Supreme Court reserves verdict on constitutional validity of company Tribunal

NEW DELHI: The Supreme Court today reserved its verdict on a batch of pleas challenging the constitutional validity of provisions in the Companies Act of 2013 relating to setting up of National Company Law Tribunal (NCLT).

A five-judge Constitution Bench, headed by Chief Justice H L Dattu, concluded the hearing in a day on the matter in which provisions of the newly-promulgated Act giving power to the Centre to suspend and sack members and Chairpersons of NCLT and National Company Law Appellate Tribunal (NCLAT) came under scrutiny.

The bench, also comprising Justices A K Sikri, Arun Mishra, R F Nariman and Amitava Roy, heard several pleas including the one filed by the Madras Bar Association challenging certain provisions of Chapter XXVII of the Companies Act, 2013 that deal with the constitution of NCLT and NCLAT.

Senior advocate Arvind Dattar and advocate Nikhil Nayar led the arguments against NCLT and NCLAT by referring to the recent verdict of a five-judge bench which had declared the National Tax Tribunal, set up to decide tax-related cases, as unconstitutional on the ground that the Act encroached on the "exclusive domain" of superior courts.

The previous UPA government had proposed setting up of NCLT and NCLAT as specialized quasi-judicial bodies with the aim to help reduce the pendency of winding-up cases, shortening the winding-up process and avoiding multiplicity of litigation before high courts, Company Law Board and Board for Industrial and Financial Reconstruction.

Dattar submitted that the Act is such that all civil servants would be eligible to be in the Tribunal and the judiciary will be taken out with the executive.

"In a galloping manner, one Tribunal after another is coming up. Judges are going out of Tribunals. Bureaucrats are going to discharge the function of High Court judges," he said.

Additional Solicitor General P S Patwali tried to dispel the apprehension by saying that the Centre was not taking the matter as an adversarial litigation and ironing out creases and infrastructure has been developed for its functioning.

The matter was referred by a three-judge bench to the larger bench after questions were raised that the Act takes away the power from High Courts and the independence of Tribunal's functioning has been compromised.