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  1. NATIONAL COMPANYLAW TRIBUNAL Opportunities for Company Secretaries By: Manisha Chaudhary, Advocate Partner UKCA Law Chambers, New Delhi

  2. NEED FOR NCLT • Considering the laws on corporate insolvency and other such provisions with regards to company law prevailing in industrially advanced countries, a High Level Committee set up by the Union of India (The Eradi Committee) recommended various amendments with regards to the provisions of Companies Act, 1956. • Setting-up of a National Company Law Tribunal and its Appellate Tribunal was recommended which will combine the powers of the: • CLB under the Companies Act, 1956, • BIFR and AAIFR under the Sick Industrial Companies (Special Provisions) Act, 1985, and • Jurisdiction and Powers relating to winding-up, restructuring and other such provisions, vested in the High Courts.

  3. IMPORTANT CONCERNS • Can the government transfer traditional judicial functions to tribunals? • Does the “wholesale transfer of powers” to NCLT offend the independence of judiciary and the separation of powers? • Are the provisions providing for a technical member along with a judicial member in a tribunal valid?

  4. 1. CAN THE GOVERNMENT TRANSFER TRADITIONAL JUDICIAL FUNCTION TO TRIBUNALS? YES In Union of India v. Harbhajan Singh Dhillon, the Hon’ble Supreme Court held, “It seems to us that the function of Article 246(1), read with Entries 1 to 96 of List I, is to give positive power to Parliament to legislate in respect of those entries. Object is not to debar Parliament from legislating on a matter, even if other provisions of the Constitution enable it to do so.” Thus the power of Parliament to enact a law which is not covered by an entry in Lists II and III is absolute. The power so conferred by Article 246 is in no way affected or controlled by Article 323 A or 323 B.

  5. 2. DOES THE “WHOLESALE TRANSFER OF POWERS” TO NCLT OFFEND THE INDEPENDENCE OF JUDICIARY AND THE SEPARATION OF POWERS? In Union of India v. R. Gandhi, the Madras Bar Association contended that constitution of a Tribunal, to transfer the entire company law jurisdiction of the High Court, was violative of the Doctrine of Separation of Powers and Independence of Judiciary. However, it was held by the Hon’ble Supreme Court that legislative measures are not subjected to basic features or basic structure or basic framework. It was further held that: - • A Wholesale transfer of power is an inevitable and natural consequence of the creation of a Tribunal. • The competence of the Parliament in this regard cannot be disputed.

  6. 3. ARE PROVISIONS PROVIDING FOR TECHNICAL MEMBER ALONGWITH JUDICIAL MEMBER VALID? • Legislature has the competence to make laws providing which disputes will be decided by courts and which disputes will be decided by Tribunals, subject to constitutional limitations, without encroaching upon the Independence of Judiciary and keeping in view the principles of Rule of Law and Separation of Powers. • If the Tribunals are intended to serve an area which requires specialized knowledge or expertise, no doubt there can be Technical Members in addition to Judicial Members. • However, where jurisdiction to try certain cases are transferred from Courts to Tribunals only to expedite the hearing and disposal or relieve from the rigours of the Evidence Act and procedural laws, i.e. no expertise is needed, there is obviously no need to have any Non-Judicial Technical Member.

  7. HIGHLIGHTS OF NCLT • It shall avoid multiplicity of litigation before various Forums (High Courts, CLB, BIFR, AAIFR). Thus there will be a consolidation of Corporate Jurisdiction. • There shall be at least 16 benches of the NCLT, thereby providing justice almost at one’s doorstep. • This tribunal shall comprise of technical experts who will provide more concrete and precise decisions. • There will be a mixture of judicial and equitable jurisdiction while deciding matters. • There shall be a reduction in period of winding-up from 20-25 years to 2 years. • Reduction in pendency of cases, expeditious disposal of cases.

  8. Reduction in burden of Hon’ble High Courts. • The appeals will be streamlined, as appeals against the order of the NCLT will go to an Appellate Tribunal (NCLAT), exclusively dedicated for this purpose. • Further appeal to the Hon’ble Supreme Court will only be on points of law, thereby reducing the delay in appeals. • This uncomplicated and consolidated company jurisdiction will help the Hon’ble Judges and Hon’ble Tribunal Members in delivering uniform decisions thereby removing any ambiguity.

  9. IMPORTANT POWERS OF THE NCLT • Of approving Merger and Amalgamations have been conferred upon the NCLT. • To call for Annual General Meeting or Meeting of members of a company, if the tribunal feels the need to do so. • To enforce compromise or arrangements. • Of winding up a company or putting a stay on the same. • To punish for contempt. • To sanction Reduction of Capital. • To grant relief in cases of oppression and mismanagement. • For rehabilitation, revival and restructuring of sick companies. • Increase in powers to adjudicate punishments and increase in the penalties.

  10. QUALIFICATIONS AND ELIGIBILITY CRITERIA OF MEMBERS OF TRIBUNALS • Legislature has been given the powers to decides eligibility criteria and qualifications of members of the NCLT and NCLAT. • However, the superior courts can examine adequacy of qualifications and eligibility criteria. • Depending upon whether the jurisdiction is being shifted from High Court, or District Court or a Civil Judge, the yardstick will differ. • It is for the court, which considers the challenge to the qualification, to determine whether the legislative power has been exercised in a manner in consonance with the constitutional principles and constitutional guarantees.

  11. FOR NCLT • President of NCLT – Judge of High court for 5 years. • Judicial Member of NCLT – 10 years service in Indian Legal or Corporate Law Services, Or equivalent post in central or state government, at a pay scale of not less than a joint secretary to the Government of India, Or held a judicial office for 10 years, Or Advocate of the High Court for 10 years. • Technical Member of NCLT – 10 years service in Indian Legal or Corporate Law Services, Or equivalent post in central or state government, at a pay scale of not less than a joint secretary to the Government of India, Or is or has been a Joint Secretary under the Central Staffing Scheme, Or has been a Chartered Accountant for at least 20 years, Or has been a Cost Accountant for at least 20 years, Or has been a Company Secretary for at least 20 years, Or 20 years experience in law, finance, management, banking etc. relating to management, conduct of affairs, revival, rehabilitation and winding up of companies.

  12. FOR NCLAT • Chairman of NCLAT – former judge of the Supreme Court or Chief Justice of a High Court. • Judicial Member of NCLAT – Judge of a High Court or Judicial Member of NCLT for 5 years. • Technical Member of NCLAT – 25 years of experience in law, finance, banking, management etc. relating to management, conduct of affairs, revival, rehabilitation and winding up of companies.


  14. TECHNICAL MEMBERS • A Company Secretary can be appointed as a Technical Member of the NCLT and the NCLAT. • For being a Technical Member in the NCLT, the company secretary should have been in practise for at least 20 years. • For being a technical member in the NCLAT, no specification has been given as to who can be an appointed. • A clear reading of this clause however shows that one can be a Technical Member of the Appellant Tribunal, by having expertise in the field of company law, finance, banking, management, economics etc. • Thus company secretaries with 25 years of experience in the above field can be considered to be Technical Members even of the appellant tribunal.

  15. REGISTERED VALUERS • Cl. 218 of the Companies Bill, 2009 provides that if valuation is required in any of the provisions of the Act relating to property, stock, assets, it should be done by a Registered Valuer appointed by the Audit Committee of the Board and the valuer should be a Chartered Accountant, or Cost and Works Accountant, or a Company Secretary or such other person possessing such qualification as may be prescribed, who has to apply to the Central Government to become a registered valuer.

  16. ADMINISTRATORS • Cl. 234 of the Companies Bill, 2009 provides that an interim or a company administrator shall be appointed by the Tribunal from a panel maintained by the Central Government comprising of advocates, company secretaries, chartered accountants, cost and work accountants and other professionals. • Also an interim or company administrator can further appoint or engage services of other experts to assist him/her, after taking approval from the tribunal. • Thus a practicing company secretary’s services may also be required by the interim or company administrator if the need arises, giving ample scope of growth to the Company Secretaries.

  17. LIQUIDATORS • Cl. 250 of the Companies Bill, 2009 provides that the tribunal may appoint as a provisional or company liquidator from a panel, maintained by the central government, comprising of: An advocate, company secretary, chartered accountant, cost and works accountant, Or firms or body corporates of advocates, company secretaries, chartered accountants, etc. Or a firm or body corporate which is a combination of professionals. having 10 years experience. • Cl. 285 further provides the appointment of a company liquidator by the directors of the company in case of Voluntary Winding up.

  18. APPEARANCE BEFORE THE TRIBUNAL • Cl. 393 of the Companies Bill, 2009 states that a party to any proceeding before the NCLT or NCLAT may either appear in person or authorise one or more chartered accountants, company secretaries, cost and work accountants or legal practitioners to appear on his/her behalf.

  19. OFFICER-IN-DEFAULT • For the first time in the Companies Bill, 2009, a new concept of Key Managerial Personnel has been introduced. The Managing Director, CEOs, Managers, Whole-time Director(s), Company Secretaries and CFOs have been brought under the purview of this definition. • The Key Managerial Personnel have also been drawn under the clause of ‘officer-in-default” in about 24 clauses excluding winding up provisions. • Thus as KMPs and as ‘officers-in-default’, company secretaries can execute more power and rights in the working and management of the company.