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1. INTRODUCTION
There is discernible trend around the world towards rationalisation of business processes and
simplification of legislations governing them. This trend is being driven partly by the use of
electronic communication and information technology that has speeded up business transactions
as well as making them international. Time is, therefore, ripe to ensure that dispensation of
justice and disposal of business matters by the court and authorities should be in tune with the
speed with which business is being transacted. Further certain business matters require
specialized domain knowledge for dealing with the matters justifiably. Keeping in view the
pendency of legal matters and need for specialized knowledge of the persons discharging the
responsibility of adjudicating the matters involving intricate issues relating to the subjects, the
process of setting up of specialized tribunals has gained acceptability over a period of time.

2. OBJECTIVES
The objective of this paper is to study in detail the provisions in the Companies Act, 2013
regarding the constitution of NCLT and how setting up of NCLT will affect the corporate
environment of our country.

3. RESEARCH METHODOLOGY
Descriptive, Applied and Analytical methods of doctrinal research have been employed in the
completion of this project based on secondary sources of data and personal scrutiny, aided at
crucial conjunctures by the duly acknowledged.





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4. GENESIS OF ESTABLISHMENT OF SPECIALISED TRIBUNALS
The genesis of setting up of specialized tribunals can be traced in the Supreme Court judgment in
Sampath Kumar case
1
. In this case while adopting the theory of alternative institutional
mechanism the Supreme Court refers to the fact that since independence, the population
explosion and the increase in litigation had greatly increased the burden of pendency in the High
Courts. The Supreme Court also referred to studies conducted towards relieving the High Courts
of their increased load; the recommendations of the Shah Committee for setting up independent
Tribunals as also the suggestion of the Administrative Reforms Commission for setting up of
Civil Service Tribunals. The problem of clearing the backlogs of High Courts, which has reached
colossal proportions has been the focus of study for close to a half century. Over time, several
Expert Committees and Commissions have analysed the intricacies involved and have made
suggestions. 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.

1
1987 (1) SCC 124
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5. CONSTITUTIONAL SCHEME FOR SETTING UP OF TRIBUNALS
Part XIVA of the Constitution was inserted by Constitution (42nd Amendment) Act, 1976
containing Articles 323 A and 323 B, providing for Administrative Tribunal and Tribunals for
other matters, respectively.

6. ESTABLISHMENT OF COMPANY LAW TRIBUNAL

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 and
Board for Industrial and Financial Reconstruction. It also provides for dealing with various
matters, which fall presently under the jurisdiction of High Court pursuant to various provisions
contained in the Companies Act, 1956. The setting up of NCLT as a specialized institution for
corporate justice is based on the recommendations of the Justice Eradi Committee on Law
Relating to Insolvency and Winding up of Companies. The Committee examined not only the
Companies Act, 1956 but also the other relevant laws having a bearing on the subject such as
Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), Recovery of Debts due to
Banks and Financial Institutions Act, 1993 and the recommendations of the United Nations and
International Monetary Fund Report - Orderly and Effective Insolvency Procedures- Key
Issues. The Committee in its report noted that there are at present three different agencies
namely, the High Courts, which have powers to order winding up of companies under the
provisions of the Companies Act, 1956; secondly, the Company Law Board set up under section
10E of the Companies Act, 1956 to exercise powers conferred on it by the Act or the powers of
the Central Government delegated to it and finally, Board for Industrial and Financial
Reconstruction Reconstruction (BIFR) which deals with the references relating to rehabilitation
and revival of companies. The High Courts are not able to devote exclusive attention to winding
up cases which is essential to conclude the winding up of companies quickly. The experiment
with BIFR for speedy revival of companies has also not been encouraging.
The committee after a detailed analysis of the working of BIFR, with respect to revival of sick
companies and the working of High Courts with respect to winding up of companies
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recommended for the formation of a composite legal forum to address all aspects of Companies
Act 1956 rather than have separate Acts (SICA 1985 etc.) and multiple forums (BIFR, High
Court) for various sections of the Companies Act 1956.

7. CONSTITUTIONAL LEGALITY OF NCLT
Whenever some change is proposed, there is bound to be opposition to such change. There have
been judicial pronouncements discussing the constitutional validity of some of the provisions of
the Companies Bill. The constitutional validity of NCLT and NCLAT was challenged in Thiru
R. Gandhi President, Madras Bar Association vs. Union of India, Department of Company
Affairs
2
. Earlier, the amendment to the Companies Act, 1956 to set up the NCLT was rendered
unconstitutional by Madras High Court for several reasons; few of amongst those were as under:
1. "The issue is not whether judicial functions can be transferred from courts to Tribunals.
Rather the issue is whether judicial functions can be transferred to Tribunals governed
by persons who are not suitable or qualified or competent to discharge such judicial
powers or whose independence is suspect"
2. "A lifetime of experience in administration may make a member of the civil services a
good and able administrator, but not a necessarily good, able and impartial adjudicator"
The Supreme Court of India on 11th May, 2010 gave a ruling validating the provisions of
Companies (Second Amendment) Act, 2002 pertaining to transfer of several judiciary and quasi-
judiciary powers under the act to an independent tribunal, called NCLT. The creation of a new
substitute judicial forum which is to carry out the work which is now being carried out by
different High Courts in the country for over nine decades, is to be done with great care so that
the new Tribunal will be efficient and effective alternate institutional forum to the High Courts
and the Company Law Board. Once the tribunal is established, all company-related matters
pending with the Company Law Board (CLB), Board for Industrial and Financial Reconstruction

2
W.P.2198 of 2003
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(BIFR), Appellate Authority for Industrial and Financial Reconstruction (AAIFR) and different
High Courts across the country will be transferred to the NCLT.
8. CONSTITUTION OF NCLT
The powers of the Tribunal may be exercised by Benches, constituted by the President of the
Tribunal having two members (Judicial and Technical). There shall be constituted such number
of Benches as may be notified by the Central Government. The President of Tribunal can refer or
transfer any matter to the Bench, as he deems fit. If the Members of a Bench differ in opinion on
any point or points, it shall be decided according to the majority, if there is a majority, but if the
Members are equally divided, they shall state the point or points on which they differ, and the
case shall be referred by the President of the Tribunal for hearing on such points or points by one
or more of the other Members of the Tribunal and such point or points shall be decided
according to the opinion of the majority of Members of the Tribunal who have heard the case,
including those who first heard it. There shall be a Principal Bench at New Delhi presided over
by the President of the Tribunal having powers of transfer of proceedings from one Bench to
another Bench of the Tribunal in the event of inability of any Bench from hearing any such
proceedings for any reason.

9. QUALIFICATIONS OF MEMBER OF NCLT
The Central Government shall appoint a person who has been, or is qualified to be, a Judge of a
High Court as the President of the Tribunal
3
. A person shall not be qualified for appointment as
Judicial Member
4
unless he-
i. has, for at least fifteen years, held a judicial office in the territory of India; or
ii. has for at least ten years been an advocate of a High Court, or has party held judicial
office and has been partly in practice as an advocate for a total period of fifteen years; or

3
Section 409(1) ,The Companies Act,2013
4
Section 409(2), The Companies Act,2013
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iii. has held for at least fifteen years a Group A post or an equivalent post under the Central
Government or a State Government (including at least three years of service as a Member
of the Indian Company Law Service (Legal Branch) in Senior Administrative Grade in
that service); or
iv. has held for at least fifteen years a Group A post or an equivalent post under the Central
Government (including at least three years of service as a Member of the Indian Legal
Service in Grade I of the service.
v. Fifteen years in Group A post or an equivalent post under the Central Government or a
State Government (including at least three years of service as a Member of Indian
Company Law Service (Account Branch) in Senior Administrative Grade in that service);
10. POWERS OF TRIBUNAL
NCLT & NCLAT shall be constituted under the Companies Act, 1956 and existing Authorities
i.e. Company Law Board (CLB) under the Companies Act 1956 and Board for Industrial and
Financial Reconstruction (BIFR) under SICA shall be dissolved. The existing powers of CLB
shall be divided and some of them (e.g., Powers under Section 58A, 111/111A, 397/398, etc.)
will be transferred to the NCLT and rest (e.g., Powers under Sections 17, 167, 621A, etc.) to the
Central Government.It may be noted that under Sections 304 and 307, powers and CLB shall be
transferred to both Central Government as well as NCLT. Further, all the powers of BIFR under
SICA and all the existing powers of the Courts (e.g., powers relating to Reduction of Share
Capital, Compromise and Arrangement, Winding Up, etc.) under the Companies Act, 1956 shall
be transferee to the NCLT.
11. APPEAL TO SUPREME COURT
Any person aggrieved by any decision or order of the Appellate Tribunal may file an Appeal to
the Supreme Court within 60 days from the date of communication of the order of the Appellate
Tribunal to him, only on any question of law arising out of such decision or order. The Supreme
Court may grant an extension of time for filing an Appeal if it is satisfied that the Appellant was
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prevented by sufficient cause from filing the Appeal within the said period, but the extension
period has been limited to a further period of 60 days.
5


12. CRITICAL ANALYSIS
The Madras High Court has noted some pertinent issues with regard to the setting up of NCLT
such as the legality of a member of the Civil services being part of the NCLT and the legality of
the judicial powers being exercised by such members of the executive. The Supreme Court has
also upheld these apprehensions of the Madras High Court. It must be noted that these
apprehensions of the judiciary must be taken care of before setting up of the tribunals.
13. CONCLUSION
At present, the High Court discharges very complicated functions under Companies Act, 1956
like entertaining winding-up petitions and entertaining applications seeking sanction of the Court
for a scheme of amalgamation etc. The Company Law Board also discharges complicated
responsibilities under section 397/398 of the Companies Act, 1956 and other provisions. There
are many limitations and we know the functioning of the office of the Official Liquidator at
present and we also aware of the proposed move to get the services of Advocates and Experts as
liquidators. Its a serious issue to deal with and requires serious consideration by the Government
and also Courts. In my personal opinion, the High Court was able to discharge its functions
under Companies Act, 1956 very well and the proceedings of Company Court were effective to a
great extent. Instant orders were passed if the situation demands and most of the orders passed by
the High Court while exercising Company Jurisdiction were obeyed and implemented by the
parties concerned. But, when it comes to the proceedings of the Company Law Board, many
express their dissatisfaction that they are being unnecessarily troubled and many feel that they
are not able to get justice though they could establish a clear case before the Board. It is also
frequently seen as to the respect given to the orders of the Company Law Board. Again, the

5
Section 421, The Companies Act,2013
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powers of the Company Law Board were limited by the express language used in the Act and
also due to the ruling on its own competence and jurisdiction. These issues are taken note of by
the Legislature and sought to be addressed in the proposed Companies Bill, 2009.We have seen
tremendous corporate growth in the recent past and with the technological revolution and its
adoption in governance like MCA scheme, the incorporation and management of Companies
have become so easy though there are complications in the Course. We need to provide an
effective and speedy redressel to the Corporate and they can not be waiting for months and years
for a redressal. Handling a Company dispute is a complicated thing and requires lot of care,
concentration and specialization and the constitution of NCLT is a step in the right direction.












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14. REFERENCES
BOOKS
i. Guide to Companies ACT, Ramaiya A, Wadhwa Nagpur, Ed.16,2006
ii. Datey V.S., Students Guide To Corporate Laws, (Taxmann, New Delhi, Ed. 5
th
)
STATUTES
i. The Companies Act, 1956
ii. The Companies Act, 2002
iii. The Companies Act, 2013
WEBSITES
i. http://www.hspcs1.com/national-company-law-tribunal-nclt - last accessed on 10th
October ,2013 at 5.20pm
ii. http://www.indiankanoon.org/search/?formInput=r.%20gandhi- last accessed on
10th October ,2013 at 5.30pm
iii. http://articles.economictimes.indiatimes.com/2013-04-18/news/38647444_1_nclt-
national-company-law-tribunal-rajya-sabha - - last accessed on 10th October ,2013 at
5.40pm
iv. http://www.business-standard.com/opinion-business-law-taxation- last accessed on
10th October ,2013 at 5.45pm