Impact of Replacement of Company Law Board with National Company Law Tribunal
The Company Law Board (CLB) was an independent quasi-judicial body which consisted powers to overlook the behavioral mechanism of companies within the premises of Company Law.
The intention behind constitution of Special Tribunals like CLB had always been simplification of procedure and to avoid the enormous delay in Courts due to strict applications of provisions of Civil Procedure Code. Despite all this, technicalities were pleaded in proceedings under the Companies Act, 1956 very often. Also, proceedings under Companies Act, 1956 were really complicated and it was not uncommon that a person would face difficulty in execution of an order.
The Indian Ministry of Corporate Affairs (MCA) through a notification dated 1 June 2016 has constituted the National Company Law Tribunal (NCLT) and its appellate authority, the National Company Law Appellate Tribunal (NCLAT) with effect from 1 June 2016.
The primary objective of these tribunals is to provide simpler, speedier and more accessible dispute resolution mechanism for company related disputes, by unburdening the courts.
Dissolution of the Company Law Board
The constitution of the NCLT/NCLAT has resulted in the dissolution of the Company Law Board (CLB) established under the Companies Act, 1956, with all pending matters before the CLB being transferred to the NCLT. Therefore, all disputes (including those relating to oppression and mismanagement) which were to be adjudicated upon by the CLB, will now be adjudicated by the NCLT. Further, going forward, both pending matters and fresh applications will be dealt with in accordance with the provisions of the 2013 Act.
What all stands different from CLB by coming up of NCLT
1. Jurisdiction
While provisions relating to mergers, restructuring and winding-up have not been notified yet, the NCLT, once fully functional, will consolidate the corporate jurisdiction of the
- CLB;
- Board of Industrial and Financial Reconstruction;
- Appellate Authority for Industrial and Financial Reconstruction and;
- Jurisdiction and powers relating to winding up, restructuring and other such provisions, currently vested in the High Courts.
2. Amicus curiae
The Draft National Company Law Tribunal Rules, 2013 (Draft Rules) now have provision for appointment of an Amicus Curiae for opinion on various dedicated legal issues.
3. From 5 to 11 Benches
The CLB used to function with only five benches whereas the NCLT will commence action with eleven benches. It is expected to eventually have benches across each state in India.
4. Filing of Class action suits
Since the inception of the Act of 1956, shareholders have always been allowed to protest against the wrong doings of the management, class action suits are a step further in the same regard. The key difference between oppression, mismanagement (Sections 241–244) and class action suits (Section 245) can be summed up in the following points:
- Under Section 245, members as well as deposit holders can file an application as opposed to only member;
- Application can be filed, in addition to company and its statutory appointees, against audit firms and any other independent consultants.
5. Other professionals allowed to represent
The Draft Rules have given powers to other professionals to represent their clients before the NCLT which was just held in the hands of Company Secretaries, Chartered Accountants and Cost Accountants until now before the CLB.
6. Dedicated online portal
An introduction of a ‘dedicated online portal’ through which all the parties or central or state government agencies and local government bodies can now send and receive documents to or from the NCLT and make required payments via electronic media.
8. Appeals — Eliminating role of High Court
The High Courts of states have been eliminated from the hierarchy therefore, Appeals from the NCLT will go to the NCLAT, and thereafter with the Supreme Court.
9. Ousting of Civil Court jurisdiction
Under the old regime, there was no express provision ousting the jurisdiction of the Civil Courts, and various judicial pronouncements have time and again reiterated the requirement of an express provision for ousting Civil Court jurisdiction.
Putting an end to the debate, Section 430 of the Act expressly ousts the jurisdiction of Civil Courts.
P.S: This blog has been written in Indian context.
About the Author
This article has been written by our Guest author — Rudraksh Durrani. Rudraksh is a 3rd law student at Rajiv Gandhi National University of Law, Punjab.
