National Company Law Tribunal (NCLT) : Objectives & Functions

What is National Company Law Tribunal (NCLT)?

The National Company Law Tribunal (NCLT) is like a special court in India that deals with problems related to companies. It was created under the Companies Act, 2013. NCLT handles various issues, such as conflicts between the companies, situations where a company can’t pay its debts, and the process of closing down a company. It has different benches in different places to make it easier for people to access it. NCLT plays a key role in resolving disputes and making decisions about company matters, making sure that things are done properly according to the laws that apply to companies in India.

Section 408 of the Companies Act, 2013 defines NCLT, and it specifies that the Central Government shall constitute a tribunal to be known as the National Company Law Tribunal. It consists of the President and other judicial and technical members to exercise and discharge powers and functions as described by the act or any other power delegated to them by way of any other enactment or any notification by the Ministry of Corporate Affairs (MCA).

Geeky Takeaways:

• A national company law tribunal was established under the Companies Act 2013 as a quasi-judicial body to address the issues concerning the Companies Act in India.
• The National Companies Law Tribunal was formed on June 1, 2016, under Section 408 of the Companies Act 2013.
• NCLT has the principal bench in New Delhi and, in total, 16 benches situated around the country.
• Each bench of NCLT is headed by a president, 16 judicial members, and 9 technical members. The current president of the NCLT since 01.11.2021 is Shri Ramalingam Sudhakar.

Objectives of NCLT

1. Consolidation and Simplification of Dispute Resolution: One of the main objectives of instituting the NCLT was to provide a uniform framework that could consolidate and simplify the corporate dispute resolution process. There were multiple forums and tribunals before the NCLT’s establishment, which were responsible for adjudicating various company-related matters; however, these forums were still not able to manage and consolidate these processes, which led to delays and overlapping jurisdiction. NCLT has replaced all these other forums as a single, specialized body to overlook corporate disputes.

2. Effective Adjudication of Corporate Disputes: The objective of NCLT is to implement a uniform platform and red tape-free adjudication of corporate disputes. NCLT acts like a quasi-judicial body, and it is vested with powers similar to those that a civil court holds. By instituting NCLT, the government aims to create a specialized forum that holds the best expertise in company law matters and can ensure that all corporate disputes, even those of high complexity, can be resolved in a fair, timely, and impartial manner.

3. Promotion of Ease of Doing Business: Business is rising day by day, as is the related paperwork and filing, and it is important to promote ease of doing business in India. NCLT has been established to address the resolution of corporate matters and aims to establish a business-friendly environment that encourages growth and investment as a specialized forum. NCLT aims to consolidate, streamline, and simplify the dispute resolution process. With the expertise of the expert tribunal members, all this helps to enhance the efficiency and speed of resolving corporate disputes. This, in turn, makes it easy to transact and operate businesses and, hence, enhances the confidence of businesses and stakeholders.

4. Efficient Insolvency Resolution: The NCLT plays a central role in the insolvency resolution process, which is another main objective of the tribunal. With the introduction of the Insolvency and Bankruptcy Code, 2016, the NCLT has been given the responsibility of overseeing and streamlining the insolvency resolution process, which would be beneficial for both corporate entities and individuals. NCLT acts as the adjudicating authority that initiates the insolvency proceedings, appoints insolvency professionals, and monitors the entire insolvency resolution process. The objective is to make sure there is a transparent and efficient resolution of insolvency cases, which benefits both debtors and creditors.

5. Protection of Stakeholder Interests: Apart from the overall corporate development, NCLT also prioritizes the interests of all stakeholders, like shareholders, employees, creditors, and others. The NCLT takes into account the rights and concerns of all stakeholders while delivering its judgments in corporate disputes. The tribunal ensures that the corporate resolution process is fair and equitable, done within time-bound limits, and balances the interests of all stakeholders involved. The NCLT’s judgment in corporate disputes aims to provide remedies for any oppression or mismanagement of companies, which protects the rights of minority shareholders and promotes corporate governance.

6. Promotion of Corporate Restructuring and Growth: The NCLT is also involved in promoting corporate restructuring and facilitating the growth of businesses. NCLT has been vested with the authority to sanction programs of arrangement, amalgamation, or any compromise between companies. This objective of corporate restructuring is achieved by enabling companies to undergo mergers, acquisitions, and restructuring processes as per the regulatory framework. The NCLT also ensures that such transactions are conducted with the best interests of stakeholders in mind and by maintaining adequate safeguards against any potential misuse or abuse of the corporate restructuring.

Major Functions of NCLT

1. Registration of Companies: The Companies Act 2013 has authorized questioning of the legitimacy of companies due to specific procedural errors that happened during the incorporation and registration processes. NCLT has been vested with the right to cancel the registration of a company or to dissolve any company if such errors are found during an investigation. The NCLT could even change the liability or charge for members from limited to unlimited. With the introduction of these powers under the Companies Act, the NCLT can de-register any company in specific situations when the NCLT thinks that the registration certificate has been obtained by wrongful or illegal means under Section 7(7) of the Companies Act, 2013.

2. Transfer of Shares: NCLT has the authority to hear grievances in the matters related to the rejection of companies in the transfer of shares and securities under Sections 58–59 of the Companies Act 2013, which were under the ambit of the Company Law Board. Earlier, under the Companies Act 1956, the grievances for rejection of transmission or transfer were limited only to shares and debentures. However, after the establishment of NCLT, the act now covers all the securities that are issued by any company.

3. Deposits: Chapter V of the Companies Act of 2013 deals with deposits, and the Company Law Board was the prime authority for taking up the cases under said chapter V. After the introduction of NCLT, powers under Chapter V of the Companies Act have been vested with them. It is worth noting that provisions regarding the deposits under the Companies Act, 2013 were notified before the establishment of the tribunal. Unsatisfied depositors now have a remedy in class action suits for seeking remedy for the omissions and acts on the part of the company that impact their rights as depositors in the NCLT.

4. Power to Investigate: An investigation of the affairs of the company can be ordered when the Tribunal receives an application of 100 members (previously, an application of 200 members was needed). Furthermore, if a person isn’t related to a company and can persuade NCLT about the presence of certain conditions requiring an order of investigation, then NCLT has the power to order such an investigation. NCLT has the authority to order investigations within India or anywhere in the world. Under the Companies Act 2013, several provisions are drafted for offering and seeking help from other courts and investigation agencies in foreign countries to facilitate such investigations. (Section 213)

5. Freezing Assets of a Company: Section 221 of the Companies Act 2013 empowers the NCLT to freeze the assets of a company. The NCLT is empowered to freeze the assets of a company that were used at any later stage when any such company comes under the investigation or scrutiny of the NCLT. Such an investigation could also be ordered at the request of others under specific conditions as prescribed under the Companies Act 2013.

6. Converting a Public Limited Company into a Private Limited Company: Sections 13 to 18 of the Companies Act 2013, read with Rule 41 of the Companies (Incorporation) Rule of 2014, establish that when a company converts from a public limited company into a private limited company, the approval of NCLT is required to approve such a conversion. The tribunal is also vested with the right to impose such terms and conditions as mentioned under Section 459 of the Companies Act of 2013.

Conclusion

A National Company Law Tribunal is established to streamline the corporate resolution process for company-related matters, insolvency proceedings, and other corporate disputes. The NCLT aims to provide a platform for resolving corporate disputes with better efficiency, within a time-bound manner, and clear clarity in the decision-making process. The NCLT has tackled the issue of red tape in corporate legal matters. NCLT has a principal bench in New Delhi and 16 total bench members handling different areas of jurisdiction throughout the country. NCLT is vested with several rights and powers by the Companies Act 2013 to empower NCLT as a quasi-judicial body to handle all company-related disputes.

National Company Law Tribunal- FAQs

What is NCLT?

The National Company Law Tribunal (NCLT) is like a special court in India that deals with problems related to companies. It was created under the Companies Act, 2013. NCLT handles various issues, such as conflicts between the companies, situations where a company can’t pay its debts, and the process of closing down a company.

Where can one file an appeal against the NCLT?

Any decision of NCLT can be challenged under the National Company Law Appellate Tribunal (NCLAT).

Who heads NCLT?

Chief Justice (Retd) Ramalingam Sudhakar head the principal bench of NCLT.

How many benches does NCLT have in India?

The NCLT has total 16 benches, out of which six at New Delhi (one being the principal bench) and two at Ahmedabad, one at Prayagraj, one at Bengaluru, one at Chandigarh, two at Chennai, one at Cuttack, one at Guwahati, three at Hyderabad out of which one is at Amaravati, one at Jaipur, one at Kochi, two at Kolkata and five at Mumbai.

What is the difference between a tribunal and a court?

A tribunal works like a Quasi-judicial body with the power to act as a court on cases of special matter which are conferred on them by statutes. The court is a part of the traditional Indian judicial system where the judicial powers are derived from the state.