Corporate affairs minister Veerappa Moily on Thursday said the government might not create an appellate tribunal over the proposed National Company Law Tribunal (NCLT) and hinted that appeals against the NCLT?s decisions could be made in high courts.
Moily told FE that under the existing set-up, appeals against the Company Law Board decisions, including those related to liquidation and corporate management, can be filed in high courts, adding, that the same arrangement could be continued in the NCLT regime too. This, he said, would help prevent a triple-tier system, which could defeat the purpose of NCLT, that is, to fast track dispute resolution, corporate restructuring and liquidation.
Company law experts, however, pointed out that instead of doing away with the appellate tribunal, which could run into a conflict with the Supreme Court’s guidelines on the NCLT’s structure, the government could prescribe the grounds on which NCLT orders could be challenged. In May last year, the SC cleared the NCLT structure, but stressed that its judicial flavour must be maintained.
?I am thinking whether an appellate body is necessary or not (over the NCLT). Because, you cannot take away a party’s right to use the existing legal system. It would create triple-tier system, which might not have the desired effect,? Moily said. He added that the government would consider this option (not having the appellate authority) although no final decision has been taken yet.
The NCLT, which would have a structure similar to corresponding bodies in many developed countries, would replace the Company Law Board and Board of Industrial and Financial Reconstruction.
The tribunal that was proposed in 2002 was caught in a major legal wrangle amid fears that its structure as proposed by the government flouted the Constitutional separation of powers by vesting essential judicial functions in a quasi-judicial body. NCLT would help expedite the approval process for M&As in the private sector, a function performed by high courts. The tribunal would also allow timely unlocking of the value of distressed corporate assets, as it would take over the process of liquidation of companies, now performed by official liquidators attached to high courts. As per the SC directions, appeals against NCLT decisions could lie to the appellate tribunal. While the NCLT would be headed by a retired high court judge and consist predominantly of technical experts, the appellate tribunal would be headed by a retired chief justice of high court or a retired SC judge. The rulings of the appellate tribunal would be considered final and can be contested only through writ petitions in high courts. Says senior corporate lawyer Sumant Batra: ?The high court is not specially equipped to deal with corporate cases. Instead, the government must laying down strict criteria for appeals to the appellate authority so that frivolous cases are not entertained.? Another Delhi-based corporate lawyer Atul Sharma, however, said that the move to remove the appellate body would ?reduce the time period for getting justice?.
Meanwhile, Moily said that in the context of corporate scams, the system of governance among companies needed to be strengthened. ?Corporate governance is an important area and we need to have a system in place. SFIO (Serious Fraud Investigation Office) needs to be tightened and the early warning system needs to be strengthened,? he said. For this purpose he is also considering a fiscal component to encourage companies. He added that he would also look into the much-debated clause in the new Companies Bill on corporate social responsibility (CSR). ?There were some concerns on the issue (of CSR). There are many backward areas in the country and the question is how do we reach out to those places,? he said. In that connection, MCA is considering entering into MoUs (memorandum of understanding) with state governments to identify such areas and encourage companies to take up development work there. So far the government has identified 300 such backward areas in the country.
