Blog Details

Author - Associate Aswini Ramesh

Introduction:

National Company Law Tribunal was established by the supreme court, it is a quasi-judicial body to regulate and resolve civil corporate disputes. The power to establish National Company Law Tribunal(NCLT) and National Company Law Appellate Tribunal (NCLAT) was derived from Article 245 of the Indian Constitution and the tribunal was established under the Companies Act, 2013 and was enforced on 1st June 2016  by Government Of India based on the recommendation of the Eradi Committee .

The National Company Law Tribunal is also the adjudicating authority for insolvency resolution process of companies and limited liability partnerships under the Insolvency and Bankruptcy code, 2016. 

Benches:

National Company Law Tribunal has thirteen (13) benches, New  Delhi has two benches out of which one is the principal bench . Subsidiary benches are as follows :

• Ahamadabad

• Allahabad

• Bengaluru

• Chandigarh

• Chennai

• Guwahati

• Hyderabad

• Jaipur

• Kochi

• Kolkata

• Mumbai 

• New Delhi 

Sitting Hours Of NCLT:

The court remains working on all working days from 9:30 AM to 6:00 PM except saturday, sunday and other national holidays. 

Powers Of NCLT:

The powers vested in NCLT are as follows:

• Class Action :  Class action suits are filed against frauds and this comes under Section 245 of the Companies Act. Any company which is registered under the Indian Companies Act steals money from investors or cheats them can be fine or penalised by the NCLT. Also the offender ( be it directors, company, auditor etc) should compensate the shareholders or depositors for the losses suffered by them on account of the fraudulent practices. 

Class of action can be filed against any type of company be it a public sector or  a private sector company. It can be filed under any company which is incorporated under the Companies Act, 2013 or any previous Companies Act. Banking companies are the only exception under this Act.

• Refusal To Transfer Shares : Incase any company mishandles registration of transfers of shares or refuses to transfer shares then the individual who incurred loss due to malpractice can to the NCLT within a period of two months to seek justice. As per Section 58 and Section 59 contracts and arrangements for security transfer comes under the jurisdiction of NCLT. 

• Oppression and Mismanagement : According to Section 397 can file complaints only about an ongoing case of abuse or mismanagement, now the tribunal allows people to seek remedy for any form of abuse be it the past or the present. If anyone finds that if working of a company is partial and aims to benefit certain parties while being oppressive towards others then the  affected people has the right to approach the tribunal and demand that it takes a look into the matters of the company so as to ensure that all people involved get justice.

• Compounding Of Offence :   Provisions of compounding under the 2013 Act were notified before the constitution of the NCLT and were assigned to CLB. This power is now vested with the NCLT and all compounding matters which are above the prescribed monetary limit will be approved by the NCLT. 

• Deregistration Of Companies : NCLT is vested with the power to deregister and dissolve companies who have got their registered done by fraudulent and illicit manner and also now can investigate any procedural involved in registration of a company if it deems to be needed.  

• Revision of Financial Statements : On several occasions falsification of record books were noticed under the Companies Act, 1956 and Section 447 and 448 were added to ensure that such an act will be effectively handled by the tribunal. Section 130 and 131 are newly added provisions that prohibit the company from suo motu opening its accounts or revising its financial statements , such opening /revising financial statements can be only done in the manner provided in the act. Section 130 allows the tribunal to command a company to reopen accounts under certain circumstances. While companies are permitted to review their financial statements under Section 131 but they do not have the powers to reopen any accounts. 

• Deposits : Chapter V of the act deals with deposits and was notified in phases in 2014 and powers to deal with the cases under it were assigned in CLB. Now the said powers are vested with NCLT. The provision for deposits under 2013 act were already notified. Aggrieved depositors also have the remedy of class actions for seeking redressal for the acts/omissions of the company which hurt their rights as depositors. 

• Tribunal Ordered Investigation : Chapter XIV provides several powers to the tribunal in relation to investigations. The most important powers vested with the tribunal are:

1. Power to order investigation : Under the Company Act, 2013 only 100 members ( but previously 200 members were required under Companies Act, 1954) are required to apply for an investigation into the affairs of a company, the power to apply for investigation is given to any person who is able to convince the tribunal that such a situation exists for initiating investigation proceedings. An investigation ordered by the NCLT can be conducted within India or anywhere abroad. Provisions are made to take as well as provide assistance to investigation agencies and courts of other countries with respect to the investigation proceedings.

2. Power to impose restrictions on securities : Earlier the restriction could be imposed only on shares. Now the tribunal can impose restrictions on any security of the company.

3. Power to investigate into the ownership of the company : The tribunal is vested with powers to investigate matters relating to ownership of the company. For instance the tribunal can order to investigate who actually runs the company if there are two parties A and B who claim to run the same company.

4. Power to freeze assets of the company :  The tribunal is vested with powers to freeze the assets of the company which can’t be used when the company is under investigation , but also can be initiated at the insistence of a wide variety of people in certain circumstances. 

• Conversion Of Public Company Into Private Company : Sections 13, 14, 15 and 18 of the Companies Act, 2013 read with rules govern the conversion of a public limited company into a private limited company. Approval from the NCLT is required for such a conversion. The tribunal may at its discretion impose certain conditions subject to which approvals may be granted.  

• Change In Financial Year : NCLT has the power to change the financial year of companies registered in India. As per Section 2 (41) the companies in existence should have a uniform financial year ending on 31st of March.

• Tribunal Convened General Meetings : Annual General Meetings (AGM) or Extraordinary General Meetings (EOGM) have to be held to revise the opinions of share holders and provide a general outline for the company’s working. These meetings have to follow the procedures provided under the companies act, 2013. In case of any extraordinary reasons the AGM or EOGM cannot be called, the tribunal as per the provisions of Sec 97 and 98 is vested with the power to convene a general meeting. 

Appeals : 

Decisions from the National Company Law Tribunal may be appealed to the National Company Law Appellate Tribunal, the decisions by the National Company Law Appellate Tribunal can be further appealed to the Supreme Court Of India. 

Difference between NCLT and NCLAT :

The NCLT has primary jurisdiction and the NCLAT has appellate jurisdiction. Evidences and witnesses are generally presented before the NCLT for decision making and the NCLAT reviews decisions of NCLT and checks on a point of law or fact. Finding facts and collection of evidences are one of the primary tasks of the tribunal whereas the appellate tribunal decides cases based on already collected witnesses and evidences. NCLAT is a higher forum than the NCLT as it reviews decisions made by the tribunal. 

Conclusion :

The merits of establishing NCLT include exclusive jurisdiction, Time efficiency with which the decisions are passed and decrease in a number of litigation cases in court. In fact in theory this is all possible but practically it has not been able to successfully implement and  achieve all the desired benefit out of this tribunal.