NATIONAL COMPANY LAW TRIBUNAL AND

CORPORATE JUSTICE

SUBMITTED TO: JYOTIRMOY CHAKRAVORTY

(LECTURER OF ACCOUNTS)

-GARVIT YADAV(1018)
IST SEMESTER

TABLE OF CONTENTS
1. GENESIS OF SPECIALISED TRIBUNALS....................................................................5
2. 7TH NATIONAL CONFERENCE OF PRACTICING COMPANY SECRETARIES......8
3. ADR FOR CORPORATE JUSTICE..................................................................................10
4. CONCLUSION..................................................................................................................12
5. BIBLIOGRAPHY..............................................................................................................15

ACKNOWLEDGEMENT
Writing a research paper is an herculeian task, well finishing the same on the other hand seems to
give utmost satisfaction.This research though has been presented as written by a single personnel,
there are quite a number of people wihout whose guidance and support the research work cannot
be completed.
The research topic was suggested by my subject teacher and I am very grateful to my subject
teacher Mr. Jyotirmoy Chakravorty for his support and guideance.
I would like to thank the library staff for their support and for providing me with books without
which completionof the research could not be possible.
I would also like to thank my friends and family who stood by me and not only provided me with
valuable advices regarding writig a research paper but also, provided me with moral support.

INTRODUCTION
Considering the laws on corporate insolvency and other such provisions with regard to company
law prevailing in industrially advanced countries. A high level committee set up by the Union of
India (The Eradi committee) recommends various amendments with regards to the provision of
Companies Act, 1956 for the setting up of a National Company law tribunal and its appellate
tribunal.

AIMS AND OBJECTIVES OF STUDY

1. Assess the needs of National Comapny Law Tribunal inIndia
2. Comrehensive study based on cases, the requirement of a National Company Law Tribunal in
India.
3. A snaeak preview of the company law tribunal in India.

RESEARCH METHODOLOGY
The research work has been done by using 'Doctrinal Method' method of research where the
research is confined to library books and e-sources only.

GENESIS OF SPECIALISED TRIBUNALS

The inception of the specialised tribunals took place after Hon'ble supreme court's judgement in the
famous Samapth kumar case, in this case the supreme court, in the due course of adoptinng the
theory of alternative dispute mechanism, highlighted the fact that post-independent India has been
the witness of population explosion and there has been a spur in the litigation which has greatly
increased the burden of pendency on the high courts.
NEED FOR NATIONAL COMANY BOARD TRIBUNAL
Browsing through the archives of history of setting uo NCLT the researcher found that; even the
Winding Up petitions before the various High Courts have been pending for a very long time.
Similarly various matters before the Company Law Board (CLB), Board for Industrial and
Financial Reconstruction (BIFR) and Appellate Authority for Industrial and Financial
Reconstruction (AAIFR) have been pending for a very long period. The detailed data given in
tabular form (Appendix A) will give an indication that many of the Companies which were referred
to BIFR had their natural death for want of timely help and assistance from BIFR and as such,
resulted into wastage of scarce national resources.
Therefore, it was desired that, in place of various bodies presently looking into different matters like
merger/amalgamation, acquisition and reconstruction, revival and rehabilitation and winding up of
Companies, a body should be constituted to handle all these matters and to dispose of all pending
matters as well as fast disposal of new matters which might be referred to it in the future. Hence, the
Government constituted a Committee under the Chairmanship of Justice V. Balakrishna Eradi, a
retired Supreme Court Judge, to review the law relating to insolvency and Winding Up of
Companies and other laws like The Sick Industrial Companies (Special Provisions) Act, 1985
(SICA) etc. The Committee made various recommendations with the main objective of expediting
the revival rehabilitation of a sick Company and protection of workers interest, which were incorporated in the Companies (Amendment) Bill, 2001. The said Bill was subsequently passed by both
the Houses of the Parliament and finally got the assent of the President of India on 13th January,
2002 and became the Companies (Amendment) Act, 2002. Consistent with the underlying
objectives, as aforesaid, and in the backdrop of the experience of administration of SICA and
winding up process, the Companies (Second Amendment) Act, 2002 provides for setting up of the
National Company Law Tribunal (NCLT) and on setting up of NCLT, all the matters relating to
companies which were earlier handled by various High Courts, CLB, BIFR and AAIFR will now be
handled by the NCLT. Pending matters with the High Courts and CLB will be transferred to NCLT.
As the SICA has not yet been repealed, the sick Companies will continue to be under BIFR. Only

sick ancillary undertakings will come under the jurisdiction of NCLT, as the newly inserted
definition of Industrial Undertaking, seems to be faulty. Further, the definition of Industrial
Undertaking is explicitly exempting the Small Scale Industries (SSI) from its ambit and therefore,
SSI will remain out of the purview of the BIFR and the NCLT both.

The Law Commission of India in its 124th Report of 1988 pointed out
that the different types of litigation coming before the High Court in exercise of its wide jurisdiction
has to some extent been responsible for a very heavy institution of matters in the High Courts and
recommended for establishment of specialist Tribunals. The Law Commission noted the erstwhile
international judicial trend which pointed towards generalist courts yielding their place to specialist
Tribunals. Describing the pendency in the High Courts as catastrophic, crisis ridden, almost
unmanageable, imposing an immeasurable burden on the system, the Law Commission stated that
the prevailing view in Indian Jurisprudence that the jurisdiction enjoyed by the High Court is a holy
cow required a review and recommended the trimming of the jurisdiction of the High Courts by
setting up specialist courts/Tribunals while simultaneously eliminating the jurisdiction of the High
Courts. Here, it is important to point out that though the theory of alternative institutional
mechanisms was propounded in respect of the Administrative Tribunals, the concept itself - that of
creating alternative modes of dispute resolution which would relieve High Courts of their burden
while simultaneously providing specialised justice - is not new. In fact, the issue of having a
specialised Tax Court had been discussed for several decades. Though the Report of the
High Court Arrears Committee 1972 dismissed it as ill conceived, the Law Commission in its 115th
Report 1986, however revived the recommendation of setting up separate Central Tax Courts.
Similarly, other Law Commission Education Officer, Academics & Professional Development, The
ICSI. The views expressed are personal views of the author and do not necessarily reflect those of
the Institute.

7TH NATIONAL CONFERENCE OF PRACTISING COMPANY

SECRETARIES
Reports have suggested the setting up of Gram Nyayalayas, Industrial/Labour Tribunals and
Education Tribunals. The Supreme Court in L. Chandra Kumar case while referring to
recommendations of the Malimath Committee pointed that the theory of alternative institutional
mechanisms be abandoned and institutional changes be carried out within the High Courts, dividing
them into separate divisions for different branches of law, as is being done in England pointed out
that in the years that have passed since the Report of the Malimath Committee the pendency in the
High Courts has substantially increased. In this context, the Supreme Court viewed that the
Malimath Committee recommendation is not suited to the present context, the reasons for which the
Tribunals were constituted still persist; indeed, those reasons have become even more pronounced
in our times.

CONSTITUTIONAL PROVISIONS
By the 42nd amendment of the constitution in the year 1976, Constitutional scheme for setting up
Administrative tribunals and Tribunals for other matters under Article 323A and 323B, The setting
up of NCLT could be possible under the constitution of India. Administrative Tribunals.In
pursuance of the power conferred upon it by clause (1) of Article 323A of the Constitution,
Parliament enacted the Administrative Tribunals Act, 1985 . The Statement of Objects and Reasons
of the Act indicates that it was in the express terms of Article 323A of the Constitution and is being
enacted because a large number of cases relating to service matters were pending before various
Courts; it is expected that the setting up of such Administrative Tribunals to deal exclusively with
service matters would go a long way in not only reducing the burden of the
various courts and thereby giving them more time to deal with other cases expeditiously but would
also provide to the persons covered by the Administrative Tribunals speedy relief in respect of their
grievances. Tribunals for other matters Article 323B of the Constitution empowers Parliament or the
State Legislatures, to enact laws providing for the adjudication or trial by Tribunals of disputes,
complaints or offences with respect to a wide variety of matters including inter alia disputes relating
to tax cases, foreign exchange matters, industrial and labour cases, ceiling on urban property,
election to State Legislatures and Parliament, essential goods and their distribution, criminal
offences. etc. Clause (3) of Article 323B enables the concerned Legislature to provide for the
establishment of a hierarchy of Tribunals and to lay down their jurisdiction, the procedure to be
followed by them in their functioning, etc. Sub-clause (d) of clause (3) empowers the concerned
Legislature to exclude the jurisdiction of all courts, except the jurisdiction of the Supreme Court
under Article 136 of the Constitution, with respect to all or any of the matters falling within the
jurisdiction of the Tribunals. The constitutional provision, therefore, invests Parliament or the State
Legislatures with powers to divest the traditional courts of a considerable portion of their judicial
work. A number of quasi- judicial forums and tribunals have been established by the Government
like Debt Recovery Tribunal, Securities Appellate Tribunal, CESTAT, etc. with a view to provide a
speedier and specialized forum for dispensation of justice and disposal of various matters.

Whenever there is a change proposed there is opposition to that change, as fundamental principle
with every morphosis is that people and society resists that.There has been judicial pronouncement
as regards the constitutional validilty of certain provisions of Companies Bill. The Constitutional
validity of NCLT and NCLAT was challenged in R.Thiru Gandhi v Union of India, Department of
Companies Affairs(2004), (Mad).
Earlier, the Amendment to the Companies Act,1956 for the establishment of NCLT was held
unconstitutional by the Madras High Court for several reasons, mainly it was pointed out that the
issue really is not the transferring of judicial functions of a Court of Law to a Tribunal, but, the fact
that can judicial functions be transferred to tribunals governed by people whose independence and
impartiality is in question,a aperson can become a good and an able administrator by a lifetime of
experience in administration but, this does not make him an impartial and able adjudicator.
IMPILCATIONS AS TO R. THIRU GANDHI, PRESIDENT MADRAS BAR ASSOCIATION V.
UNION OF INDIA
Constitution of India, Articles 136 & 226- Companies Act, 1956 (1 of 1956) {as amended by
Companies (Second Amendment) Act, 2002 (11 of 2003) with effect from 01.04.2003}, Parts
I-B & I-C-Companies Bill, 2008 Part I-B of Companies Act relates to constitution of National
Company Law Tribunal and Part I-C relates to National Company Law Appellate Tribunal Eradi
Committee suggested transfer of Company Law jurisdiction from High Court to Tribunal for
reason that there is delay and recommended setting up of separate Tribunals to exclusively deal
with Company matters Eradi Committee did not suggest that such Tribunal should have
2Technical Members Jurisdiction relating to Company cases which High Courts are dealing
with can be dealt with by Tribunal with Judicial Members alone-High Courts were exercising
Original Jurisdiction in respect of Company matters Under Part I-B provision is made for
constitution of National Company Law Tribunal with President and large number of Judicial and
Technical Members (as many as 62) Further dilution in qualification for members of National
Company Law Tribunal which is substitute for High Courts for hearing winding up matters and
other matters which were earlier heard by High Courts Such Members need not even be
Secretary or Additional Secretary level officers and all Joint Secretary level Civil Servants for a
period of 5 years are made eligible Any person who held Group A post for 15 years (which
means anyone belonging to Indian P & T Accounts & Finance Service, Indian Audit and
Accounts Service, Indian Customs & Central Excise Service, Indian Defence Accounts Service,
Indian Revenue Service, etc.)with three years of services as Member of Indian Company Law
Service (Accounts) Branch, or who has dealt with any problems relating to Company Law can
become a Member-This means that cases which were being decided by Judges of High Courts
can be decided by two Members of Civil Services i.e. Joint Secretary level Officers or Officers

holding Group A posts or equivalent posts for 15 years can now discharge functions of High
Court-Proposed Companies Bill, 2008 contemplates that any Member of Indian Legal Service or
Indian Company Law Service (Legal Branch) with only 10 years service out of which three
years should be in Pay Scale of Joint Secretary is qualified to be appointed as Judicial Members
This dilution of Qualification and Standards for appointment as Judicial Members affects
independence of Judiciary Fact that Senior Officers of Civil Services could function as
Administrative Members of Administrative Tribunals does not make them suitable to function as
Technical Members in Company Law Tribunals or other Tribunals requiring technical expertise
Tribunals cannot become providers of sinecure to Members of Civil Services by appointing them
as Technical Members though they may not have technical expertise in field to which Tribunals
relate or worse where purely judicial function are involved There is no logic in Members of
general Civil Services being Members of Company Law Tribunal- Dilution of independence is
there if any Member of Tribunal is permitted to retain his lien over his post with parent cadre as
he would continue to think, act and function as Member of Civil Services -Perception of litigants
and public would be that such Member will not be independent and impartial Independence of
Members discharging judicial functions in Tribunals cannot be diluted Amendment, 2002
proposes to shift Company matters from Courts to Tribunals where Judicial and Technical
Members would decide disputes Selection of Members as contemplated under Section 10 may
result in most of Members including so called Judicial Members not having any judicial
experience or Company Law experience when such Members are required to deal with and decide
3 complex issues of fact and Law- Candidates falling under sup-sections (2)(b) & (2)(c) and subsections (3)(a) & (3)(b) of Section 10-FD have no experience and expertise to decide Company
matters It is equally erroneous to assume that Members of Civil Services will have judicial
experience or Technical Members nor can persons having experience of 15 years in Science,
Technology, Medicines, Banking, Industry can be termed as experts in Company Law for being
appointed as Technical Members Technical Members will be suited to areas which require
assistance of Professional Experts qualified in Medicine, Engineering, Architecture, etc.
Supreme Court pointed out various defects in Parts I-B and I-C of Companies Act, 1956-While
upholding decision of High Court that creation of National Company Law Tribunal and National
Company Law Appellate Tribunal and vesting in them powers and jurisdiction exercised by High
Courts in regards to Company Law matters are not unconstitutional Supreme Court declared that
Parts I-B and I-C as presently structured are unconstitutional and liberty given to Union
Government to make said Parts operational by making suitable amendments in addition to
amendments what Union Government had agreed before High Court.

ALTERNATIVE MECHANISM FOR CORPORATE JUSTICE

Alternative dispute resolution or simply ADR is getting popular in the corporate world as an
alterenative to the traditional methods for seeking justice, the flexibility in the mechanism, and
ofcourse the very fact that the party there is no need to knock the doors of a court of law is luring
more corporate personnels to choose the course of ADR to seek justice, but every good thing comes
with it's negative implications, the fact that it lacks sanction is a major drawback. Also, recent
studies have shown deviations froma general belief, belief that the alternative dispute resolutions
are ac cheaper means to seek justice, but studies show that ADR Proves to be an expensive affair
even, expensive than the traditional litigation process.
Alternative Dispute Resolution in India is an attempt made by the legislators and judiciary alike
to achieve the Constitutional goal of achieving Complete Justice in India. ADR first started as
a quest to find solutions to the perplexing problem of the ever increasing burden on the courts. A
thought-process that started off to rectify docket explosion, later developed into a separate field
solely catering to various kinds of mechanisms which would resolve disputes without
approaching the Formal Legal System (FLS). The reasoning given to these ADR mechanisms is
that the society, state and the party to the dispute are equally under an obligation to resolve the
dispute as soon as possible before it disturbs the peace in the family, business community,
society or ultimately humanity as a whole.
Alternative Dispute Resolution in India was founded on the Constitutional basis of Articles 14
and 21 which deal with Equality before Law and Right to life and personal liberty respectively.
These Articles are enshrined under Part III of the Constitution of India which lists the
Fundamental Rights of the citizens of India. ADR also tries to achieve the Directive Principle of
State Policy relating to Equal justice and Free Legal Aid as laid down under Article 39-A of the
Constitution. The Acts which deal with Alternative Dispute Resolution are Arbitration and
Conciliation Act, 1996 (discussed in detail later) and the Legal Services Authorities Act, 1987.
Section 89 of the Civil Procedure Code, 1908 makes it possible for Arbitration proceedings to
take place in accordance with the Acts stated above.

A SPECIAL NOTE ON THE COMPANY ACT, 2013

The new legislation promises to bring easy and efficient way of doing business in India, better
governance, improves levels of transparency, enhance accountability, inculcating self compliance
and making Corporates socially responsible. The Companies Bill, 2012 (the Bill) will replace
more than half a centuary old Companies Act, 1956 with some sweeping changes including those in
relation to corporate restructurings, mergers and acquisitions. Some of the key changes to look for
are in merger/demerger processes, cross border mergers, fast track mergers between smal
companies and holding subsidiaries, and provisions relating to minority shareholders protection
and exit. We believe that the new Act will help in reducing shareholders litigation and making
corporate restructuring process smooth and efficient.
CONSTITUTION OF NATIONAL COMPANY LAW TRIBUNAL
The Central Government shall, by notification, constitute, with effect from such date as may be
specified therein, a Tribunal to be known as the National Company Law Tribunal consisting of a
President and such number of Judicial and Technical members, as the Central Government may
deem necessary, to be appointed by it by notification, to exercise and discharge such powers and
functions as are, or may be, conferred on it by or under this Act or any other law for the time being
in force(SECTION 408, COMPANIES BILL,2012).

CONCLUSION
There is a discernible trend around the globe towards the rationalisation of business processes and
simplification of legialations governing them. Electronic communication and information acts as a
catalyst to business transactions, as the same has made it possible to carry on trade and business
overseas. A commmon adage time is money, holds true, dispensation of justice and disposal of
business matters by the court and authorities must be in tune with the speed with which business
transactions are carried out. Further, specialised knowledge is a requistie for certain business
matters , for dealing the matter justifiably, a doctor in medical cases and an accountant in accounts
is the personnel to consult with. Reflecting on

the pendancy of legal matters, the judicial

mechanism and the need for specialised knowledge of the persons discharging the responsibility of
adjudicating the matters involving intricate issues in relation to the subjects, the process of setting
up of specialised tribunals has gained popularity over a period of time, it is the need of the hour and
essential to account the everchanging business environment and trends.The Company Act, 2013
which provides for a Constitution for NCLT and it's Appellate Tribunal are a positive step ensuring
the same and is a welcome move by the Corporate world.

BIBLIOGRAPHY
1. Pursottam Grover, National Company Law Tribunal-A single Window Institution for Corporate
Justice, available at
http://www.icsi.edu/WebModules/Programmes/PCS/7PCS/BG%20PCS-6-Grover.pdf. (Last Visited
on 19th october, 2013, 15:26 IST)
2. The Companies Act, 2002
3. The Comapnies Bill, 2012
4. The Companies Act, 2013
5. 124th Law Commission Report, available at,
http://lawcommissionofindia.nic.in/51-100/Report88.pdf., (Last Visited on 19th October, 2013,
15:28 IST)