Draft Cos Bill Adds Teeth To Company Law Board
The draft Companies Bill, 1997, has empowered the Company Law Board now renamed the Company Law Tribunal to punish companies that do not obey its orders for contempt of court. This has aligned the CLTs powers with those of other tribunals like the Monopolies and Restrictive Trade Practices Commission (MRTPC).
Till now, the CLB was forced to refer cases of its orders being disobeyed to the concerned High Court, which would then proceed against the offending company. Apart from beefing up the quasi-judicial bodys punitive powers, the expert group on the Companies Act, 1956, has also recommended that the renamed CLT should be granted the power to review its own orders.
The review powers are being included in the Act for the first time. Till now, the review powers were included only in the regulations.
But this created technical problems since the regulations had no legal validity as they were not backed by similar powers in the underlying Act. Hence, the CLB deleted these powers from the regulations. In that sense, these powers have been granted to the body for the first time.
The draft bill provides that appeals against a CLB order will now lie with a dual member bench of the High Court instead of a single member bench. This change has been brought about because only a sitting or retired judge of a High Court could be appointed as the CLB chairman.
However, no judge wanted to take up a posting in the CLB since the law provided that his judgement could be challenged before another judge of the same rank.
Interestingly, the draft bill has now corrected this anomaly, but simultaneously dropped the qualifying condition for the chairman.
The draft bill states that the central government may appoint a judicial member as president (the new nomenclature for chairman) of the CLT. However, this appointment would have to be done in consultation with the Chief Justice of India
The draft bill also states that in case of conflicting orders from two high courts, companies can appeal to the Supreme Court. The Companies Act was totally silent on appeals in case of conflicting orders till now. This provision also opens the scope for appeal against a CLT order before the Supreme Court as in the case of MRTPC orders.