Major Authorities under the Companies Act, 2013

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This article is written by Niraj Soni pursuing BA.LLB(Hons) from University College of Law, Mohanlal Sukhadia University, Udaipur. This is an article which deals with various powers and functions of NCLT under the Companies Act, 2013.

Major authorities under the Companies Act, 2013.

There are three major authorities under the Companies Act, 2013. They are:

1) National Company Law Tribunal (NCLT)

2) National Company Law Appellate Tribunal (NCLAT) and

3) Special Courts

The NCLT and NCLAT were established under the Companies Act, 2013. The Special Courts were first introduced by Companies Act, 2013.

Introduction

Before the establishment of the National Company Law Tribunal and National Company Law Appellate Tribunal, the powers and functions of the Companies were discharged by the Company Law Board (CLB) and Board for Industrial and Financial Corporation.

The Central government constituted NCLT under Section 408 of Companies Act, 2013. It W.E.F on June 1, 2016, and it was set up on the basis of the recommendations of the  V. Balakrishna Eradi Committee on the law relating to insolvency.

What is the National Company Law Tribunal?

It is a quasi-judicial authority incorporated for dealing with corporate disputes that are of civil nature arising under the Companies Act. However, a difference could be witnessed in the powers and functions of NCLT under the previous Companies Act and the 2013 Act. The constitutional validity of the NCLT and specified allied provisions contained in the Act were re-challenged. Supreme Court had preserved the constitutional validity of the NCLT; however, specific provisions were rendered as a violation of the constitutional principles. The objective is to provide for a single judicial forum to adjudicate all disputes concerning the affairs of Indian Companies except any criminal prosecution.

Composition of the National Company Law Tribunal (Section 408)

The NCLT (Tribunal) consists of a President and such member of two types of members (a) Judicial member (b) Technical member, as the Central government may deem necessary.

The President of the Tribunal shall be appointed by the Central Government after consultation with Chief Justice of India. The Members are to be appointed by the Central Government on the recommendation of a Selection Committee.

Also Read: Winding Up Under The Companies Act, 2013

There are three categories of members of NCLT, namely:

  • President
  • Judicial Member
  • Technical Members

Qualifications for appointment of president and members

Section 409 prescribes the qualifications for the appointment of president and members.

President: The NCLT’s president must have served as a High Court Judge for at least 5 years

Judicial Member: A judicial member of the NCLT must have served judge of HC, or is or has been district court judge for at least 5 years or has been an advocate of a court for at least 10 years.

Technical Members: Any of the following can be a Technical Member of the NCLT:

  • Someone who has spent at least 15 years as a member of the Indian Corporate Law Services.
  • Someone who has been a CA for at least 15 years.
  • Someone who has practised CS for at least 15 years.
  • Someone who has practised CMA for at least 15 years.
  • Person having special knowledge and experience of at least 15 years. In field of Industrial finance, Industrial management, Industrial reconstruction, Investment and accountancy
  • Someone who has served as a presiding officer of a Tribunal or Labour Court National Tribunal for at least 5 years.

Tenure of Office (Section 413)

President and every member of the tribunal is to hold office for a term of 5 years from the date on which he enters upon his office but shall be eligible for Re-appointment for another term of 5 years.

The age of retirement of the president is 67 years and that of members 65 years. 50 years is the eligible age for appointment.

Resignation of President and Members

The president or any other member can resign by giving a notice in writing under his hand addressed to the Central Government, or until person duly appointed as his successor enters upon his office or until the expiry of his term office, whichever is earliest.

Removal of President and Members (Section 417)

As per Section 417 the Central Government may, after consultation with Chief Justice of India, remove from office of the President or any other member who:

  1. has been adjudged an insolvent; or
  2. has been convicted of an offence which in the opinion of the central government involves moral turpitude; or
  3. has become physically or mentally incapable of acting as such president or member. or
  4. has acquired such financial or other interest as is likely to affect prejudicially his functions as president or member or
  5. has so abused his position as to render his continuance in office prejudicial to public interest.

The president or member shall be given a reasonable opportunity of being heard, on any grounds from (b) to (e) before removal.

Jurisdiction of NCLT

The Tribunal has jurisdiction on the matters under Companies Act 2013 which include:-

  1. Cancellation/Variation of shareholder rights (Section 48)
  2. Redemption of preference shares (Section 54)
  3. Transfer and Transmission of shares (Section 56)
  4. Rectification of register of members (Section 59)
  5. Reduction of shares capital (Section 66)
  6. Petition of Debentures trustee (Section 71)
  7. Public Deposits (Section 73)
  8. Repayment of Deposits (Section 74)
  9. Disqualification of a Director (Section 164)
  10. Protection of employees during investigation (Section 218)
  11. Compromise or arrangement with Creditors (Section 230, 231) 13) Merger and Amalgamation (Section 232)
  12. 14) Oppression and Mismanagement (Section 241)
  13. 15) Removal of name of a company from register of Company
  14. 16) Revival and Rehabilitation of Sick Company (Chapter XIX)
  15. 17) Winding Up (Section 271)
  16. 18) Fraudulent Preferable (Section 238)

National Company Law Appellate Tribunal NCLAT (Section 410)

National Company Law Tribunal has primary jurisdiction whereas National Company Law Appellate Tribunal has appellate jurisdiction. The central government has established an appellate tribunal to be known as the NCLAT. It was established under Section 410 of the Companies Act 2013. National Company Law Appellate Tribunal (Appellate Tribunal) hears appeals against orders of the NCLT and National Financial Reporting Authority (NERA).

It consists of  chairperson, judicial and technical members not exceeding 11.

Qualifications of members of NCLAT

The chairperson is or has been a judge of the SC or chief justice of a HC

Judicial member has to be a person who is or has been judge of HC or judicial member of the Tribunal for 5 years.

A technical member has to be a person having special knowledge and experience of at least 25 years in Industrial finance, Industrial management, Industrial reconstruction, Investment and accountancy

Tenure of Office (Section 413)

Chairperson and every member of the tribunal is to hold office for a term of 5 years from the date on which he enters upon his office but shall be eligible for Reappointment for another term of 5 years.

The age of retirement of the chairperson is 70 years and that of members 67 years. 50 years is the eligible age for an appointment.

Powers of the National Company Law Tribunal

The powers of the National Company Law Tribunal are as follows:

  1. The Power as a Civil Court: The Tribunal shall enjoy the same powers as a civil court under the code of the Civil procedure 1908, on the following matters.
  2. Summoning and enforcing the attendance of any person and examining him on oath;
  3. Requiring the discovery and production of documents ;
  4. Receiving evidence on affidavit;
  5. Subject to provision of sections 123 and 124 of the Indian Evidence Act 1972, requisitioning any public record, document or a copy of such record or document from any offices;
  6. Issuing commissions for the examination of witness or documents;
  7. Dismissing a representation for default or deciding it ex parte;
  8. Any other matter which may be prescribed, Section 424 (2).
  9. Execution of an order: An order made by the Tribunal may be enforced in the same manner as a decree made by a court in a suit.
  10. Power to punish for contempt: The Tribunal shall have the same power and authority to punish for contempt as the high court under the provisions of contempt of Court Act 1970 (Section 425).
  11. Delegation of power: NCLT/NCLAT may by general order or special order, delegate powers to any officer/employee to inquire into any proceedings pending.(Section 426)
  12. Power to seek assistance of chief metropolitan magistrate etc.: In any proceeding relating to winding up of a company or rehabilitation of a sick company, the Tribunal may seek the help of the Chief Metropolitan magistrate, Chief Judicial magistrate or the district collector for the purpose of taking into custody of property, book of account or other documents.(Section 429)
  13. Power of the tribunal to regulate their own procedure based on natural justice: under the provisions of the act or the Insolvency and Bankruptcy code, 2016.

APPEAL TO APPELLATE TRIBUNAL AGAINST ORDER OF TRIBUNAL (Section 421)

Any person aggrieved by order of the tribunal may within 45 days from the date on which the copy of the order was made available, file an appeal tp the Appellate tribunal (NCLAT). If person was prevented from filling the appeal within 45 days due to sufficient cause, the appellate tribunal may extend the period by another 45 days.

APPEAL TO SUPREME COURT AGAINST ORDER OF APPELLATE TRIBUNAL (Section 423)

An appeal against the order of the appellate tribunal (NCLAT) may be filed by the aggrieved person to the SC. The appeal must be filed within 60 days of the order. If the person was prevented by sufficient cause to fail to file an appeal within the time then an extension of 60 days may be granted.

SPECIAL COURTS

The central government may for the purposes of providing a speedy trial of the offence under the act, establish as many Special courts as may be necessary.

Special court shall consist of a single judge / metropolitan magistrate Judicial magistrate first who shall be appointed by the Central government after consulting Chief justice of the high court within whose jurisdiction the judge to be appointed would be working.

Single judge holding the office as a Sessions judge or additional sessions judge, in case of offence punishable under this act with imprisonment of 2 years or more. A Metropolitan magistrate or a Judicial Magistrate of the First class, in case of other offence.

Offences tribal and jurisdiction (Section 436)

All offences under the act are to be triable only by the special court established for the area in which the registered office of the company is situated. If there are more than one court in the area, the jurisdiction will be of the court as may be designated by high court concerned.

Application of the code of criminal procedure (Section 438)

The special court shall be deemed to be a (court of sessions or court of metropolitan magistrate or judicial magistrate of first class, as the case may be) the person conducting a prosecution a public prosecutor and the provisions of the CrPc 1973 shall apply acc to proceeding before special court.

Factors determining the level of punishment (Section 446-A)

The court or the special court, while deciding the amount of fine or imprisonment under this act, shall have due regard to the following factors namely:-

  • Size of the company.
  • Nature of business carried on by the company
  • Injury to public interest
  • Nature of the default
  • Repetitions of the default

References

  1. Avtar Singh (2018): Company Law 17e
  2.  Dr. G.K. Kapoor and Dr. Sanjay Dhamija (2021): Taxmann’s Company Law, 23rd Edition
  3. P. P. S.Gogna: Textbook Of Company Law, S.Chand
  4. https://www.mca.gov.in/content/mca/global/en/about-us/affiliated-offices/nclt.html#:~:text=NCLT%20is%20a%20quasi%2Djudicial,arising%20under%20the%20Companies%20Act.&text=Pertaining%20to%20claims%20of%20oppression,prescribed%20under%20the%20Companies%20Act.
  5. https://nclt.gov.in/about-nclt
  6. https://blog.ipleaders.in/constitution-national-company-law-tribunal-nclt/
  7. https://blog.ipleaders.in/powers-and-function-of-national-company-law-tribunal-under-companies-act/

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