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.