By Antara Srivastava
B.com(2nd year)
University of Lucknow (Main Campus)
TRIBUNALISATION IN INDIA-Revamping the Corporate Justice
Introduction
Under section 408 of the Companies Act 2013, the Central
Government established the National Company Law Tribunal in 2016. The National
Company Law Tribunal and National Company Law Appellate Tribunal were
established as quasi-judicial authorities to manage Indian firms. They are the
successors to the Companies Law Board (CLB).
The Constitutional legitimacy of the National Company Law
Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) was
affirmed by a five-judge Constitutional Bench of the Hon'ble Supreme Court of
India in Madras Bar Association v.
Union of India on May 14, 2015.
Background
NCLT
and NCLAT were proposed by Eradi Committee for the first time in the year 2000.
It was established in 1999 to investigate the legislation relating to
Insolvency, Bankruptcy, and Winding up of Companies. According to the committee,
a national tribunal should be created. In accordance with Justice V.
Balakrishna Eradi's suggestions, The Companies (Second Amendment) Act of 2002
(2002 Amendment Act) has to be amended to include additional sections for
the replacement of the existing NCLT/NCLAT, IB and IC supplied provisions. All
topics, procedures, and cases currently pending before the CLB to transfer to
NCLT and dispose of such instances in accordance with the provisions of The
Companies Act, 1956 and 2002 Amendment Act.
The
stated 2002 Amendment Act was never announced since the Madras Bar Association
contested it in the Madras High Court, and the constitutional legitimacy of the
same was determined by the Supreme Court in Union of India v. R. Gandhi,
President, Madras. On May 11, 2010, the Hon'ble Supreme Court ruled in support
of Parliament's legislative competence to create the NCLT and NCLAT.In the case
of Virendra Kumar Satyawadi v. The State of Punjab, it clarified
the distinction between Court and Tribunal. The Supreme Court, on the other
hand, ruled that the structure of the NCLT and NCLAT proposed under the 2002
Amendment Act was unconstitutional.To correct this problem, the government was
required to make changes. Before it could establish real and functional Tribunals,
the government was supposed to evaluate a number of aspects, including member
selection, tenure, and qualification of the judicial and technical members.
However, even after the passing of
the Hon'ble Supreme Court judgment in May 2010 with respect to the
constitutional validity of the setting up of NCLT and NCLAT, the same could not
be established. Time passed and the Parliament of India notified the Companies
Act, 2013 ("2013 Act") which replaced the 1956 Act and included
substantial provisions with respect to the establishment, powers, operations,
and jurisdiction of the NCLT and NCLAT in line with the necessary changes
required by the Hon'ble Supreme Court in May 2010 judgment.
The Madras Bar Association, however,
challenged the comparable provisions relating to NCLT and NCLAT imposed under
the 2013 Act due to conflict in the provisions of the 2013 Act with the orders
of the Hon'ble Supreme Court in the prior ruling of May 2010. The issue was
finally decided by the Apex Court's Constitution Bench on May 14, 2015, in Union
of India v. R. Gandhi, President, Madras Bar Association, where the
Supreme Court held that the constitutions of both the NCLT and the NCLAT are
constitutionally valid, as held in the May 2010 Supreme Court judgement. The
Supreme Court further stated that under the Indian Constitution, it is
permissible for the legislature to enact forums for adjudication outside Courts
as decided in the case of State of Gujrat v. GujratRevenue Tribunal
Bar Association.
The topic of whether the creation of tribunals robbed the courts of their
power was raised in the case of L. Chandra
Kumar v. Union of India. As a result,
the Hon'ble Supreme Court paved the way for the creation of tribunals by ruling
that tribunal decisions can always be appealed to the Supreme Court.
The Ministry of Corporate Affairs(MCA) notified on June 1, 2016 the
establishment of NCLT and NCLAT in the exercise of powers provided by Sections
408 and 410 of the Companies Act, 2013. Consolidating corporate jurisdiction
previously held by Company Law Board (CLB), Board for
Industrial and Financial Reconstruction (BIFR), The Appellate Authority for
Industrial and Financial Reconstruction (AAIFR),
as well as
powers relating to winding up or restructuring, as well as other provisions,
previously held by High Courts. Therefore, with the creation of the NCLT and
NCLAT, the Company Law Board under the Companies Act, 1956, has now dissolved.
Powers
of NCT & NCLAT
Ø 1. The
authority to hear complaints about companies' refusals to transfer securities
and to correct the membership register.
Ø 2. The
protection of various stakeholders' interests, particularly non-promoter
shareholders and depositors.
Ø 3. The
ability to provide investors with relief from a broad range of wrongful actions
committed by the company's management or other consultants and advisors
affiliated with the company.
Ø 4. Depositors
who are dissatisfied with the company's actions or omissions that have harmed
their depositor rights can file class actions to seek redress.
Ø 5. Authority
to order the company's accounts to be reopened or to revise its financial
statements.
Ø 6. Antidote
to oppression and mismanagement.
Ø 7. Company
de-registration.
Ø 8. Make
members' responsibility unlimited.
Advantages
Ø 1. The fundamental reason
is to minimize the pressure on high courts.
Ø 2. The establishment of NCLT and NCLAT aids in the resolution of
disputes more quickly, allowing business owners to conduct their operations
with greater ease.
Ø 3. Displeased parties who
are dissatisfied with the business law board's findings and orders may file an
appeal with the NCLAT.
Ø 4. Businessmen and
individuals believed that standard jurisdiction was required in order to
resolve disputes in a timely and cost-effective manner.
Ø 5. The shareholders and
other individuals were of the opinion that replacing NCLT, in addition to
resolving the issue faster, also aids in having an efficient free flow of management.
Conclusion
After
a 14-year hiatus, the quasi-judicial body was finally formed for adjudicating
disputes regarding corporate operations where speedy adjudication may help in
the smooth running of the economy. The former administration had many obstacles
that hampered the revival of ill enterprises; as the saying goes, "Justice
Delayed is Justice Denied," therefore cases were delayed.Though the
tribunals continue to do excellent work, there is a need to strengthen their
infrastructure, increase the number of benches and sanction judges, all of
which would aid in settling cases in a timely and effective manner, lowering
the cost of justice.
References
https://www.indiafilings.com/learn/national-company-law-tribunal-powers-jurisdiction/
https://indiankanoon.org/doc/748977/?type=print
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