IP Connect

India: National Company Law Tribunal (NCLT) replaces Company Law Board (CLB) from June 2016

On June 01, 2016, the Ministry of Corporate Affairs (MCA) published a notification regarding the constitution of the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) with effect from the June 01, 2016. The constitution of the aforesaid Tribunals is in exercise of the powers conferred by Sections 408 and 410 respectively of the new Companies Act, 2013.

The Companies (Second Amendment) Act, 2002 provides for the setting up of a National Company Law Tribunal and Appellate Tribunal to replace the existing Company Law Board (CLB) and Board for Industrial and Financial Reconstruction (BIFR). The setting up of the NCLT as a specialized institution for corporate justice is based on the recommendations of the Justice Eradi Committee, a committee set up to examine the existing law relating to winding up proceedings of companies in order to re-model it in line with the latest developments and innovations in the corporate law and governance and to suggest reforms in the procedure at various stages followed in the insolvency proceedings of companies to avoid unnecessary delays in tune with the international practice in this field. The setting up of the NCLT and NCLAT are part of the efforts to move to a regime of faster resolution of corporate disputes, thus improving the ease of doing business in India. NCLT and NCLAT will also pave the way for the faster implementation of the bankruptcy code. Their setting up is expected to reduce the burden on courts. As reported by Livemint, an Indian daily, government data revealed that 48,418 civil cases were pending before the Supreme Court of India as of mid-February 2016, 3.116 million civil cases pending before the High Courts as of December 31, 2014 and 8.234 million civil cases pending before the district and subordinate courts.

The establishment of the National Company Law Tribunal (NCLT) consolidates the corporate jurisdiction of the following authorities:

1. Company Law Board
2. Board for Industrial and Financial Reconstruction.
3. The Appellate Authority for Industrial and Financial Reconstruction
4. Jurisdiction and powers relating to winding up restructuring and other such provisions, vested in the High courts

With the establishment of the NCLT and NCLAT, the Company Law Board under the Companies Act, 1956 will stand dissolved.

While provisions relating to the investigation of a company’s accounts, freezing of assets, class action suits, conversion of a public company to a private company will now be governed by the NCLT, and appeal therefrom would be before NCLAT instead of High Court, those relating to compromise, amalgamation and capital reduction will continue to be under the purview of the High Courts. Gradually powers of High Court under the Companies Act 2013 / 1956 relating to reduction of share capital, winding-up and compromise or arrangement (merger, demerger, settlement) would get transferred to NCLT under specific directions issued by the MCA.

As per a notice published on the website of the Department of Personnel and Training on March 30, 2016, former judge (Retd.) of the Supreme Court of India, Hon’ble Mr. Justice S.J. Mukhopadhya, was appointed as the chairperson of the NCLAT, and the Appointments Committee of the Cabinet approved appointment of Justice (Retd.) M.M. Kumar, Chairman of the Company Law Board as President, National Company Law Tribunal (NCLT). As per section 466 of the Companies Act 2013, existing members and staff would be members and staff of the NCLT. The Rules in this regard are yet to be notified.

Vide its notification dated June 01, 2016, the Central Government also constituted 11 (eleven) Benches of the NCLT in exercise of its powers under sub-section (1) of section 419 of the new Companies Act, 2013. Of the said 11 benches, two shall be situated in New Delhi, and one each at Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata and Mumbai.

The notification regarding constitution of the NCLT and the NCLAT can be found here.

The notification detailing the list of the different benches of the NCLT, where they are located, and the areas over which they exercise their jurisdiction can be found here.

The notification regarding the transfer of matters or proceedings or cases pending before the Company Law Board to National Company Law Tribunal can be found here.