NATIONAL COMPANY LAW TRIBUNAL

The Companies Second Amendment Act 2002 has brought it a major change in the

manner which certain very important functions are administered. This is aimed at and it is

certainly hoped so that it will reduce delays and tedious procedures for carrying out many

acts under the Companies Act, 1956. These group of amendments relate to the setting up

of the National Company Law Tribunal (“Tribunal”) which will also see the simultaneous

dissolution of the Company Law Board. (“CLB). Essentially, the Tribunal will, to start

with, replace the CLB in all respects. For all practical purposes, therefore, the functions

that were hitherto carried out by the CLB will be now carried out by the Tribunal except

for certain matters. However, very importantly, matters that till now required the sanction

of the court or were otherwise carried out by the Court will also be carried out by the

Tribunal. Consider some of the very important powers so carried out by the Court -

power to sanction reduction of capital, power to approve schemes of arrangements and

compromises including mergers and demergers and above all, winding up of companies.

Also, the Tribunal will carry out the totally new function of restructuring of and other

functions relating to sick companies. In essence, it will also thereby be a successor body

to BIFR.

Let us consider the scheme of these provisions. However, before that, the reader is once

again reminded that though the Companies Second Amendment Act 2002 has been duly

enacted, it has not been brought into effect. It is only when a notification is issued under

section 1(2) of this Act the amendment provisions will be brought into effect. It appears

that the amendments made are so significant and will require so much backing up through

amendments in the rules and Guidelines, that there is so much delay in bringing them into

effect. To start with the CLB will be dissolved. All matters pending therein will be passed

on to the Tribunal. The National Company Law Tribunal will be set up. It will consist of

a President and 62 other members. The members shall be judicial members or technical

members. Considering also the fact that now the Tribunal will be concerned with 2

special matters, i.e., winding up and restructuring of sick companies, it is required that to

qualify to be a technical member, a person may have been a Presiding Officer of a

Labour Court or has special knowledge or experience relating to labour matters. Note that

the law specifically provides that for rehabilitation, etc. of sick companies, the bench of

the Tribunal will specifically consist if a member who has been a Presiding Officer of a

Labour Court or has special knowledge or experience on labour matters, as explained

above. however, such person will be one of three member bench.

The Tribunal will, as stated above, carry out, firstly, almost all of the functions of the

CLB. For example, petitions relating to oppression and mismanagement will be handled

now by the Tribunal. Amalgamations and demergers, which today require the sanction of

the Court will now need only the Tribunal’s approval. Appeals from the Tribunal can be

preferred to the Appellate Tribunal which is also being separately constituted for this

purpose. Appeals from the Appellate Tribunal will lie straight to the Supreme Court.

Appeals shall be to the Appellate Tribunal within forty five days of receipt of order to be

appealed against and in case of delay in filing of appeal, the Appellate Tribunal can give

grace in fitting cases. Similarly, appeal to the Supreme Court can be made within sixty

days of receipt of the order. However, the Supreme Court can allow a delay only of

another sixty days for late filing of appeal. Though not an absolute time limit, it is

provided that the Appellate Tribunal shall endeavour to dispose of the appeal within six

months.

Thus, the advantage companies will now have is that there will be a specialised and

focussed forum that bundles also effectively as a court for disputes and that is also

without the innumerable other burdens that a normal court has. In particular, the Tribunal

will also not be weighed down by the many requirements of procedure that a Court has to

meet which may be fair and required for a wide range of cases but not for most matters

under the Companies Act, 1956. It is provided that the Tribunal and the Appellate

Tribunal will not be bound by the procedure laid down in the Code of Civil Procedure but

shall be guided by the principles of natural justice and shall have the power to regulate its

own procedure. Also, the Tribunal and the Appellate Tribunal has exclusive jurisdiction

and thus civil courts are excluded from taking up or even granting injunction relating to

matters falling within the purview of the Tribunal or Appellate Tribunal. This should

ensure avoidance of multiplicity of forums. The parties shall have right of legal

representation before the Tribunal and the Appellate Tribunal. These representation can

be made by a chartered accountant, a cost accountant, a company secretary, apart from a

lawyer.

The Tribunal shall also administer the fund accumulated arising out of the levy of Cess

on all companies. This fund would be used for rehabilitation and similar other relief in

relation to sick companies. To conclude, the constitution of the Tribunal and providing it

with widespread powers under the Act should help result in reduction of time in

disposing of matters under the Companies Act, 1956.