NCLT, short for National Company Law Tribunal, plays an important role in law governed by regulating and resolving corporate disputes in India. NCLT has been established to simplify and streamline the law of procedure as it regards companies and to bring efficiency to corporate adjudication. This formation of NCLT meant integrating all the judicial and quasi-judicial authorities, which came under the single roof of an integrated platform to resolve any matters regarding company law.
Meaning of NCLT
The National Company Law Tribunal, which is a quasi-judicial body created in India with the purpose of deciding the matters of company law under the Companies Act, 2013, has replaced the Company Law Board (CLB) and absorbed the different functions performed by the High Courts, BIFR, and AAIFR earlier.
Through the NCLT, redressal of mergers and demergers, insolvency, shareholder disputes, or mismanagement about companies can be made possible in a more efficient manner as part of the pursuit of improvement in corporate governance through timely adjudication.
Features of NCLT
The NCLT is blessed with distinct features that guarantee efficient corporate dispute resolution and company governance.
Judicial Nature: NCLT holds judicial jurisdiction to determine issues relating to the company.
Single Window for Disputes: The institution has brought together dispersed functions that exist between courts and tribunals under a single entity.
Fast Track Resolution: NCLT aims at reducing delays that occur during the adjudications involving companies.
Appeal Mechanism through NCLAT: Appeals concerning orders rendered by the NCLT are adjudged and disposed of by the National Company Law Appellate Tribunal.
Insolvency: NCLT is significant in insolvency procedures under the IBC, 2016 in India.
Binding Nature of Orders: The order rendered by the NCLT has binding value like a civil court's order.
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Functions of NCLT
The National Company Law Tribunal (NCLT) performs numerous functions to streamline corporate governance and speedy disposal of cases. Being a quasi-judicial body, NCLT is to ensure convergence with the Companies Act, 2013, and plays an important role in enforcing corporate laws, mergers, insolvency resolutions, and safeguarding the rights of the stakeholders. Under this are the core functions of NCLT:
1. Adjudication of Company Law Matters
NCLT decides cases on corporate governance, shareholder disputes, and directorial misconduct.
It applies the Companies Act, 2013 provisions in its judgments on companies.
2. Approvals for mergers, demergers, and Restructuring
NCLT approves merger/demerger plans/restructuring schemes and enquires whether such arrangements are per the law and whether the interests of stakeholders are adequately protected.
It tests the fairness of such arrangements and safeguards the interests of minority shareholders also in M&A deals.
3. Insolvency and Bankruptcy Laws
NCLT is the primary adjudicating authority for corporate insolvency proceedings under the IBC, 2016.
It either revives a company or liquidates it to settle creditors' claims.
4. Prevention of Oppression and Mismanagement
NCLT intervenes where minority shareholders or members are oppressed or mismanaged by the majority.
It protects the interests of shareholders by having measures like the removal of existing management or reorganisation of a company.
5. Winding-Up of Companies
NCLT regulates proceedings for winding up companies: voluntary and on a decree of a court.
Liquidation of companies and distribution of assets among all stakeholders with regard to settling debts and liabilities is carried out with perfection.
6. Reduction of Share Capital
Requests relating to reductions in share capital are dealt with by NCLT to ascertain whether the process fulfills legal requirements.
It examines whether the reduction affects the rights of the creditors and protects the interests of the stakeholders.
7. Depositor and Creditor Grievance Redress
NCLT hears grievances from the depositors and creditors and renders fair treatment and speedy action against the defaulting companies.
It redresses grievances on a non-payment or fraudulent basis.
8. Revival of Dormant Companies
NCLT has the authority to revive companies that have been lodged for strike-off from the register of companies by the Registrar of Companies.
It enables dead companies to start working when their essential needs are met.
9. Appeal against Registry of Companies decisions/orders
NCLT disposes of appeals filed against any decision/order made by the Registry of Companies.
It provides an opportunity to the companies as well as other individuals to file appeals once wrongful decisions have been meted out.
10. Enquiry of Company Affairs
NCLT can conduct an inquiry about the company's matters if there is a suggestion of fraud or malpractice.
It becomes an order to the regulatory authorities, like the Serious Fraud Investigation Office (SFIO), for instance, to carry out an investigation.
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Powers of NCLT
NCLT has a galaxy of powers with which it can adjudicate disputes and enforce compliance with the law. They are as follows:
Summoning and Enforcement of Attendance: It can summon people and enforce their attendance.
Production of Records or Documents: It has the power to requisition the production of any records or documents relating to a proceeding.
Examination on Oath: It can administer the oath to examine parties and record their statements.
Issuance of Orders relating to Insolvency and Bankruptcy: the NCLT decides the fate of companies undergoing the process of insolvency or bankruptcy.
Winding Up of Companies: It can issue orders to wind up companies under the provisions of the Companies Act, 2013.
Punitive Action: The NCLT is authorized to impose penalties on the respective companies or individuals if they do not obey.
NCLT Structure
The NCLT is structured in such a way that it shall be accessible as well as efficient.
Principal Bench in Delhi: The principal bench is located at New Delhi.
Regional Benches: NCLT has regional benches stationed across the major Indian cities
Judicial and Technical Members: Every bench has judicial and technical members to address several cases
Presiding Officer: The presiding officer is a judicial member of the tribunal.
NCLAT as Appellate Tribunal: NCLAT hears appeals against the NCLT orders, thus establishing a stronger review mechanism.
Connect with the Supreme Court of India: An appeal against an order made by NCLAT can be referred to the Supreme Court of India.
Notable Cases Handled by NCLT
Some of the landmark judgments pronounced by NCLT are shaping the corporate landscape of India.
Tata Sons vs. Cyrus Mistry:
The most crucial decision in that series is Tata Sons vs. Cyrus Mistry, where NCLT was seen playing the pivotal role in the heavyweight clash between Tata Sons and its erstwhile chairman Cyrus Mistry. NCLT also filed an insolvency petition for Jet Airways, paving the way for revival.
Bhushan Steel Insolvency Case:
NCLT handled one of the largest insolvency cases, and it was acquired by Tata Steel from Bhushan Steel.
Satyam Computer Services Scam:
NCLT was involved in the restructuring process of Satyam post-scam, and it was acquired by Tech Mahindra.
Videocon Group Insolvency:
The tribunal managed the case of insolvency in Videocon Industries, which is one of the most complex cases with multiple stakeholders involved.
Conclusion
The National Company Law Tribunal is an integral part of the corporate governance structure in India. The NCLT establishment made the processes of corporate adjudication streamlined by combining the functions of different authorities under one, thus achieving speedy resolutions of disputes. Having jurisdiction over mergers and acquisitions, insolvency matters, and corporate mismanagement, the NCLT plays an irreplaceable role in the Indian business world.
NCLT has emerged as a harbinger of huge transformation in the evolution of the Indian economy as it revolutionized the legal process by opening up forums for effective corporate disputes and has been a panacea that has permitted business confidence and governance. The future role of NCLT would be pivotal in shaping the contours of corporate law in this country.
NCLT in Company Law FAQs
1. When was NCLT established?
NCLT was established on June 1, 2016. Replacing the Company Law Board (CLB) and integrating the adjudication of various company-related disputes, NCLT exercises exclusive jurisdiction.
2. What are the powers of NCLT?
NCLT can authorize mergers, and demergers, resolve insolvency cases, wind up companies, prevent oppression and rectify mistakes in company registers, summon individuals, enforce attendance, and may fine them.
3. NCLT and NCLAT differ in what way?
NCLT is a first-tier tribunal in respect of jurisdiction in companies' matters, and an appeal against the decision of NCLT is made before NCLAT. However, an appeal further lies before the Supreme Court of India.
4. How does NCLT ensure protection for shareholders?
NCLT interferes in cases of oppression or mismanagement to protect the interests of the minority shareholder. It can pass orders for changing management, restructuring, or any other measures for rectifying such unfair practices
5. May litigants approach NCLT without resorting to other forums?
Yes, this court can be approached directly by the minority shareholders, creditors, and depositors in case they get victimized by the oppression, non-payment, or mismanagement of companies.
