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NCLT Vs. CLB

NCLT Vs. CLB

The Law Commission of India in its 124th 1 Report of 1988 pointed out that the different types of litigation coming before the High Court in exercise of its wide jurisdiction has to some extent been responsible for a very heavy institution of matters in the High Courts and recommended for establishment of specialist Tribunals. With the intention of establishing a separate tribunal to deal with all issues or disputes under the Companies Act,1956 a Special Tribunal and Appellate Tribunal called National Company Law Tribunal and National Company Law Appellate Tribunal were sought to be established through the Companies (Second Amendment) Act,2002.

The Companies Amendment Act, 2002 inserted new parts 1B &1C in the Companies Act,1956 for the formation of NCLT & NCLAT 2. The CLB constituted under Section 10E (1) of Companies Amendment Act,2002 shall stand dissolved and all matters or proceedings or cases pending before the CLB shall stand transferred to the NCLT 3.However,the same did not get notified.

In the year 1999, the Government of India set up a High Level Committee headed by Justice V.B. Eradi, to examine and make recommendations with regard to desirability of changes in existing law relating to winding up of companies so as to achieve more transparency and avoid delays in the final liquidation of the companies. Balakrishna Eradi Committeee Report envisaged the setting up of NCLT &NCLAT which have jurisdiction and power exercised by the CLB.

There is a convergence of corporate jurisdiction whereby the entire corporate jurisdiction under

  • Company Law Board (CLB),
  • Board for Industrial & Financial Reconstruction (BIFR) and the
  • Appellate Authority for Industrial and Financial Reconstruction (AAIFR) and
  • various High Courts will be merged into one under NCLT & NCLAT.

The National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal

(NCLAT) have been constituted by Central Government with effect from 1 June, 2016 4. This would dissolve the Company Law Board (CLB) as constituted under the Companies Act, 1956 from the same day.

S.No

Clauses

National Company Law Tribunal Rules, 2013 (Draft Rules)

Company Law Board Regulations,1991 (Regulations)

1. Jurisdiction of the Bench 11 benches- Two in New Delhi and one each at Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Gauhati, Hyderabad, Kolkata & Mumbai 5. 4 benches- Kolkata, New Delhi, Chennai & Mumbai 6.
2. Matters Power of rectification of register, complaints regarding refusal to transfer/ transmitting securities, rectification of registers of members, oppression & mismanagement and class action suits.

Disputes relating to reduction of capital, mergers and amalgamations and winding up.(not yet notified)

Power of rectification of register, complaints regarding refusal to transfer/ transmitting securities, rectification of registers of members, oppression & mismanagement.
3. Amicus Curie The Tribunal at its discretion permit an Amicus Curie to communicate views on any legal issues 7. No such regulation mentioned under the CLB, Regulations.
4. Electronic filing & service The Draft Rules provides for electronic filing & services such as:

  • Dedicated portal online where there is electronic transmission of documents to the Tribunal for hearing and disposal of cases.
  • “EDGAR (Electronic Data Gathering, Analysis and Retrieval) Filer Manual.
  • Maintaining Electronic Registry, Electronic Filing etc.
No such services mentioned under the CLB, Regulations.
5. Appeals Aggrieved persons can appeal to NCLAT 8 and thereafter to Supreme Court 9. Aggrieved persons can appeal to High Court and thereafter to Supreme Court.
6. Bar of Jurisdiction City Civil Court shall not have jurisdiction in respect of any matter which the NCLT or NCLAT shall determine 10. There is no express provision for the bar of jurisdiction.

 

Once the Companies Amendment Bill,2016 (pending before the Parliamentary Standing Committee) which provides for amendments to the Companies Act, 2013, including amendment to be made on constitution of NCLT and NCLAT is passed shall face certain changes. Also, the provisions relating to reduction of share capital, winding-up and compromise or arrangement (merger/demerger), etc., will remain under the jurisdiction of High Court till they are notified.

 

Notes:

  1. The High Court’s arrear- A Fresh Report
  2. Section 10FA of Companies Amendment Act,2002
  3. Section 10FB of Companies Amendment Act,2002
  4. Ministry of Corporate Affairs vide Notification dated 01.06.2016
  5. Rule 4 of the Draft Rules
  6. Regulation 7 of the Regulations
  7. Rule 96 of the Draft Rules
  8. Section 421 of Companies Act,2013
  9. Section 423 of Companies Act,2013
  10. Section 430 of Companies Act,2013

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