NCLT will take over and re-hear all CLB cases, in which verdicts have been reserved

The advent of the Companies Act 2013, has provided a new lease of life for many judgments which have been reserved by the Company Law Board. Under the Companies Act 2013, National company Law tribunals will be taking over the hearing of all cases related to Company Law. It has come to the notice that the government is considering a proposal, wherein all such cases in which judgments have been reserved by the Company Law Board (CLB), will now be heard all over again by the National Company Law Tribunal (NCLT), as and when it is set up.

The Draft Rules floated by the Ministry of Corporate Affairs under the new Companies Act 2013 says that in such cases,

The tribunal shall reopen the matter and rehear the case as if the hearing had not taken place.

This is due to the fact that the CLB will cease to exist once the NCLT becomes operative. In that event, all cases being heard by the CLB at that moment in time would be transferred to the Tribunal (NCLT).

These rules are in the proposal stage and feedback towards these can be given by 19th October 2013. This may appear as a delay the current process of justice, however, but this seems to be the principle which is applicable in a situation like this. The genesis of this proposed provision comes from the fact that in case a person or entity is aggrieved by the decision of the CLB, they would need to file an appeal against the judgment at the relevant High Court.

However, in order to appeal before the National Company Law Appellate Tribunal (NCLAT), the decision needs to come from the NCLT. NCLAT on its own will not be entertaining such an appeal against the already decided order of CLB. Therefore, the NCLT will have to re-hear the matter and all such matters where the judgment has been reserved by CLB and provide an order based on the new hearing. In an event where a party is aggrieved by the order of the NCLT, it can file an appeal before the NCLAT. This is a technical requirement of the new legal system.

The formation of the NCLT has been in the works for over a decade now, as the provisions for the formation of the NCLT had been introduced by an amendment to the Companies Act, 1956. These provisions, however, got into a legal wrangle amid some fears that the proposed structure would flouted the norms of Constitutional separation of powers, by vesting essential functions in a quasi-judicial body.

This legal matter of concern was deliberated before the Madras High Court and subsequently before the Supreme Court. The Supreme Court on hearing the matter had given its nod for the formation of the Tribunal way back in 2010, however, the proposed provisions and subsequent formation of the NCLT has not seen the light of the day. It is now being said that Cases not only being deliberated and reserved with the CLB but also those related to the Companies Act 1956 currently sub-judice with the District lvel and other High Courts would be transferred to the NCLT. This includes all cases related to Mergers and Acquisitions as well as Winding-up of Companies.

It has also been told that all Companies whose cases are with the Appellate Authority for Industrial and Financial Reconstruction and the Board of Industrial and Financial Reconstruction (BIFR) related issues, will have to make a reference to Tribunal within a stipulated time.

The Justice Eradi Committee had examined the Companies Act, 1956 and other related legislations which had highlighted that there were multiple agencies dealing with matters relating to Company Law viz. CLB, BIFR and High Courts.  The proceedings have hence been a very time-consuming process.

There was hence, a clear need to have formed an exclusive and composite forum which would have specialized powers and knowledge of matters which relate to Companies and this would ensure speedy dispensation of corporate justice.

Tags: Companies ActCompanies Act 1956Companies Act 2013Company Law BoardCorporate Affairs MinistryMadras High CourtNCLTSupreme Court

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