SC upholds constitutional validity of Company Tribunals

The Supreme Court today upheld the constitutional validity of provisions of the Companies Act of 2013 relating to setting up of National Company Law Tribunal and National Company Law Appellate Tribunal but struck down provisions which permitted inclusion of civil servants of the level of Joint Secretary as technical members.
A five-judge Constitution bench, headed by Chief Justice H L Dattu, quashed Section 409(3)(a) and (c) and Section 411(3) of the Act providing for qualifications of technical members and held them to be invalid saying for appointment of technical members to NCLT, directions contained in 2010 judgment will have to be "scrupulously followed."

It said the apex court's 2010 order holding that persons below the rank of a Secretary or Additional Secretary should not be appointed as a technical member to NCLT must not be tinkered with as it would have the potential of compromising with standards which it "so zealously sought to secure".
It also held as invalid Section 412 of the new Act which contemplates selection by a committee consisting of two Judges and three Secretaries, saying this very issue stands concluded by the 2010 judgment which is now a binding precedent.
"We are of the opinion that this again does not constitute any valid or legal justification having regard to the fact that this very issue stands concluded by the 2010 judgment which is now a binding precedent and, thus, binds the respondent equally.

"The prime consideration in the mind of the bench was that it is the Chairperson, viz. Chief Justice of India, or his nominee who is to be given the final say in the matter of selection with right to have a casting vote," it said while maintaining the 2010 verdict which had held that a selection committee must consist of four members.
The court directed the Centre to ensure that the bodies are adequately manned and start functioning at the earliest.
"Since, the functioning of NCLT and NCLAT has not started so far and it's high time that these Tribunals start functioning now, we hope that respondents shall take remedial measures as per the directions contained in this judgment at the earliest, so that NCLT and NCLAT are adequately manned and start functioning in near future," the bench, also comprising Justices A K Sikri, Arun Mishra, R F Nariman and Amitava Roy, said.