18 Company Law Board/ National Company Law Tribunal/ National Company Law Appellate Tribunal, Their Constitution, Powers And Duties

DR.Rita Gupta

18.1 Introduction

Sec. 2(90) of the new Companies Act, 2013 defines ‘Tribunal’ as the National Company Law Tribunal (NCLT) and Sec. 2(4) defines ‘Appellate Tribunal’ as National Company Law Appellate Tribunal (NCLAT). The Act confers power on the Central Government to constitute NCLT and NCLAT. These Tribunals are quasi judicial bodies to govern the companies in India and administer the provisions of the Act. It has to replace the earlier body known as Company Law Board (CLB). It would exercise almost similar powers that were being assigned to CLB by the erstwhile Companies Act, 2013. The constitution of NCLT, as envisaged, would streamline the administration of justice under the Act. It is intended to have greater expertise to adjudicate disputes more efficiently and expeditiously. The Appeal from NCLT order would lie before NCLAT. The second appeal may be filed with the Supreme Court. The whole justice administration system has been made time bound by the Act. The Tribunals would comprise of senior judicial and technical members. These Tribunals will not be bound by the procedure laid down by the Civil Procedure Code, 1908 and will have the power to regulate their own procedures. These are to be further guided by the Principles of Natural Justice. Their orders will be enforceable as a Court’s decree.

18.2 Constitution of National Company Law Tribunal (NCLT) (Sec. 408)

NCLT is successor quasi judicial body of Company Law Board (CLB). The Central Government is to constitute this Tribunal that shall consist of a President and such number of judicial and technical members as may be deemed necessary. Such members are to exercise and discharge such powers and functions as may be conferred on it by or under the Act or any other law for the time being in force. Sec. 409 provides for the qualifications of President and the Members of the Tribunal. The President shall be a person who is or has been a Judge of High Court for five years.

To qualify for appointment as a judicial member, a person shall qualify any of the following:

To be a judge of a High Court; or

is or has been a District Judge for at least five years; or

has been an advocate of a court for at least ten years.

A technical member of the Tribunal shall fulfil any of the following:

He may be a member of Indian Corporate Law Service or Indian Legal Service out of which at least three years shall be in the pay scale of Joint Secretary to the Government of India or equivalent or above in that service; or

A Chartered Accountant who has been in practice for 15 years; or

A Company Secretary who has been in practice for 15 years; or

A person of proven ability, integrity, having special knowledge and experience of 15 years in law, industrial finance, industrial management or administration, industrial reconstruction, investment, accountancy, labour matters or such other disciplines related to management, conduct of affairs, revival, rehabilitation and winding up of companies; or

Five years’ standing as a presiding officer of a Labour Court, Tribunal or National

Tribunal constituted under the Industrial Dispute Act, 1947.

18.3 Constitution of National Company Law Appellate Tribunal (NCLAT) (Sections 410-411)

The Central Government shall constitute an Appellate Tribunal to be known as the National Company Law Appellate Tribunal. It shall consist of a Chairperson and members not exceeding eleven. The Central Government shall notify such appointments. The Appellate Tribunal has to hear appeals against the orders of the Tribunal. Sec. 411 establishes the eligibility criteria for the Chairperson and the members. It provides that the Chairperson shall be a person who is or has been a Judge of the Supreme Court or the Chief Justice a High court. A Judicial Member has to be a person who is a sitting or retired Judge of High Court or Judicial Member of the Tribunal for five years. A Technical Member shall be a person of proven ability, integrity and standing having special knowledge and experience, for not less than twenty-five years, in law, industrial finance, industrial management or administration, industrial reconstruction, investment, accountancy, labour matters, or such other disciplines related to management, conduct of affairs, revival, rehabilitation and winding up of companies.

18.4 Selection of Members (Sec. 412)

The President of the Tribunal, the Chairperson and Judicial Members of the Appellate Tribunal have to be appointed with consultation of the Chief Justice of India. The Members of the Tribunal and Technical Members of the Appellate Tribunal have to be appointed on the recommendation of a selection committee consisting of:

The Secretary in the Ministry of Corporate Affairs shall be the Convener of the Selection Committee. The said Committee shall determine its procedure for recommending persons as mentioned above. However, no such appointment of the Members of the Tribunal or the Appellate Tribunal shall be invalid due to any defect or vacancy in the constitution of the Selection Committee.

18.5 Terms of Office and Salary etc. (Sections. 413-414)

The President and every other Member of the Tribunal is to hold office for a term of five years from the date on which he enters upon his office. He shall be eligible for re-appointment for another term of five years. The age of retirement is 67 years for the President while that of the members is 65 years. The salary, allowances and other terms and conditions of service of the Members of the Tribunal and the Appellate Tribunal would be prescribed under the rules. National Company Law Appellate Tribunal (Salaries, Allowances & Other Terms & Conditions of Service of the Chairperson & Other Members) Rules, 2014 and National Company Law Tribunal (Salaries, Allowances & Other Terms & Conditions of Service of the President & Other Members) Rules, 2013 may be referred for the same along with the other rules as and when framed by the concerned authority. However, it is provided that neither the salary and allowances nor the other terms and conditions of service of Members shall be varied to the prejudice of those who have been appointed.

Sec. 415 provides that if any casual vacancy arises in the office of the President or Chairperson, due to resignation, death or otherwise, the senior most member is to act until new appointment. If the Chairperson, the President or any other member wishes to resign, he may do so by notice in writing to the Central Government. If the President or the Chairperson is unable to discharge his functions owing to absence, illness or any other cause, the senior-most Member shall discharge the functions of the President or the Chairperson, as the case may be, until the date on which the President or the Chairperson resumes his duties.

Resignation of Members (Sec. 416)

The President, the Chairperson or any Member of the Tribunal may, by notice in writing under his hand addressed to the Central Government, resign from his office. However, they shall continue to hold office until:

However, as per Sec. 416, such President, Chairperson or the Member shall continue to hold office, until

• the expiry of three months from the date of receipt of such notice by the Central Government; or
• a person duly appointed as his successor enters upon his office ;or
• his term of the office comes to an end.

Out of the above mentioned, whichever is earliest becomes applicable.

18.6 Removal of Members (Sec. 417)

The Central Government may order for removal of any of the persons, appointed under earlier sections, namely, President, Chairperson or any other member; after consultation with Chief Justice of India in the following cases:

a.has been adjudged an insolvent; or

b.has been convicted for an offence which, in the opinion of the Central Government, involves moral turpitude; or

c.has become physically or mentally incapable of acting as such President, the Chairperson, or Member; or

d.has acquired such financial or other interest as is likely to affect prejudicially his functions as such President, the Chairperson, or Member ;or

e.has so abused his position as to render his continuance in office prejudicial to the public interest.

The Proviso states that except for the reason mentioned under clause (a), the removal on any other ground would require reasonable opportunity of being heard.

A removal may be effected by the Central Government in case of proved misbehavior or incapacity where inquiry has been made by a Judge of the Supreme Court. Such person should be informed of the charges against him and he should be given a reasonable opportunity of being heard although he may be suspended during the period of inquiry.

18.7 Orders of Tribunal and Filing of Appeal (Sections. 420-423)

After giving a reasonable opportunity to the parties of being heard, the Tribunal may pass appropriate orders. The Tribunal, within two years from the date of the order, may rectify mistakes in its orders. No amendment can be made to an order against which an appeal has been preferred. The copy of every order shall be sent to the parties concerned.

The appeal may be preferred before the Appellate Tribunal against any order of the Tribunal by any aggrieved within a period of forty five days from the date on which the copy of the order of the Tribunal is made available to the aggrieved person [Sec. 421(1)]. Where any order is passed by the Tribunal with the consent of the parties, no appeal shall lie against any such order to the Appellate Tribunal. [Sec. 421(2)].The appeal to the Appellate Tribunal shall be in such form and accompanied by such fees, as may be prescribed [Sec. 421 (3)].

In case the Appellate Tribunal is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the period of limitation of forty five days, the Appellate Tribunal may condone the delay in filing of appeal but not exceeding forty five days after the expiry of period of limitation of forty five days and entertain the appeal after expiry of said period of forty five days. On receipt of appeal, the Appellate Tribunal shall provide a reasonable opportunity of hearing to the parties to the appeal and after hearing the parties to the appeal shall pass such orders thereby confirming, modifying or setting aside the order appealed against, as it thinks fit and send a copy of every order made by it to the Tribunal as well as to the parties to appeal [Sec. 421(4-5)].

Further, as per Sec. 422, every application has to be dealt with and disposed off as expeditiously as possible. As far as possible, it should be disposed off within three months.

Where such disposal is not done, reasons for the same should be recorded in writing. After taking into account such reasons, the President or the Chairperson may allow a further period of 90 days for disposal.

Anybody aggrieved by any order of the Appellate Tribunal may file an appeal to the SC within 60 days from the receipt of the order of the Appellate Tribunal to him. Such an appeal should involve a question of law. The period may further be extended by another set of 60 days on a sufficient cause.

18.8 Procedure before Tribunal and Appellate Tribunal (Sec. 424)

The said Tribunals shall not be bound by the procedure laid down by the Civil Procedure Code, 1908 but guided by the principles of natural justice. They have the power to regulate their own procedure. For the purpose of discharging their functions under the Act, the Tribunals shall have the same powers as are vested in a civil court while trying a suit with respect to the following:

a) summoning and enforcing the attendance of any person and examining him on oath;

b) requiring the discovery and production of documents;

c) receiving evidence on affidavit;

d) subject to the provisions of Sections 123 and 124 Evidence Act, 1872, requisitioning any public record or document or a copy of such record or document from any office;

e) issuing commissions for the examination of witnesses or documents;

f) dismissing a representation for default or deciding it ex parte;

g) setting aside any order of dismissal of any representation for default or any order passed by it parte;

h) any other matter as may be prescribed.

The orders of the Tribunals are enforceable in the same manner as a court decree. In the case of a company, the order will be sent for enforcement to the court in whose local limit the office of the company is situated. If the order is against an individual, the order is to be sent to the court in whose local limits the individual resides or carries on business or professionally works for gain.

The proceedings before the said tribunals are deemed to be judicial proceedings within the meaning of Sections 193 and 228 of the IPC and for the purposes of Sec. 198 of the IPC. They are to be deemed to be Civil Courts for the purposes of Section 195 and Chapter XXVI, CrPC, 1908.

The Tribunals have the power to punish those who commit contempt of Tribunals (Sec. 425). Sec. 426, the Tribunals have a limited power of delegation of their powers. The President, members and officers are deemed to be public servants by virtue of the provisions of section 427 and they are not to be punished for any action taken in good faith (Sec. 428).

Sec. 429 provides for the power to seek assistance of Chief Metropolitan Magistrates while Sec. 430 provides that to the extent of powers vested in the Tribunals, no civil court would have any jurisdiction. Any vacancy in the Tribunals shall not invalidate any acts or proceedings by virtue of sec. 431. Section 432 confers the right to legal representation upon the parties. Regarding limitation, Sec. 433 prescribes that the provisions of the Limitation Act, 1963 are, as far as possible, would apply to proceedings or appeals before the Tribunals.

Learning Outcomes:

Summary:

In this module, the constitution by the Central Government of a National Company Law Tribunal (NCLT) and an Appellate Tribunal has been discussed. The Procedure to be followed by these Tribunals has been detailed along with the time period and manner of filing of appeal. The Constitution of the Tribunal, qualifications and removal of the members has been provided. The term of the office and salary structure is also discussed in the module.How the orders are to be passed and how the applications can be disposed off expeditiously as provided by the Act is taken up at the end.

References:

1) Avtar Singh, Introduction to Company Law, Eleventh Edition, Eastern Book Company

2) Taxmnn’s Companies Act 2013 with Rules, 2014

3) http://www.taxmann.com/datafolder/News/CHAPTER%20XXVII%20-%20NCLT.pdf

4) www.mca.gov.in

5) www.clb.nic.in

6)http://aishmghrana.me/2014/01/17/power-and-function-of-national-company-law-tribunal-companies-act-2013/

7)http://forbesindia.com/article/real-issue/key-implications-of-the-companies-act-2013-on-board-room-decision-making/38170/1

8) http://www.mca.gov.in/SearchableActs/Section416.htm