Everything About NCLT Proceedings

Introduction:

National Company Law Tribunal is a quasi-judicial body to regulate and resolve civil corporate disputes. The power to establish National Company Law Tribunal(NCLT) and National Company Law Appellate Tribunal (NCLAT) was derived from Article 245 of the Indian Constitution and the tribunal was established under the Companies Act, 2013 and was enforced on 1st June 2016 by Government Of India based on the recommendation of the Eradi Committee.

The National Company Law Tribunal is also the adjudicating authority for insolvency resolution process of companies and limited liability partnerships under the Insolvency and Bankruptcy Code, 2016.
Benches:

National Company Law Tribunal has thirteen (13) benches, New Delhi has two benches out of which one is the principal bench. Subsidiary benches are as follows:

• Ahamadabad
• Allahabad
• Bengaluru
• Chandigarh
• Chennai
• Guwahati
• Hyderabad
• Jaipur
• Kochi
• Kolkata
• Mumbai
• New Delhi

Sitting Hours Of NCLT:
The court remains working on all working days from 9:30 AM to 6:00 PM except Saturday, Sunday and other national holidays.

Powers Of NCLT:

The powers vested in NCLT are as follows:

• Class Action: Class action suits are filed against frauds and this comes under Section 245 of the Companies Act. Any company which is registered under the Indian Companies Act and steals money from investors or cheats them can be fined or penalised by the NCLT. Also, the offender ( be it directors, company, auditor etc) should compensate the shareholders or depositors for the losses suffered by them on account of the fraudulent practices.

Class action can be filed against any type of company, be it a public sector or a private sector company. It can be filed against any company which is incorporated under the Companies Act, 2013 or any previous Companies Act. Banking companies are the only exception under this Act.

• Refusal To Transfer Shares: In case any company mishandles registration of transfers of shares or refuses to transfer shares then the individual who incurred a loss due to malpractice can approach the NCLT within a period of two months to seek justice. As per Section 58 and 59, contracts and arrangements for security transfer come under the jurisdiction of NCLT.

• Oppression and Mismanagement: Now, unlike before, the tribunal allows people to seek remedy for any form of abuse be it the past or the present. If anyone finds that if working of a company is partial and aims to benefit certain parties while being oppressive towards others then the affected people have the right to approach the tribunal and demand that it takes a look into the matters of the company so as to ensure that all people involved get justice.

• Compounding Of Offence: Provisions of compounding under the 2013 Act were notified before the constitution of the NCLT was assigned to CLB. This power is now vested with the NCLT and all compounding matters which are above the prescribed monetary limit will be approved by the NCLT.

• Deregistration Of Companies: NCLT is vested with the power to deregister and dissolve companies who have got themselves registered by fraudulent and illicit means. Now, NCLT can also investigate any procedural discrepancy involved in registration of a company if it deems so to be needed.

• Revision of Financial Statements: On several occasions, falsification of record books were noticed under the Companies Act, 1956 and Section 447 and 448 were added to ensure that such an act will be effectively handled by the tribunal. Section 130 and 131 are newly added provisions that prohibit the company from suo-motu opening its accounts or revising its financial statements, such opening /revising financial statements can be only done in the manner provided in the act. Section 130 allows the tribunal to command a company to reopen accounts under certain circumstances. Though the companies are permitted to review their financial statements under Section 131, they do not have the powers to reopen any accounts.

• Deposits: Chapter V of the act deals with deposits and was notified in phases in 2014 and powers to deal with the cases under it were assigned in CLB. Now the said powers are vested with NCLT. The provision for deposits under the 2013 act was already notified. Aggrieved depositors also have the remedy of class actions for seeking redressal for the acts/omissions of the company which violated their rights as depositors.

• Investigation: Chapter XIV provides several powers to the tribunal in relation to investigations. The most important powers vested with the tribunal are:

1. Power to order investigation: Under the Company Act, 2013 only 100 members ( but previously 200 members were required under Companies Act, 1954) are required to apply for an investigation into the affairs of a company, the power to apply for investigation is given to any person who is able to convince the tribunal that such a situation exists for initiating investigation proceedings. An investigation ordered by the NCLT can be conducted within India or anywhere abroad. Provisions are made to take as well as provide assistance to investigation agencies and courts of other countries with respect to the investigation proceedings.

2. Power to impose restrictions on securities: Earlier the restriction could be imposed only on shares. Now the tribunal can impose restrictions on any security of the company.

3. Power to investigate the ownership of the company: The tribunal is vested with power to investigate into the matters relating to ownership of the company. For instance, the tribunal can order to investigate about who actually runs the company and if there are two parties A and B who claim to run the same company.

4. Power to freeze assets of the company: The tribunal is vested with powers to freeze the assets of the company which consequently can’t be used when the company is under investigation.

• Conversion Of Public Company Into Private Company: Sections 13, 14, 15 and 18 of the Companies Act, 2013 read with rules governing the conversion of a public limited company into a private limited company convey that approval from the NCLT is required for such a conversion. The tribunal may at its discretion impose certain conditions subject to which approval may be granted.

• Change In Financial Year: NCLT has the power to change the financial year of companies registered in India. As per Section 2 (41), the companies in existence should have a uniform financial year ending on the 31st of March.

• Tribunal Convened General Meetings: Annual General Meetings (AGM) or Extraordinary General Meetings (EOGM) have to be held to revise the opinions of shareholders and provide a general outline for the company’s working. These meetings have to follow the procedures provided under the Companies Act, 2013. If at the instance of any reasons, the AGM or EOGM is not called, the tribunal, as per the provisions of Section 97 and 98 is vested with the power to convene a general meeting.

Appeals:
Decisions from the National Company Law Tribunal may be appealed against beofre the National Company Law Appellate Tribunal. The decisions by the National Company Law Appellate Tribunal (NCLAT) can be further appealed to the Supreme Court Of India.

Difference between NCLT and NCLAT:
The NCLT has primary/original jurisdiction while the NCLAT has appellate jurisdiction. Evidence and witnesses are generally presented before the NCLT for decision-making and the NCLAT reviews decisions of NCLT and checks on a point of law or fact, if appealed against by an aggrieved party. Finding facts and collection of evidence are one of the primary tasks of NCLT, whereas the appellate tribunal (NCLAT) decides cases based on already collected witnesses and evidence. NCLAT is a higher forum than the NCLT as it reviews decisions made by the tribunal.

Conclusion:
The merits of establishing NCLT include exclusive jurisdiction on company matters, time efficiency and decrease in a number of cases in other general courts. In fact, in theory, this is all possible but practically, it has not been successfully implemented and the tribunal has not yielded expected results.

By: Harshavardhan Abburi
Co-author: Associate Aswini Ramesh