SC refers to larger bench pleas against Company Law provisions

It has sent a batch of petitions challenging its constitutional validity to a larger bench

Supreme Court today questioned some provisions of the 2013 Companies Act relating to setting up of National Company Law Tribunal (NCLT) and sent a batch of petitions challenging its constitutional validity to a larger bench.

A three-judge bench headed by Justice T S Thakur questioned certain provisions of the newly-promulgated Act which gives power to the Centre to suspend and sack members and Chairpersons of NCLT and National Company Law Appellate Tribunal (NCLAT).

"You (Centre) are taking away the power from the High Courts and giving them to the tribunals whose members or chairman can be suspended by you.

"The fact that they can be suspended raises questions as to how they will be able to function independently while dealing with matters involving the Centre.

"Moreover, suspension is also a stigma. Don't you (Attorney General) think that this should also go to the constitution bench for an authoritative pronouncement," the bench, also comprising justices R F Nariman and Prafulla C Pant, said.

AG Mukul Rohatgi, appearing for the Centre, defended the provisions saying the members and Chairpersons can only be removed with concurrence of the Chief Justice of India and "if CJI cannot uphold the principal of natural justice, then who will?"

"You know the judges can be impeached and can't be suspended," the bench said. To this, the AG replied that "impeachment has not worked."

The bench is hearing several pleas including one filed by Madras Bar Association challenging certain provisions of Chapter XXVII of the Companies Act, 2013 that deal with the constitution of the NCLT and NCLAT.

During the hearing, it referred to the 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 bench said the challenge in the present petitions are "akin" and hence, they should be sent to the CJI for being put before a larger bench.

Erstwhile UPA government had proposed setting up the NCLT and the NCLAT as specialized quasi-judicial bodies.

The move was aimed at helping 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.