May 23,2020 | 9 min read

National Company Law Tribunal

Author - Dushyant Tiwari

The National Company Law Tribunal (NCLT) was established under the Companies Act 2013 and was constituted on 1 June 2016 by the Government of India and is based on the recommendation of the V. Balakrishna Eradi committee on law relating to the insolvency and the winding up of companies. The NCLT acts as a quasi-judicial authority dealing with systems, rules, and conflicts relating to corporate proceedings.


  1. The Eradi Committee is credited with the creation of the Tribunal, which acts as a court of law hearing corporate cases.
  2. The Tribunal is expected to check the evidence and hold discussions to resolve corporate-related legal matters.
  3. The authority to close cases relating to businesses and factories has been formally transferred from the CLB to the NCLT, rendering it the Sole Force in such legal matters. According to the guidelines in Section 434 of the Companies Act, 2013, pending cases under CLB were also transferred to the NCLT.
  4. The law decreed that the judicial powers of the High Court, the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) and the Board of Industrial and Financial Reconstruction (BIFR) would all rest with the Tribunal, rendering it an independent authority on such matters.
  5. In New Delhi, it has one principal bench and ten other benches under it.

Major Functions of NCLT

  • Insolvency Proceedings
  • Company registration
  • Share Transfers 
  • Deposits
  • Power to investigate
  • Freezing of a company's assets 
  • Converting a public limited company into a private limited company

Working of NCLT Courts

The Corporate Insolvency Resolution Process (hereinafter referred to as "CIRP") may be initiated by the Financial Creditors appealing to the National Company Law Tribunal (NCLT) according to Section 7 of the IBC, 2016 by Operational Creditors pursuant to Section 9 of the IBC, 2016 and by the Corporate Creditor himself pursuant to Section 10 of the IBC, 2016. The fundamental deviation from the old law and basic rule under this newly codified law is that a corporation that has gone insolvent cannot begin the liquidation process in the first stage unless and until it has passed through the Corporate Insolvency Resolution Process (CIRP) process; Under the resolution process as mentioned earlier, the company's recovery options are discussed and, if the resolution process above fails, only the company enters liquidation.


If a corporate debtor fails to repay creditors, obligations, financial creditors, an Operational creditor or a corporate debtor through a corporate claimant or any designated member, a person who has the capacity to control the corporate debtor's financial affairs has the power to initiate the insolvency resolution procedure. To begin the process, a request must be made to the National Company Law Tribunal (NCLT) under Section 7 of IBC 2016 by the Financial Creditor and under Section 10 of IBC 2016 by the Corporate Debtor.

The Operational Creditors must issue a 10-day notice of demand pursuant to (Section 8(2) of IBC, 2016 in the case of Operational Creditors) to the corporate debtor before he approaches the NCLT pursuant to Section 9 of IBC, 2016). Nevertheless, if the corporate debtor refuses to reimburse the outstanding dues or fails to show any current difference, an operational creditor may approach the NCLT directly.

The new code states that a corporate debtor's insolvency process must be completed in the NCLT within 180 days of the date of initiation (Section 12, 2016 IBC). The creditors' claims shall be frozen for a term of six months upon NCLT's acceptance of the appeal. The NCLT will listen to the options for reviving and agreeing on the potential course of action during this period. It is further explained that no legal claim against the corporate debtor shall be pursued in any other venue or Tribunal unless a resolution plan is made or liquidation procedure is initiated (Section 14 of IBC, 2016).

When an application for insolvency is approved pursuant to Section 7/9/10 of the IBC, 2016 the NCLT appoints an Insolvency Resolution Professional (IRP) within fourteen days after receipt of a referral from the Board of Insolvency and Bankruptcy. The designated Resolution Professional then assumes responsibility for the assets and operations of the debtor. He also receives from information utilities all the information that is relevant to the debtor's financial condition. IP shall only be designated for thirty days within which he shall carry out all required scrutiny (Section 18, IBC, 2016).

Making a public announcement about the start of the corporate insolvency process, is the next step, so that, if any, claims from any other creditors can also be taken forward. The IRP post shall constitute a creditor's Committee which receives any claims by the public announcement (IBC Section 13, 2016). If any financial lender is a related party of the defaulting debtor, such lender shall not have the right to represent, vote or participate in the creditors ' Committee so established by the IP. To be part of the Creditor's Committee, the operating creditors ' total contributions must be at least 10 percent of the debt. The Committee of Creditors shall decide, by seventy-five per cent voting, on the first seven days of its establishment whether the interim IRP should be used as a Resolution Specialist or substituted by someone else.

The NCLT names him after the Committee finalizes the Professional Resolution (Section 16 of IBC, 2016). The Creditor's Committee can replace the so-called Resolution Expert at any time by a seventy-five per cent majority vote. In the interim, i.e. until any new Resolution Professional is named, the Creditor's Committee may take decisions on insolvency resolution by a majority vote of seventy-five per cent.

The NCLT may grant a one-time extension of up to a maximum of 90 days over and above the pre-decided tenure of 180 days if the majority (75 per cent) of the financial creditors believe that the case is very complicated and that more time extension is needed. Resolution Professional shall be solely responsible for managing and implementing the corporate insolvency resolution process during such a period (IBC Section 18, 2016).

The Resolution Professional shall compile a statistical note to enable the resolution applicant to prepare a resolution plan. An applicant for resolution can be identified as a person who has the duty and responsibility to send a resolution plan to the Professional for resolution. Furthermore, the Committee of Creditor receives the proposal for approval from the Resolution Professional.

The next move on the agreement being approved by the Creditor's Committee is to come up with restructuring plans that can either come up with a changed repayment plan or liquidate the company's assets to recover the dues. If the Committee of creditors fails to take any definitive decision regarding the debtor's repayment, the assets of the debtor will be liquidated to pay back the creditors. If an application is approved for resolution, the same shall be forwarded for approval and implementation to NCLT.

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Dushyant Tiwari

Panel counsel for Delhi State Legal Service Authority and also practicing before the Supreme Court of India, Bombay NCLT, Bangalore High Court, Lucknow High Court, Allahabad High Court and NCLT & Delhi High Court, Consumer Courts, NCLT and other Tribunals. Matters related to State Commission.