Law Appellate Tribunal comprising Chairperson and Judicial and Technical members, for hearing appeals against the orders of the Tribunal.
However, it provides a Condition that technical members of NCLAT shall not exceed 11 members. Initially NCLT and NCLAT were given Jurisdiction over the Following matters:
- Board for Industrial and Financial Reconstruction. (“BIFR”)
- The Appellate Authority for Industrial and Financial Reconstruction. (“AAIFR”)
- Jurisdiction and powers relating to winding up restructuring and other such provisions, vested in the High Courts.
- Company Law Board (“CLB”).
It is important to note that the Company Law Board would cease to exist after the establishment of NCLT and NCLAT as per Section 466 of Companies Act, 2013.
NCLT and NCLAT have been established to act as a uniform forum for adjudicating disputes relating to working of companies where adjudicating it in a timely manner will help in smooth running of the economy. The earlier regime of the Company Law Board failed miserably because they were not useful in adjudicating disputes in an effective and time bound manner. Though NCLT and NCLAT are doing great work in streamlining the system, a lot more needs to be done. There is a need for improving the infrastructures at these Tribunals, increasing the Number of Benches as well as sanctioning of judges which will help in deciding cases in a time bound and effective manner and thus would reduce precious time and resources of companies which can be used by companies in growth of economy of India.
The Companies Act 1956 has been replaced by new Companies Act of 2013. It has brought several changes in the corporate practice in India. For the Corporate lawyers in Delhi it has brought several challenges. Company Law Board has been abolished. National Company Law Tribunal has been set up. NCLAT has also been set up to hear company appeal. Company jurisdiction of High Courts has been abolished due to changes in new Companies Act, 2013.
The Central Government has constituted National Company Law Tribunal (NCLT) under section 408 of the Companies Act, 2013 (18 of 2013) w.e.f. 0106.2016. In the first phase the Ministry of Corporate Affairs have set up eleven Benches, one Principal Bench at New Delhi and one each Regional Benches at New Delhi, Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guahati, Hyderabad, Kolkata and Mumbai.