Figuring out what shape the National Company Law Tribunal (NCLT) will take

What would NCLT do?

The Companies (Second Amendment) Act, 2002 suggested the creation of a national tribunal would look into most corporate matters in the country. It will be responsible for handling all pending matters before the Company Law Board, the Board for Industrial and Financial Reconstruction (BIFR) and the corporate benches of the High Courts, apart from handling new cases.

Why was its creation challenged?

The main reason for the challenge was the constitutionality of the tribunal as it involved the wholesale transfer of jurisdiction of the High Courts in company matters to a quasi-judicial body. It was argued that such transfer will result in vesting of intrinsic judicial functions in a quasi-judicial body, which was vulnerable to executive interference.

What did the Supreme Court say?

While clearing the setting up of the NCLT by holding it constitutionally valid, it questioned the practice of filling up bureaucrats as members of quasi-judicial tribunals. It has highlighted the need to keep the tribunal immune from executive interference by stopping appointment of bureaucrats to such bodies.

What is the challenge ahead?

With guidelines being prescribed to keep minimal executive presence in NCLT, the challenge lies in swift selection of its members and constituting the forum with proper infrastructure and resources. For a forum to handle all corporate cases, the NCLT will require very good infrastructure and facilities.

What are the type of cases that will be heard by NCLT?

The NCLT is empowered to look into all types of corporate matters, presently handled by the Company Law Board and high courts. It will also cater to the high court’s mandate to approve merger and acquisitions and liquidation of companies.

How will NCLT expedite winding up of sick firms?

At present, liquidation of a sick company takes up to 10 years, leading to near complete erosion of a company’s assets. With the NCLT taking up the responsibility of BIFR and also of liquidation cases in High Courts, such cases should now take substantially less time.