1. Column: Expand the companies law tribunals’ ambit

Column: Expand the companies law tribunals’ ambit

This will speed up resolution of issues outside the companies Act and make doing business in India easier

By: | Published: November 10, 2015 12:42 AM

After winning two legal battles, fought right to the Supreme Court, for Constitutional validity, the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) are soon going to be a reality. The apex court has twice upheld the constitutional validity of these tribunals. Some amendments though will be required in the Companies Act, 2013 (Act) to align the composition of these tribunals as directed by the Supreme Court.

The process to appoint members to man these tribunals and infrastructure to house them is already in the works. It is expected that these tribunals should be operational by the first half of 2016.

However, nearly 40% of the provisions of Act are still not in force because these can only be effective once these tribunals are operational. So, it is time to focus on getting these tribunals up and running. Also rather important is that they work as multifunctional tribunals and not solely for the purposes of the Act. The Act, the mother legislation for these tribunals, provides that in addition to its provisions, these tribunals can be used to exercise and discharge powers and functions given to them under any other law. The first to make use of this provision is the draft Insolvency and Bankruptcy Bill, 2015, that provides use of these tribunals as Insolvency Adjudicating Authority. The draft bill provides that the NCLT shall be the adjudicating authority with jurisdiction over companies, limited liability entities and that appeals from the order of NCLT will go to the NCLAT. This is a great move to use these specialised tribunals for insolvency and bankruptcy law as well. Under the Act, these tribunals will replace the jurisdiction of high courts with respect to company law matters, the Company Law Board, Board for Industrial and Financial Reconstruction, and Appellate Authority for Industrial and Financial Reconstruction.

The principal bench and other benches of these tribunals will comprise ‘judicial’ and ‘technical’ members. These will be people of high positions with vast experience, special knowledge and proven ability which will make it a right recipe for their efficient functioning. The success of these tribunals will not only depend on the rich composition, but also upon their accessibility. While the principal bench will be in New Delhi, the central government has power to set up other benches. In order to cater to large parts of the country and for efficient functioning, it is essential that large number of benches is established. This will, in addition to facilitating the access of the tribunals to corporates and other stakeholders, also facilitate work opportunities for various professionals in smaller cities. Apart from lawyers, practising company secretaries, chartered accountants and cost accountants are also allowed to appear before these tribunals.

The success of any legal system largely depends on “cost” and “time” involved to dispose matters and the “quality of judicial process”, that is, the good practices that promote quality and efficiency in the court system. The World Bank rankings on the ease of doing business takes into account these factors to determine the ease of enforcement of contracts. That India badly fails in ease of enforcement of contracts is evident from its poor ranking, at 178 out of 189 countries. According to the report, contract enforcement in India could take 1,420 days and can cost around 39.6% of the value of the claim. It aptly reminds of the maxim “justice delayed is justice denied”. It will require tireless labour to improve the ranking by ensuring speedy and efficient disposal of matters. Almost all legislations passed these days are conscious of time-bound disposal of matters. The two ordinances recently promulgated to amend the Indian arbitration law and to set up commercial courts to settle commercial disputes are a case in point. The Act, like these ordinances, also provides that applications or petitions filed with NCLT and the appeals filed with NCLAT be dealt with and disposed off as expeditiously as possible and every endeavour to be made for disposing them in 3 months. Any time beyond this will have to be approved by the president of NCLT or Chairperson of NCLAT, as the case may be, with reasons of delay being recorded. The maximum extension can only be for another 90 days. As important matters like corporate restructuring, rehabilitation, reviving of companies, oppression and mismanagement, winding up, etc. will be heard by these tribunals, it will be really heartening to see fast disposal of these matters.

The Act also provides that these tribunals make their own procedure and not be bound by the procedure provided in the Civil Procedure Code, 1908, provided they follow the principles of natural justice while framing their own procedure. The civil courts will neither have any jurisdiction over matters determined by these tribunals and nor they can grant injunction for any action taken by these tribunals.

With much expertise and resources available at their disposal in addition to the autonomy enjoyed in their operations, let these tribunals be best used for enforcement of modern corporate laws and act as super tribunals.

The author is partner with J Sagar Associates. Views are personal

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