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Bankruptcy panel proposes to assuage judiciary concerns regarding NCLT

Suggests selection procedure similar to HC for NCLT and NCLAT

Jayshree P Upadhyay & Deepak Patel  |  Delhi 

The legal hurdles standing in the way of operationalisation of National Company Law Tribunal, may end if the Ministry of Corporate Affairs accepts the recommendations of the Bankruptcy Law Reform Committee.

The bankruptcy panel headed former Union Law Secretary TK Vishwanathan, earlier this month had submitted its report to the finance ministry which has been put up for public consultation.

In the report the panel has suggested a similar selection procedure as that of a High Court - for the selection of NCLT and National Company Law Appellate Tribunal (NCLAT) - in order to end the litigation going on in Supreme Court.

On Wednesday, a three-judge SC bench headed by Justice T S Thakur questioned the 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).

The matter has now been referred to a constitutional bench. This is after a writ petition was filed in Madras High Court on the appointment of members of the two proposed bodies last year.

The bankruptcy panel report agreed that Act, 2013 does not comply with all the observations of the Supreme Court in the NCLT case of 2010.

"The Ministry of Corporate Affairs cannot have representation on the committee to appoint members to the NCLT or the NCLAT," said the reform committee report.

The Supreme Court, in its 2010 judgment, had held certain provisions of Act, 1956, relating to the NCLT and the NCLAT to be unconstitutional, while the NCLT and NCLAT (as envisaged under Companies Act, 1956) were themselves held to be constitutional.

TK Vishwanathan opines that the panel recommendations may put an end to the litigation.

"Our recommendations are in-line with the Supreme Court directions in 2010. The Chief Justice of India should have the final say in the appointment of members to the NCLT and NCLAT, with the relevant inputs being obtained from the concerned ministry," said Vishwanathan.

Moreover, according to the panel, such amendments have become extremely important especially in light of a recent ruling by a Constitution Bench of the Supreme Court on the 25th of September, 2014, which struck down the National Tax Tribunals Act, 2005 on similar grounds.

The bankruptcy panel suggested that the Chairman of NCLT as well as NCLAT should be given exclusive power to determine the constitution and jurisdiction of benches of the NCLT and NCLAT respectively.

According to the panel only those officers, who have held a post at Additional Secretary level or higher, should be eligible for appointment for the NCLT OR NCLAT benches. The Companies Act, 2013, permits the officers of the level of Joint Secretary or higher to appointed in such benches.

Companies Act 2013 talks about appointment of a judge as the Chairman NCLT and NCLAT only in case if he/she is or has been a High Court judge for five years. The panel recommends removal of such provision, adding that at least one member of each NCLAT bench should be a judicial member.

"A clause should be introduced to indicate that in all appeals not involving technical issues, the NCLAT bench hearing such appeals should only comprise judicial members or technical members with legal training," said the panel report.

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First Published: Fri, February 20 2015. 19:06 IST