Can NCLAT cope with competition?

The winding up of the Competition Appellate Tribunal (Compat) has raised questions over the readiness of the National Company Law Appellate Tribunal (NCLAT), to which these appeals are to be transferred. 

According to the Finance Act, 2017, the functions of Compat are being shifted to the NCLAT. The move is expected to streamline India’s tribunal-based structure and increase its efficiency through consolidation. However, experts are doubtful of the NCLAT’s ability to handle this additional workload, alongside its responsibilities mandated under the Companies Act, 2013, and the Insolvency and Bankruptcy Code, 2016. 

According to Satyajit Gupta, principal, corporate/M&A, Advaita Legal, there is concern over the lack of manpower at the NCLAT. “One is not sure how much time the bench will be able to give to competition appeal cases,” says Gupta. Moreover, competition law requires a deep knowledge of economics, adds Gupta.

Unlike the erstwhile Company Law Boards (CLBs), created under the earlier Companies Act, 1956, the National Company Law Tribunals (NCLTs) have far more responsibilities, which include aspects of liquidation, industrial and financial reconstruction, mergers, amalgamations, and winding up companies. To cope with this additional workload, the government has created a robust NCLT structure, with more locations and members than the earlier CLBs.

However, this requirement does not seem to have been considered while constituting the NCLAT. The government still decided to man the appellate tribunal with only two appointees (one judicial and one non-judicial) as against the maximum sanctioned strength of 11 under the Companies Act, 2013. Even after almost a year of its formation, the number of members in the NCLAT still remains the same. 

However, Lalit Kumar, partner, J Sagar Associates, says the shortage of manpower and infrastructure is a temporary issue. “Since the NCLAT has both judicial and technical members, who specialise in the subject, a hearing before the tribunal should not be a problem,” says Kumar.

The manner of selecting these additional members, who must be proficient in a variety of laws, could also prove challenging. Section 411 of the Companies Act, 2013, lays down the qualifications for these new appointees. According to the provision, a judicial member must be a past or present judge of the high court or a member of the NCLT for at least five years. Technical members must have a special knowledge of law, management, administration, industrial finance, etc, and an experience of not less than 25 years. Section 412 also says that these appointments must be made in consultation with the Chief Justice of India in the case of judicial members, and after the recommendation of a specified selection committee in the case of technical members. 

To add to this manpower-related dilemma, Section 422 of the Companies Act, 2013, says that the NCLAT must deal with all appeals expeditiously and make endeavours to dispose of the cases within three months. The maximum period of extension that the NCLAT may make is 90 days, after recording the reasons for the delay. Similarly, Section 64 of the Insolvency and Bankruptcy Code also allows the NCLAT to extend the specified time-periods to a maximum of only 10 days.

Given these issues, companies may initially consider going to the high court for competition appeals as there is little clarity on whether the bench will have enough time and manpower to hear competition cases, notes Gupta. However, he mentions that this route may have its own set of issues and could prove to be a risky proposition.

Existing responsibilities

• Appeals from orders of NCLTs under the Companies Act 2013

• Appeals from orders of Insolvency & Bankruptcy Board and Adjudicating Authorities under Insolvency and Bankruptcy Code 2016

New responsibilities

Appeals from orders/directions/decisions of the Competition Commission relating to: 

• Closure of investigation

• Abuse of dominant position

• Approval/denial/modification of combinations

• Execution of orders and recovery/imposition of penalty

• Compensation to government/persons affected by non-compliance of orders