Role of NCLT in India
Introduction
The concept of the National Company Law Tribunal (NCLT) was initially introduced in the second amendment act of 2002 of the Companies Act, 1956. Still, it was never appraised as it got mired in litigation surrounding the constitutionality of NCLT. The concept was retained in the Companies Act of 2013, and finally, NCLT came through in May 2015.
Scope of NCLT in India
After 14 years of deliberations, the Ministry of Corporate Affairs in June 2016 amended the Companies Act, 2013. It introduced the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) to handle all the corporate civil disputes of Indian companies as a single judicial forum to minimize the burden of pending cases in courts.
The introduction of NCLT made redundant the powers of the Company Law Board (CLB), Board for Industrial and Financial Reconstruction (BIFR), The Appellate Authority for Industrial and Financial Reconstruction (AAIFR), and the powers relating to Winding up or reconstruction vested in High Courts.
Difference Between NCLT & NCLAT
The NCLT is a quasi-judicial authority that has ground-level jurisdiction, and NCLAT is an appellate tribunal and has appellate jurisdiction. Functions of NCLT functions are on the lines of any normal court in India and is obliged to decide matters with the principle of natural justice by taking into account the shreds of evidence and witnesses to come to a conclusion.
In contrast, NCLAT is instituted to maintain a balance mechanism by reviewing orders and decisions of NCLT. After the order or decision of the NCLT, the appeals go to NCLAT as it is a transitional appellate forum like a High Court. The decisions of NCLAT can be further challenged in the Supreme Court of India.
Powers Vested in NCLT
Ministry of Corporate affairs vested some of the significant powers in the hand of NCLT, which are as follows:
- Deregistration of Companies
Registration of the company can at any time be questioned if any procedural errors were found. The companies act empowered the tribunal to take several steps, including cancellation of registration, dissolving the company, and can even declare the liability of members unlimited.
Sec 7(7) enshrined in the act provides de-registration of companies when the registration of companies is obtained illegally or wrongfully.
- Converting a Public Company into a Private Company
Company’s Act 2013, Sections 13, 14, 15, and 18 read with rules that come into play to regulate the conversion of public limited companies into private limited companies. Companies act makes it mandatory for the companies to take prior approval from the NCLT before initiating the procedure of conversion. The tribunal may, at its discretion, also impose certain conditions subject to conversion while granting approval.
- Transfer of Shares & Securities
NCLT has been vested with powers to hear grievances regarding the rejection of companies to transfer shares & securities u/s 58 and 59 of the Companies Act, 2013. In the repealed act of 1956, the remedies available for refusal of transfer or transmission were limited only to shares and debentures of the company, but under the 2013 Act, the horizon of the same has been increased, and the umbrella now covers all the securities issued by a company.
- Power to Order Investigation
NCLT also has the power under the provision of the Companies Act, 2013 to initiate an investigation into the affairs of the company, which requires an application of 100 members. However, prior to the 2013 act, 200 members were required for the same. Tribunal can also order the investigation at the request of a person who is not even related to the company if that person convinces NCLT about the requirement of conducting an investigation. NCLT can order an investigation which can be conducted in India or abroad.
- Power to freeze assets of the company
The tribunal has been vested with powers to freeze the assets of the company, but it cannot congeal the assets so as to use them later when the company is under scrutiny or investigation.
- Corporate Debt Restructuring (CDR)
Corporate debt restructuring means the reorganization of the company. The sole purpose of CDR is to reinstate the liquidity of a company so it can avoid insolvency. According to the rules of NCLT, if more than 75% of the secured creditors be of the opinion that there is a need for corporate debt restructuring, then they can approach the tribunal.
Conclusion
The present article briefly reviewed the role of the National Company Law Tribunal after its implementation. The structure of the tribunal is drafted in a way that it operates independently to expeditiously dispose of the matters. The NCLT has the power to make its own procedure to ease the process. The forming of NCLT/NCLAT has been a great relief to the corporates in the country and it was a long-overdue reform that has been welcomed by everyone.
