NATIONAL COMPANY LAW TRIBUNAL

INTRODUCTION

The National Company Law Tribunal is a quasi-judicial authority created under the Companies Act,
2013 to handle corporate civil disputes arising under the Act. Appeals arising out of the order of the
NCLT are heard and decided by the National Company Law Appellate Tribunal. Chapter XXVI of the
Companies Act provides for the constitution of the NCLT, qualifications for its members, jurisdiction
of the Tribunal, and other incidental matters.

The procedural law governing the proceedings before the NCLT and NCLAT is contained in the
NCLT Rules, 2016 and the NCLAT Rules, 2016 respectively.

BACKGROUND OF NCLT

The need for a special tribunal for dealing with all matters relating to company law was felt as early as
in the year 2000, when the Eradi Committee submitted its report wherein it recommended setting up
of a National Tribunal, to exercise the jurisdiction and powers of the Board for Industrial and
Financial Reconstruction, the Company Law Board, and the High Courts in respect of all matters
under the Companies Act 1956 and allied laws. The Companies (Amendment) Act, 2002 introduced
the NCLT but the provisions relating to the same were not notified due to certain reasons.

The Companies Act 2013 retained the concept of NCLT and NCLAT, however these provisions were
also not notified with immediate effect. The constitutionality of the NCLT was challenged before the
Supreme Court in the case of

Madras Bar Association v. Union of India

The Supreme Court upheld the constitutionality of the concept of NCLT except for some of the
provisions on constitution and selection process.

Finally the provisions for constitution of NCLT and NCLAT were notified by the MCA on 1st June
2016.

CONSTITUTION OF NCLT [S. 408]

The NCLT is constituted by the Central Government by notification No. 1932 (E) dated 01.06.2016.
The Tribunal consists of a President, and such Judicial and Technical Members at the Central
Government may deem necessary.

Only High Court Judges, or Judges who have served in the rank of a District Judge for at least five
years or a person who has practiced as a Lawyer for ten years, or more, can be considered for
appointment as a Judicial Member.
Only officers who are holding the ranks of Secretaries or Additional Secretaries alone can be
considered for appointment as Technical members of the National Company Law Tribunal.

The President and the Members of the Tribunal are appointed by the Central Government.

The President of the Tribunal shall be appointed after consultation with the Chief Justice of India. The
members shall be appointed after consultation with a ‘Selection Committee’ consisting of –

1. The Chief Justice of India or his nominee – Chairperson;

2. A senior Judge of the Supreme Court or Chief Justice of High Court – Member;
3. Secretary in the Ministry of Corporate Affairs – Member; and
4. Secretary in the Ministry of Law and Justice – Member

The term of office of the President and every other Member shall be 5 years, and they shall be eligible
for re-appointment for another term of five years.

JURISDICTION OF THE NCLT

TERRITORIAL JURISDICTION (BENCHES OF THE NCLT)

The Central Government has constituted one Principal Bench (at New Delhi) and 10 other Benches of
the NCLT. The territorial jurisdiction of each Bench is as determined and notified by the Central
Government in that behalf.

SUBJECT-MATTER JURISDICTION

The subject-matter jurisdiction of the NCLT is twofold –

1. The Tribunal exercises jurisdiction under the Companies Act, 2013 and exercises and discharges
the powers and functions as are or as may be conferred on it by or under the Companies Act;
2. The Tribunal also exercises the jurisdiction, powers and functions of the Adjudicating Authority
under the Insolvency and Bankruptcy Code.

POWERS OF THE TRIBUNAL

A. GENERAL POWERS FOR THE PURPOSE OF DISCHARGING THEIR FUNCTIONS

For the purposes of discharging their functions under this Act, the Tribunal shall have the same
powers as are vested in a civil court under the Code of Civil Procedure, 1908 while trying a suit in
respect of the following matters, namely-

1. summoning and enforcing the attendance of any person and examining him on oath;
2. requiring the discovery and production of documents;
3. receiving evidence on affidavits;
4. issuing commissions for the examination of witnesses or documents;
5. dismissing a representation for default or deciding it ex parte;
6. setting aside any order of dismissal of any representation for default or any order passed by it ex
parte; and
7. any other matter which may be prescribed.

The Tribunal also has the power –

1. To stay winding up [S. 289]

2. To settle list of contributories [S. 285]
3. To deliver property to the company liquidator [S. 283]
4. To set off claims [S. 295]
5. To make calls [S. 296]
6. To adjust rights of contributories [S. 297]
7. To order costs [S. 298]
8. To order public examination of promoters, directors etc. [S. 300]
9. To arrest absconding person [S. 301]

B. POWERS IN RESPECT OF PREVENTION OF OPPRESSION AND MISMANAGEMENT

Under section 242 of the Act, the Tribunal has the power to order for the

1. regulation of the conduct of affairs of the company in future,

2. the purchase of shares,

3. restriction on the transfer of the share,

4. termination, setting aside or modification of any agreement,

5. setting aside of any transfer, delivery of goods,

6. payment,

7. execution or other act relating to property,

8. removal of managing director, manager, or any of the directors of the company,

9. recovery of undue gains made by any managing director, manager or director during the period of
his appointment as such, imposition of costs as may be deemed fit.

C. POWERS IN RESPECT OF WINDING UP BY THE TRIBUNAL

On receipt of a petition for winding up under section 272, the NCLT may –

1. Dismiss it, with or without costs.

2. Make any interim order as it thinks fit.
3. Appoint a provisional liquidator of the company till the making of a winding up order.
4. Make an order for the winding up of the company with or without costs. The Tribunal shall not
refuse to make a winding up order merely because of the reason that –
 a. the assets of the company have been mortgaged for an amount equal to or in excess of those
assets; or
b. the company has no assets.
5. Any other order as it thinks fit.

D. POWER TO PUNISH FOR CONTEMPT [S. 425]

The Tribunal shall have the same jurisdiction, powers and authority in respect of contempt of
themselves as the High Court has and may exercise, for this purpose, the powers under the provisions
of the Contempt of Courts Act, 1971.

ORDER OF THE TRIBUNAL [S. 420]

The Tribunal may, after giving the parties to any proceeding before it, a reasonable opportunity of
being heard, pass such orders thereon as it thinks fit. The order so passed may be amended by the
Tribunal at any time within 2 years from the date of the order, with a view to rectifying any mistake
apparent from the record, if the mistake is brought to its notice by the parties.

APPEAL FROM ORDERS OF TRIBUNAL [S. 421]

Any person aggrieved by an order of the Tribunal may prefer an appeal to the Appellate Tribunal. No
appeal shall lie to the Appellate Tribunal from an order made by the Tribunal with the consent of
parties.

The appeal may be filed within 45 days from the date of the order, but the Appellate Tribunal may
condone delay in preferring appeal within a further period not exceeding forty-five days, if it is
satisfied that the appellant was prevented by sufficient cause from filing the appeal within that period.

EXPEDITIOUS DISPOSAL BY THE TRIBUNAL [S. 422]

Every application or petition presented before the Tribunal shall be dealt with and disposed of by it as
expeditiously as possible and every endeavour shall be made by the Tribunal for the disposal of such
application or petition within three months from the date of its presentation before the Tribunal.

TRANSFER OF CERTAIN PROCEEDINGS

On December 7th, 2016, the MCA issued Companies (Transfer of Pending Proceedings) Rules, 2016
for transfer of pending legal proceedings from High Court to National Company Law Tribunal bench.
Consequently all proceedings initiated under the Companies Act, including proceedings relating to
arbitration, compromise, arrangements and reconstruction, pending before the High Court, shall stand
transferred to the Benches of the Tribunal exercising respective territorial jurisdiction.