The government on Wednesday constituted the National Company Law Tribunal (NCLT) and its appellate body, implementing most of the provisions of new Companies Act and helping implementation of the Bankruptcy Code. With this, the Company Law Board (CLB), constituted under the old Act, stands dissolved.
Retired judge M M Kumar would be the president of NCLT and retired judge S J Mukhopadhaya would take over as chairman of National Company Law Appellate Tribunal.
Initially, NCLT will have 11 benches - two at New Delhi and one each at Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata and Mumbai.
According to the provisions of the Companies Act, 2013, NCLT will not only replace CLB, but also handle various cases of companies currently with the high courts, the Board for Industrial and Financial Reconstruction, and the Appellate Authority for Industrial and Financial Reconstruction.
In total, it will have 63 members and 21 benches.
NCLT and Debt Recovery Tribunal (DRT) will be the adjudicating agencies for the recently-passed Bankruptcy Code. While NCLT will resolve insolvency cases of companies and limited liability partnerships, DRT will handle cases of individual bankruptcy.
In May 2015, a five-judge Constitution Bench of the Supreme Court had struck down several provisions of the Companies Act 2013, which provided for establishment of NCLT and its appellate forum. However, it upheld the law providing for the tribunals and asked the government to set them up without further delay as litigation had stopped their establishment for years.
Section 409, which allowed a joint secretary to be the technical member of the tribunal, was found invalid. The court wanted only secretary or additional secretary to be appointed to the post. Moreover, the provision for cost accountant with 15 years' experience was also held to be invalid. The court held that these provisions went against the "clear and categorical dicta in the 2010 judgment".
A Constitution Bench had already examined the Companies Act provisions in 2010 and found several legal hitches. The government, then, amended those offending provisions.
"Tinkering with them would evidently have the potential of compromising with standards which 2010 judgment sought to achieve, nay, so zealously sought to secure," the judgment written by Justice A K Sikri said.
Another serious illegality found was regarding the constitution of the selection committee. According to the apex court, the mandate of the 2010 judgment was not followed in the amended rules when it comes to the composition of the selection committee.