In order to bring thousands of legal matters pertaining to companies under one roof and expedite them, the government has kept for itself a strict timeline of four months to constitute and operationalise the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT).
NCLT will replace the Company Law Board (CLB), the Board for Industrial and Financial Reconstruction (BIFR) and the Appellate Authority for Industrial and Financial Reconstruction (AAIFR). NCLT will be a one-stop body for approval of mergers, wind-ups, corporate reorganisation, capital reduction, extension of financial year, among other matters related to companies, which are currently executed through multiple agencies including High Courts, CLB, BIFR and AAIFR. This is likely to reduce the burden of High Courts. “Once NCLT is in place, BIFR and AAIFR will be dissolved,” an official said.
The creation of NCLT tops the agenda of the corporate affairs minister Sachin Pilot because between CLB and BIFR, there are around 3,000 pending cases while the total numbers of companies under liquidation as on March 31, 2012 stood at 5,727 in various High Courts. Of that, 1,046 cases have been pending for over 20 years.
Sources said the corporate affairs ministry is looking to notify the provisions related to NCLT within the next 45 days and, subject to the Cabinet’s approval, the process of constitution of NCLT will be initiated by December. “We are waiting to hear the feedback from the law ministry and department of personnel and training. The process of appointment of members for NCLT is also on. At this pace, NCLT should become a realty very soon,” said a senior government official.
As per the provisions of the new company law, NCLT will be the sole authority for all cases that have been pending across High Courts, CLB, BIFR or any other tribunal. “Each bench will be required to draw up a calendar for the hearing of transferred cases. NCLT will also have the power to re-hear matters that could not be decided in CLB, BIFR or any other tribunal/court,” said a senior corporate lawyer.
According to the latest data released by the corporate affairs ministry last week, nearly 22% of the 13.45 lakh companies registered in India have either closed down or are in the process of closing down. The MCA data said that 2.57 lakh companies have been closed while another 30,127 were in process of being shut down. Moreover, the data showed that 1.44 lakh companies did not file their annual returns/balance sheets for more than three consecutive years and, therefore, they have been classified as ‘dormant’ under the new Companies Act, 2013. As per the data, nearly 9 lakh companies were ‘active’ as on August 31, 2013, of which over 7,000 new companies were registered in August.