CLB TO NCLT governing legal bodiess.pptx

clb

1. – A NEW JURISDICTION – NATIONAL COMPANY LAW APPELATE TRIBUNAL (NCLAT) NATIONAL COMPANY LAW TRIBUNAL (NCLT) &

2. RESEARCH QUESTIONS: 1. What are the reasons for the replacement of Company Law Board (CLB) by the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT)? 2. Comparative Study of the CLB, NCLT and NCLAT

3. Student Assignment Case Analysis Find one case adjudicated by the NCLT or NCLAT (e.g., a corporate restructuring or an oppression case) and summarize its significance in corporate law. Evaluation Criteria: Clarity and coherence of the report. Depth of analysis and use of examples. Quality of research and proper referencing.

4. BACKGROUND NCLT & NCLAT were introduced in the Companies (Second Amendment) Act, 2002 on the recommendation of a high level committee headed by Justice V. Balakrishna Eradi . However, the constitutionality of the establishment of NCLT under the Companies (Second Amendment) Act, 2002 was challenged in the Madras High Court in the case of R.Gandhi vs. Union of India.

5. Company Law Board (CLB) Aspect Details Introduction Constituted in February 1964 under Section 10E of the Companies Act, 1956 , as the BOARD OF COMPANY LAW ADMINISTRATION; restructured in its present form on May 31, 1991. Nature Independent quasi-judicial authority established to handle matters relating to company law and the Companies Act. Key Responsibilities - Exercise powers and functions of the Central Government under the Companies Act or other laws as notified. - Address company-related disputes and issues. Enlarged Powers Powers expanded after the 1988 amendment to the Companies Act. Regulations and Rules - Framed Company Law Board Regulations, 1991 for regulating board proceedings. - Established Company Law Board [Fees on Application and Petitions] Rules, 1991 for fees and procedures for applications and petitions. Constitution (Section 10E) - Maximum of 9 members, with one designated as Chairman. - Authority to establish benches for specific functions. - Considered a civil court under the Code of Civil Procedure, 1908, and Code of Criminal Procedure, 1973. Appeals (Section 10F) - Appeals against CLB decisions can be made to the High Court within 60 days of communication. - High Court may proceed with appeals based on sufficient grounds. Powers and Functions - Address oppression and mismanagement issues (Sections 397-409, Chapter VI of the Companies Act, 1956). - Recommend removal of managerial personnel (Sections 388B-388E, Chapter IVA of the Act). Authority Type Quasi-judicial and administrative, with jurisdiction equivalent to civil courts for company law matters. Tabular Representation of Company Law Board (CLB)

6. Justice Eradi Committee Report for NCLT and NCLAT Aspect Details Committee Formation Justice V. Balakrishna Eradi led a committee in 1999 to analyze insolvency laws, winding up of companies, and delays in company law judicial proceedings. Key Objective To recommend reforms for reducing delays in adjudicating company law matters, addressing case duplicity, and improving judicial efficiency. Major Recommendation Proposed the constitution of National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) to consolidate and streamline processes. Transfer of Powers Suggested transferring powers of the High Court, Company Law Board (CLB), and Board for Industrial and Financial Reconstruction (BIFR) to NCLT and NCLAT. Legislative Changes - Companies Act amended in 2002 to include provisions for NCLT and NCLAT. - Section 408 of the Companies Act, 2013 formalized their establishment. Judicial Challenges - Writ petition filed by Madras Bar Association questioned constitutionality. - Supreme Court upheld NCLT and NCLAT establishment but required amendments. Constitution Date Ministry of Corporate Affairs notified the constitution of NCLT and NCLAT on June 1, 2016. Scope of NCLT - Powers of High Court for company law matters like winding up and restructuring. - Functions of CLB and BIFR under Sick Industrial Companies Act. Bench Locations Principal Bench in New Delhi; other benches in Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata, Mumbai, and New Delhi. Impact Streamlined company law adjudication processes, consolidated multiple authorities, and addressed inefficiencies in handling company law matters.

7. (Cont’d) The Madras High Court by its order dated March 30, 2004 held that establishment of NCLT and NCLAT and vesting in them the powers hitherto exercised by the High Courts and CLB was not unconstitutional but various provisions of Parts 1B and 1C of Companies Act, 1956 suffered from constitutional infirmities which had to be sufficiently amended to establish NCLT and NCLAT. BACKGROUND Parties approached Supreme Court and the Constitutional bench of the Supreme Court after considering all the issues in detail, on May 11, 2010 upheld the decision of Madras High Court that the establishment of NCLT & NCLAT were constitutionally valid and further issued certain guidelines to be followed by the central govt. while amending the provisions under Part 1B & 1C of the Act in order to remove the defects and make them constitutional. UPHELD ORDERED

8. NOTIFICATION The Ministry of Corporate Affairs has finally notified the constitution of NCLT & NCLAT and various other relevant provisions with effect from June 1, 2016. NCLT has started functioning with eleven benches. Benches constituted and their respective jurisdiction is as follows;

9. S. No. Location Jurisdictional State/Union Territory 1 New Delhi (2 Benches) Rajasthan and Union Territory of Delhi 2 Ahmedabad Gujarat, MP, Dadra and Nagar Haveli, Daman & Diu 3 Allahabad Uttar Pradesh and Uttarakhand 4 Bengaluru Karnataka 5 Chandigarh Chandigarh, Punjab, Himachal Pradesh, Haryana and J&K 6 Chennai Kerala, Tamil Nadu, Lakshadweep and Puducherry 7 Guwahati Arunachal Pradesh, Assam, Manipur, Mizoram, Meghalaya, Nagaland, Sikkim and Tripura 8 Hyderabad Andhra Pradesh and Telangana 9 Kolkata Bihar, Jharkhand, Odisha, West Bengal, Andaman and Nicobar Islands 10 Mumbai Chhattisgarh, Goa and Maharashtra JURISDICTION

10. INTRODUCTION NCLT is a separate quasi- judicial authority for company law matters established under the Companies Act, 2013. NCLT has powers and procedures like those vested in a court of law. NCLAT has the powers to set aside, modify or confirm the decisions of NCLT. NCLT and NCLAT are not bound by the CPC but shall be guided by the principles of natural justice . NCLAT is an appellate authority established for dealing with appeals arising out of the decisions of NCLT.

11. Features of the NCLT and NCLAT Feature Details Replacement of CLB The NCLT replaced the Company Law Tribunal , and all cases previously handled by the Company Law Board (CLB) were transferred to NCLT. Appellate Authority The NCLAT became the sole appellate authority , taking over powers of the High Court for hearing appeals related to corporate matters. Scope of Jurisdiction NCLT handles all corporate affairs of companies registered in India. Reduction of Litigation Multiplicity Designed to reduce the multiplicity of litigation cases and streamline the adjudication process. Expert Members Tribunals are comprised of members with judicial knowledge and technical expertise , enhancing efficiency and effectiveness. Speedy Disposal Aimed to enable quick resolution of cases and ensure the privacy of companies . Exclusive Jurisdiction Jurisdiction of the NCLT and NCLAT is exclusive , ensuring focused handling of corporate law matters.

12. PRESIDENT JUDICIAL MEMBER TECHNICAL MEMBER COMPOSITION OF NCLT

13. President A person who is or has been a judge of High Court for 5 years Judicial Member a present or retired judge of High Court; or a district judge for at least 5 years; or advocate with 10 years of practice. Technical Member has for at least 15 years been a member of the Indian Corporate Law Service or Indian Legal Service out of which at least 3 years as Joint Secretary or above; or a PCS/PCA/PCWA, who is or has been in practice for 15 years. is a person of proven ability, integrity and standing having special knowledge and experience, of not less than 15 years, in law, industrial finance, industrial management or administration, industrial reconstruction, investment, accountancy, labour matters, or such other disciplines related to management, conduct of affairs, revival, rehabilitation and winding up of companies. is, or has been, for at least 5 years, a presiding officer of a Labour Court, Tribunal or National Tribunal constituted under the Industrial Disputes Act, 1947. COMPOSITION OF NCLT

14. COMPOSITION OF NCLAT CHAIRPERSON JUDICIAL MEMBER TECHNICAL MEMBER

15. Chairperson A person who is or has been a judge of the Supreme Court or Chief Justice of the High Court Judicial Member A present or retired judge of a High Court or is a judicial member of tribunal for 5 years. Technical Member A person of proven ability, integrity and standing having special knowledge and experience of not less than 25 years. COMPOSITION OF NCLAT

16. WHO CAN APPEAR? Section 432 of the Companies Act, 2013. A party to any proceeding before NCLT or NCLAT can appear either: to present his case before NCLT or NCLAT. can authorize CA; or can authorize CS; or can authorize legal practitioner; or any other person, himself; or

17. POWERS NCLT Have The Following Powers Winding Up Compromise and Arrangements Revival and Rehabilitation of Sick Companies Rectification of Register(s) Complaints relating to refusal to transfer/ of transmission of shares. Investigation & Compounding Oppression & Mismanagement Powers in terms of LLP Act, 2008

18. Major Functions of NCLT and NCLAT Function Description Registration of Companies Adjudicates procedural errors, grants, cancels, or deregisters companies for illegal registration under Section 7(7). Transfer of Shares Resolves disputes on non-transfer or refusal to register share transfers under Sections 58 and 59. Class Action Provides redressal for fraud or improprieties affecting shareholders and investors under Section 245. Oppression and Mismanagement Offers remedies for cases of mismanagement and public interest violations under Section 241. Revision of Financial Statements Investigates and orders revision/reopening of falsified accounts under Sections 130, 131, 448, and 449. Conversion of Companies Approves conversion from public to private companies under Sections 13-18. Power to Investigate Authorizes investigations into company affairs, even by non-members, under Chapter XIV. Convening Meetings Organizes AGMs and UOGMs when companies fail to do so, ensuring compliance with the Companies Act, 2013.

19. NEW CONCEPTS Class Action Suits Financial Year Changing Cross Border Merger Issue & Redemption of Preference Shares Re- Opening of Accounts Power to Appoint Amicus Curiae

20. NCLT consolidates the corporate jurisdiction of the Company Law Board, Board for Industrial and Financial Reconstruction (BIFR), the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) and the powers relating to winding up or restructuring and other provisions vested in High Courts. Hence, NCLT consolidate all powers to govern the companies registered in India. CONSOLIDATION OF CORPORATE JURISDICTION

21. CORPORATE DISPUTE Courts Company Law Board BIFR/AAIFR Scheme of compromise/ arrangements Winding Up Reduction of Share Capital Restoration of defunct companies Variation of rights Appeal against CLB orders Matters relating to oppression and mismanagement Cause an investigation into the affairs of the Company Compounding of offences Power of rectification of register, rectification of register of members Revival of sick companies OLD SYSTEM

22. Company Law Board BIFR & AAIFR High Court Companies Insolvency Matters NCLT & NCLAT PRESENT SYSTEM

23. Section 434 – Set out the procedure in detail to deal with cases pending in various forums. The Government has notified on 1 st June 2016 for transfer of matters from CLB to NCLT. NCLT in its sole discretion can take up the pending matter before CLB from any stage. It can take up the matter at stage where it was left by CLB or start the proceedings afresh or from any stage it deems fit. TRANSITION

24. NCLT is a specialized court only for Corporates, i.e., companies registered in India. There is no other tribunal/forum for corporate disputes. NCLT will reduce the multiplicity of litigation before different forums and courts. NCLT has multiple branches and is able to provide justice at a close range. NCLT consists of both judicial and technical members while deciding on matters. The time taken to windup a company is reduced. Speedy disposal of cases will help reduce the number of cases. NCLT & NCLAT have exclusive jurisdiction. ADVANTAGES

25. THE INSOLVENCY AND BANKRUPTCY CODE, 2016 & NCLT NCLT is an adjudicating authority for insolvency resolution process and liquidation of corporate debtors. (Section 60 of Code) Crucial Role: Right from accepting/ rejecting application filed for initiating the corporate insolvency resolution process till passing of dissolution order. NCLAT – Appellate authority

26. SUPREME COURT (60 days and only question of law) NCLT NCLAT (45 days under Act & 30 days under Code) APPEALS

27. LANDMARK CASES Innoventive Industries Limited vs. ICICI Bank Limited Adherence to principles of natural justice would not mean that in every situation the NCLT is required to afford reasonable opportunity of hearing to the corporate debtor before passing its order. NCLT is bound to issue only a limited notice to the corporate debtor before admitting a case under Section 7 of the Insolvency and Bankruptcy Code, 2016.

28. LANDMARK CASES Cyrus Investments & Ors.. Vs. Tata Sons & Ors. Rejected the plea of Cyrus Mistry seeking waiver from the eligibility criteria of holding at least 10% shareholding in Tata Sons to file a case of oppression and mismanagement. Held “ Waiver should be granted only in rare, compelling and exceptional circumstances ”. Failure to fulfill cause of action test to maintain oppression and mismanagement allegations. (Cont’d)

29. Overburden of appeals on NCLAT With right to appeal to Supreme Court on any question of law, a large number of cases may be delayed due to pendency of appeal before overburdened Supreme Court CHALLENGES