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A PROJECT REPORT ON: - INTRODUCTION OF NATIONAL

COMPANY LAW TRIBUNAL AND NATIONAL COMPANY


LAW APPELLANT TRIBUNAL UNDER COMPANY ACT 2013

PROJECT SUBMITTED TO:

Dr. DEEPAK DAS

(FACULTY OF LAW)

PROJECT SUBMITTED BY:

SHOAIB ALVI

(SEMESTER VI)

ROLL NO.153

SECTION-A

SUBMITTED ON: 06.04.2017

HIDAYATULLAH NATIONAL LAW UNIVERSITY

RAIPUR, CHHATTISGARH

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ACKNOWLEDGEMENT

I feel highly elated to work on the topic Introduction of National Company Law Tribunal
and National Company Law Appellant Tribunal under Company Act 2013 the practical
realization of this project has obligated the assistance of many persons. I express my deepest
regard and gratitude to my teachers for their unstinted support. Their consistent supervision,
constant inspiration and invaluable guidance have been of immense help in understanding and
carrying out the nuances of the project report.

I would like to thank my family and friends without whose support and encouragement, this
project would not have been a reality. I take this opportunity to also thank the University and the
Vice Chancellor for providing extensive database resources in the Library and through Internet.

My gratitude also goes out to the staff and administration of HNLU for the infrastructure in the
form of our library and IT Lab that was a source of great help for the completion of this project

Some printing errors might have crept in, which are deeply regretted. I would be grateful to
receive comments and suggestions to further improve this project report.

Shoaib Alvi

Roll No. 153

Section A

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CONTENTS

ACKNOWLEDGEMENTS...02

CHAPTER 1:- INTRODUCTION...............04-07

OBJECTIVES.......07
NATURE OF STUDY AND SOURCES OF
DATA................................................07

CHAPTER 2:- POWERS OF NATIONAL COMPANY LAW TRIBUNAL AND


NATIONAL COMPANY LAW APPELLATE TRIBUNAL 08-15

CONCLUSION...16

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CHAPTER 1:- INTRODUCTION

The constitution of the National Company Law Tribunal and the National Company Law
Appellate Tribunal is a paradigm shift with the intention of establishing a specialized forum to
adjudicate all disputes/issues pertaining to companies in India. The primary objective of
constituting these tribunals is to provide a simpler, speedier and more accessible dispute
resolution mechanism.

The Government of India has, after fourteen years since their introduction, constituted the
National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal
(NCLAT) under the Companies Act, 2013 (Companies Act) to provide for a single judicial
forum to adjudicate all disputes concerning the affairs of Indian companies. The tribunals have
been made effective from 1 June 2016.

The NCLT will have eleven benches initially, two at New Delhi and one each at Ahmadabad,
Allahabad, Bangalore, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata and Mumbai. The
NCLT will comprise a president and judicial and technical members, as necessary. Justice M.M.
Kumar, former Chief Justice of the High Court of Jammu and Kashmir has been appointed the
president of the NCLT. The NCLAT, the appellate body, will consist of a chairperson and a
maximum of eleven judicial and technical members. Justice S.J. Mukhopadhaya, a retired judge
of the Supreme Court of India, has been appointed the chairperson of the NCLAT.

While the tribunals have been set up to deal with all company related disputes (except any
criminal prosecution for offences under the Companies Act), the powers currently provided to
the NCLT and the NCLAT under the recent notifications are limited. It is expected that further
notifications will soon be issued to allow the NCLT and the NCLAT to exercise complete gamut
of powers prescribed under the Companies Act.1

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Creation of Appellate Tribunal

One of the important provisions of the Companies (Second Amendment) Bill, 2013 is to provide
for the creation of Appellate Tribunal under the legislation which will hear appeals from the
NCLT. It has been constituted under Section 10FR. AN appeal can be made to the Appellate
Tribunal under Section 10FQ. However, not all appeals to the Appellate Tribunal are allowed
from the NCLT. Those orders made by the NCLT which were with the consent of both parties,
appeals cant be allowed against such orders. 45 days is the period within which appeal must be
made to the Appellate Tribunal and but delay can be condoned if there is sufficient reason for the
delay. When an order is given by the appellate tribunal then a copy has to be given to the parties
concerned and also the NCLT.

The composition of the Appellate tribunal will consist of a Chairperson and two members. The
Chairman of the appellate tribunal should be a person who is qualified to be a Supreme Court
Judge or Chief Justice of High Court. The member of the appellate tribunal should be a person
who has experience of not less than 25 years in the field of science, technology, medicine,
economics, banking or any such field whose experience might be valuable in Appellate Tribunal.
Section 10FT of the legislation says that Chairperson and members will hold office for a period
of 3 years and the upper age limit for Chairperson is 70 years and for members is 67 years.
Section 10 FZ says that no action will lie upon the members of the Appellate Tribunal for actions
taken in good faith. Under Section 10FZ, the immunity against prosecution will also cover the
employees of the tribunal or any such person who has been duly authorized by the Appellate
Tribunal to discharge any function.2

One of the unique features of the Appellate tribunal is that it will not be bounded by procedure
laid down in CPC 1908. It is the principle of natural justice that will guide the Appellate Tribunal
regarding the procedures. For the purpose of discharging the functions assigned under the Act
the tribunal as well as the appellate tribunal shall have the same power as are vested in a civil
court under CPC while trying a suit in respect of matter specified, namely, the summoning and
enforcing the attendance of any person and examining him on oath, requiring the discovery and
production of materials and receiving evidence on affidavits.

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The proceedings of the tribunal or appellate tribunal will be considered to be judicial proceedings
in consonance of Section 193 and 228 of the IPC. The tribunal and Appellate Tribunal will have
all powers which are vested in the civil court. But, it must be noted, that the jurisdiction of civil
court is not barred in all matters and in cases, where the tribunal thinks that the civil court can
look into the matter in a more competent matter, then the matter can be referred to the civil
court.

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Objectives-

To study introduction of National Company Law Tribunal and National Company Law
Appellant Tribunal under Company Act 2013.
To study powers of National Company Law Tribunal and National Company Law
Appellant Tribunal under Company Act 2013.

Nature of Study and Sources of Data

This research project is qualitative analytical and descriptive in nature. It is largely based on
secondary & electronic sources of data books & other references. The original sources of law
such as Statues, Case laws and Law Commission Reports, as guided by the faculty of Corporate
Law have also been widely referred to.

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CHAPTER 2:- POWERS OF NATIONAL COMPANY LAW TRIBUNAL
AND NATIONAL COMPANY LAW APPELLATE TRIBUNAL

The constitution of Benches of the Tribunal is given under Section 10FL and the principal bench
will be in New Delhi. The principal bench will be presided over by the President of the NCLT.
The power of giving orders and rectifying the orders are derived from Section 10FM (1) and
section 10FM (2) of the Act. Under Section 10 FM (1), the tribunal will hear the parties
concerned and then pass order and under Section 10FM (2), the tribunal can re-hear the matter
under 2 years and can rectify the order if there is a mistake of law. Section 10FP gives power to
the tribunal to ask for assistance from the Chief Metropolitan Magistrate and DM to enforce its
decree against the company or persons connected with the order.

However, the decision of the Tribunal or the Appellate Tribunal is not binding and there is a
provision for filing an appeal to Supreme Court under section 10GF. However, proviso to section
10GF says that that appeal has to be filed within 60 days from the date of communication of
order of tribunal. However, the Supreme Court may allow belated filing of application if the
cause for delay is genuine. If there is delay in filing the application, then the law can be
circumvented by filing an appeal under Article 136 of the Constitution under Special leave
Petition. Then, it is upon the Supreme Court to allow or not allow the appeal under Article
136 the researcher is of the view that a time period of 60 days to file an appeal is less and the
time must be extended to 90 days, so that aggrieved people are not deprived of the right to appeal
because of short limitation period.

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The NCLT has been given wide powers under the Companies Act to adjudicate:

1. Cases initiated before the Company Law Board (CLB) under the Companies Act, 1956 (Old
Act) (which, pursuant to NCLT's constitution, stand transferred to the NCLT);

2. All proceedings pending before any district court or High Court under the Old Act including
proceedings relating to arbitration, compromise, arrangements and reconstruction and winding
up of companies (which, upon the relevant notification being issued, shall stand transferred to the
NCLT);

3. References/inquiries/proceedings pending before the Board for Industrial and Financial


Reconstruction (BIFR), including those pending under the Sick Industrial Companies (Special
Provisions) Act, 1985 (SIC Act), which would be abated, upon relevant notification being issued,
and referred to the NCLT within 180 days from the date of abatement;

4. Appeals or any other proceedings pending before the Appellate Authority for Industrial and
Financial Reconstruction (AAIFR), including those pending under the SIC Act, which would be
abated, upon relevant notification being issued, and referred to the NCLT within 180 days from
the date of abatement; and

5. Fresh proceedings pertaining to claims of oppression and mismanagement of a company,


winding up of companies and all other powers prescribed under the Companies Act.3

6 The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging its
functions under this Act, the same powers as are vested in a civil court under the Code of Civil
Procedure, 1908 while trying a suit in respect of the following matters:

(a) Summoning and enforcing the attendance of any person and examining him on oath;

(b) Requiring the discovery and production of documents;

(c) Receiving evidence on affidavits;

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Subject to the provisions of the Indian Evidence Act, 1872, requisitioning any public record or
document or copy of such record or document from any office;

(e) Issuing commissions for the examination of witnesses or documents;

(f) Reviewing its decisions;

(g) Dismissing a representation for default or deciding it ex parte;

(7) Any order made by the Tribunal or the Appellate Tribunal may be enforced by that Tribunal
in the same manner as if it were a decree made by a court in a suit pending therein.

(8) All proceedings before the Tribunal or the Appellate Tribunal shall be deemed to be judicial
proceedings within die meaning of sections 193 and 228, and for the purposes of Section 196, of
the Indian Penal Code.

(9) No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any
matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this
Act or any other law for the time being in force and no injunction shall be granted by any court
or other authority in respect of any action taken or to be taken in pursuance of any power
conferred by or under this Act or any other law for the time being in force.

In addition, the recently enacted Insolvency and Bankruptcy Code, 2016 (Bankruptcy Code),
also provides wide powers to the NCLT to adjudicate upon the 'insolvency resolution process'
and liquidation of corporate debtors. However, the Bankruptcy Code is yet to be notified and
made effective.

In light of the limited provisions under the Companies Act which have been made effective,
presently, the NCLT has jurisdiction to:

1. Entertain any claims of oppression and mismanagement of a company and to pass any order
that the NCLT may deem fit in this regard;

2. adjudicate proceedings and cases initiated before the CLB under the Old Act, which now stand
transferred to the NCLT; and

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3. Exercise powers under various sections of the Companies Act which have been notified and
made effective by the Government of India, including (a) power to pass any order against a
company incorporated by providing false information or by fraud, (b) power to grant approval
for alteration of articles of a company, if such alteration changes its nature from public to private,
and (c) power to provide approval for issuance of redeemable preference shares by a company
under certain circumstances.

All appeals against any order of the NCLT may be filed by the aggrieved parties with the
NCLAT. Any appeal against the orders of the CLB before the constitution of the NCLT would
continue to lie before the relevant High Court and not the NCLAT. Currently, for matters
pertaining to the winding up of companies and sick companies, parties would have to continue to
approach the concerned High Courts, the BIFR or the AAIFR.

The formation of the NCLT and the NCLAT is a significant step towards attaining fast and
efficient resolution of disputes relating to affairs of the Indian corporate. It is expected that once
all relevant provisions under the Companies Act and the Bankruptcy Code are made effective,
these tribunals would provide holistic solutions to issues being faced by companies, including
those of winding up, oppression/mismanagement and insolvency. Being the sole forum dealing
with company related disputes, these tribunals would also eliminate any scope for overlapping or
conflicting rulings and minimise delays in resolution of disputes, thus, proving to be a boon for
litigants.

IMPACT OF INTRODUCTION OF NCLT:

Currently matters involving same companies or parties would be spread across various forums
such as High Courts for winding up and merger/amalgamation schemes, CLB for oppression and
mismanagement and before the Board of Industrial Financial Reconstruction (BIFR) pursuant
to reference under Sick Industrial Companies Act, 1985. On multiple occasions, litigants would
adopt the approach of moving various forums causing multiplicity of proceedings and delays.

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The NCLT aims at consolidating the various forums and providing a one stop shop for
adjudication of company matters.4

The NCLT and NCLAT are expected to dispose-off appeals, applications and petitions filed
before it within a period of 3 months from the date of the filing. An extension of 90 days may be
granted by the President of NCLT or Chairperson of NCLAT for disposal of the matter.

Currently the High Courts were burdened with company matters including winding up
proceedings. Transfer of such proceedings to NCLT is expected to reduce the burden.
Additionally, as appeal from an order of NCLT will lie before the NCLAT, High Courts will
have a further reduced burden, considering that earlier, appeal from the order of Company Law
Board was filed before High Court. However, an area of concern is that NCLAT may be faced
with a very high volume of appeals which earlier stood divided amongst various High Courts.

Thus, there would be a need for multiple members of the NCLAT. However considering the
requirements for being appointed as a member of the NCLAT are fairly high, there may be a
dearth of such qualified members causing delay in disposition of appeals.

With the notification of the provisions of the Bankruptcy Code, NCLT would form a forum
offering a completely new and improved process for liquidation of companies in India.

CLASS ACTION

A much awaited reform brought into effect along with the introduction of the NCLT, is the
statutory remedy of class action proceedings. Class action proceeding is one where a group or
class of people similarly affected can initiate a proceeding collectively. This allows reducing
time and costs and also inspires confidence amongst the parties as they act collectively.
Currently, class action proceedings were initiated in form of representatives suits, minority
action for oppression & mismanagement, proceedings before the consumer forums or through
public interest litigation. However, none of these provided a holistic remedy.

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Dearth of such a remedy was felt particularly in the wake of the Satyam Scam, where the public
shareholders in India had no remedy as opposed to the bondholders in the United States. With
the notification of Section 245 of the Companies Act, 2013, members and depositors in a
company have the additional remedy in form of class action proceedings which could be initiated
before the NCLT.

The recent surge in shareholder activism in India makes the introduction of class actions remedy
highly interesting. It is a critical tool now in the hand of minority shareholders who may question
the decisions made by the management and the intent thereof.

NATIONAL COMPANY LAW APPELLATE TRIBUNAL

A. Constitution of the Appellate Tribunal

The Central Government shall by notification constitute an Appellate Tribunal called the
National Company Law Appellate Tribunal consisting of a Chairperson and not more than two
Members, to be appointed by the Government, for hearing the appeals under this Act[s 10FR (1)]

The Chairperson of the Appellate Tribunal shall be a person who has been a Judge of the
Supreme Court or Chief Justice of the High Court [s 10FR(2)]. The other Members of the
Appellate Tribunal shall be persons of ability, integrity and standing having special knowledge
of and professional experience and of not more than twenty five years in science, technology,
economics, banking, industry, law, matters relating to labour, industrial finance, industrial
management, industrial reconstruction, administration, investment, accountancy, marketing or
any other matter, the special knowledge of, or professional experience in which, would be the
opinion of the Central Government useful to the Appellate Tribunal.[s 10FR (3)].5

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The Members of the Appellate Tribunal are mere Technical Members and not Judicial Members
unlike the Tribunal. The tenure of the Chairperson and the Members is for three years and they
can be reappointed. The age of superannuation of the Chairperson is 70 years and that of the
Members is 67 years. [s10FT]. One interesting point is to be noted here, the words in Section
10FE(1) is not more than two Members, so it appears that the Appellate Tribunal can function
even if no Member is appointed, as long as the Chairperson is appointed, moreover the Appellate
Tribunal can function even if only one Member is appointed. But this may cause difficulty in
case of a deadlock. In any case the provision needs urgent amendment. 6

B. Appeal from order of the Tribunal

All appeals from the Tribunal shall lie to the National Company Law Appellate Tribunal. But no
appeal shall from an order or decision made by the Tribunal with the consent of the parties. [s
10FQ(2)]. The limitation period to file an appeal is prescribed as 45 days from the date on which
a copy of the order or decision of the Tribunal is received by the appellant [s 10FQ (3)].

Such appeal shall be made in the prescribed form and accompanied by fee as may be prescribed
[s 10FQ (3)]. The Appellate Tribunal may condone the delay in filing appeal if it is satisfied that
the appellant was prevented by sufficient cause from not filing the appeal in time [s 10 FQ (2)].

On receipt of an appeal, the Appellate Tribunal shall, after giving the parties to the appeal, an
opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or
setting aside the order appealed against [s 10FQ(4)]. Copy of ever order in appeal shall be sent to
the Tribunal and parties to the appeal [s 10 FQ (5)]. Section 10FQ (6) provides that the appeal
should be heard expeditiously and endeavour shall be made to dispose of the appeal finally
within six months from the date of the receipt of the appeal. C. Benches of the Tribunal There is
no provision for forming benches of the Appellate Tribunal. It appears that all Members of the
Tribunal will constitute a bench.7

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Power to Punish for Contempt

The Appellate Tribunal has the same jurisdiction, powers an authority in respect of contempt of
itself as the High court has. The Appellate Tribunal shall exercise this power subject to the
Contempt of courts Act, 1971, subject to certain modification 1. The reference therein to a high
court shall be construed as including a reference to the Appellate Court 2. The reference to the
Advocate general in Section 15 of the said Act shall be construed as reference to such Law
officers as the Central Government may specify. Limitation The provisions of the Limitation
Act, 1963(36 of 1963) shall, as far as may be, apply to an appeal made to the Appellate Tribunal
[s 10GE].8

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CONCLUSION

The establishment of NCLT will prove to be a great help to the corporate world. With the change
in definition of a Sick Company a lot more companies have come under the ambit of a Sick
Company and thereby can get the needful attention on time. With the establishment of fund and
change in definition of Sick Company and winding up procedures, the time period for revival
and winding up will reduce. But the fund for revival of companies might come to a naught if the
amount is deposited with the Central Government, efforts should be made to put this into a
separate Fund thereby avoiding bureaucratic interference. In all efforts are being made by the
central government to achieve its proposed objectives through of avoiding multiplicity of suits,
protection of rights of the workers and to reduce the time period for winding up of a Sick
Company. Now what is required is to see that the provisions of this Act are strictly implemented
and the objectives are achieved.

The constitution of NCLT marks another seminal shift in the Indian judicial landscape and
clearly demonstrates that the judicial system is turning for the better. The CLB stands scrapped
and the matters will now be dealt with by the NCLT. Further, the notification of the provisions of
Bankruptcy Code is imminent and it is expected that upon such notification NCLT would take
over the corporate insolvency matter from courts. Thus, a complete overhaul of the system is
taking place. This is further demonstrated by the constitution of the first commercial courts in the
country. Commercial courts have been set up in Gujarat and the High Courts of Delhi, Mumbai
and Himachal Pradesh have also constituted its commercial divisions. However, introduction of
any new reforms brings with it its own set of challenges. The NCLAT may be overburdened with
appeals. Further with statutory second appeal on any question of law to Supreme Court being
available under Section 423 of the Companies Act, 2013, a large number of cases may be
delayed on account of pendency of appeal before the overburdened Supreme Court.

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