Wednesday, Aug 03, 2016

NCLT and NCLAT Rules 2016 – A Transformation in the Corporate Law Judiciary

The establishment of National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) is a paradigm shift in the corporate law judiciary with regard to the dispute resolution. The tribunals are established with the intention to adjudicate all disputes/issues pertaining to companies in India under one umbrella. The basic objective of constituting these tribunals is to provide a simpler, speedier and more accessible dispute resolution mechanism.

Constitution of NCLT and its Functioning

The Government of India, Ministry of Corporate Affairs vide Notification dated 1st June, 2016 announced the constitution of NCLT and NCLAT thus dissolving the Company Law Board under the Companies Act, 1956. The NCLT is a quasi – judicial body in India that adjudicates the issues related to Companies in India. The NCLT presently has eleven benches, two at New Delhi (one being the principal bench) and one each at Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata and Mumbai.

The powers of NCLT under the Companies Act to adjudicate proceedings are-

-          All the cases Initiated before the Company law board under the Companies Act, 1956

-          All proceedings pending before the Board for Industrial and Financial Reconstruction, including those pending under the Sick Industrial Companies (Special Provisions) Act 1985;

-          Appeals or any other proceedings pending before the Appellate Authority for Industrial and Financial Reconstruction; and

-          fresh proceedings pertaining to claims of oppression and mismanagement of a company, winding up of companies and all other powers prescribed under the Companies Act.

Decisions of the NCLT may be appealed to the National Company Law Appellate Tribunal.

“NCLT shall have the powers to adjudicate all the proceedings held under CLB, BIFR and any appeals pending before Appellate Authority for Industrial and Financial Reconstruction, SICA and claims or proceedings w.r.t. oppression and mismanagement of a company, winding up of companies.”

The tribunal shall consist of a President and such number of Judicial and Technical Members as may be required. The principal bench shall be located at New Delhi which shall be presided over by the President. The powers of the Tribunal shall be exercised by Benches constituting of two members, one being the Judicial member and the other a Technical member.

Under the NCLT Rules, 2016 the tribunal shall have a President, Registrar and a Secretary. The President shall have the powers beside provided under the Companies Act, 2013.

Provisions of the Act made effective with the constitution of the Tribunals:


All the appeals against any order of the NCLT may be filed by the aggrieved parties with the NCLAT and thereafter with the Supreme Court thus eliminating High Courts from the chain of adjudication making it more fast in terms of the passing of speedy judgements. However, appeals against the orders of the CLB before the constitution of the NCLT would continue to be made before relevant High Court.

While matters like class action suits, alteration of articles and may more will now be governed by NCLT, others relating to winding-up, compromise, amalgamation and capital reduction will continue to be under the purview of the high courts. The matters handled by the Board of Industrial and Financial Reconstruction (BIFR), the Appellate Authority for Industrial and Financial Reconstruction and High Courts would eventually be transferred to NCLT.  With this, NCLT and NCLAT are indented to act as a quasi-judicial body to adjudicate all disputes pertaining to Indian companies. The primary objective is to provide a specialised dispute resolution mechanism for Indian corporates which is easily accessible, fast and efficient. It is to be seen as to how smooth the transition will happen.