ADJUDICATORY BODY (MADRAS B A vs UOI)

HIERARCHY OF ADJUDICATION

There are two adjudicatory bodies under companies act, 2013 under chapter 27:

1. NCLT (National Company Law Tribunal)
2. NCLAT (National Company Law Appellate Tribunal)

NCLT (National Company Law Tribunal):

NCLT is a quasi- judicial body that adjudicates issues relating to company matters.. It shall act as a single window or settlement of all company related disputes. The powers and jurisdiction being exercised earlier by various bodies under the earlier Companies Act, viz., Company Law Board(CLB), Board of Industrial and Financial Reconstruction (BIFR) or High Courts have been consolidated and entrusted to the Tribunal. Thus multiplicity of litigation before various courts\ quasi judicial bodies will be avoided as all these matters will now be heard and decided by NCLT. The shareholders are allowed to file class action suits before NCLT against the directors or auditors of the company for their misconduct and unwarranted acts. The CG constituted NCLT w.e.f. 1st June, 2016 consisting of a President and certain Judicial and Technical members . The powers of the Tribunal shall be exercisable by Benches presided by Judicial Member. The Principal Bench is at Delhi and is presided over by the President of the Tribunal. The Tribunal ,after giving the parties , a reasonable opportunity of being heard, pass such orders as it thinks fit and send a copy of its order to all the parties concerned. NCLT shall try to dispose of the proceeding expeditiously within 3 months from the commencement of the proceeding. Any person aggrieved by the decision or order of the NCLT , may file an appeal before NCLAT within 45 days from the date on which a copy of the Tribunal’s order is received by him.

NCLAT (National Company Law Appellate Tribunal):

NCLAT is an appellate authority to hear appeals against the orders of NCLT or NFRA ( National Financial Reporting Authority) or CCI (Competition Commission Of India). It has the same powers as a civil court for discharging its functions. The Central Government has constituted NCLAT w.e.f 1st June, 2016 consisting a Chairperson and certain Judicial and Technical Members, not exceeding 11. The Chairperson shall be a person is\who has been a judge of Supreme Court or the Chief Justice of a High Court. The Judicial Member shall be a person who is \ has been a Judge of a High Court or is a Judicial Member of NCLT for 5 years. The Technical member shall be a person of proven ability , integrity and standing having special knowledge and professional experience of at least 25 years, in the fields of finance ,management, accountancy, law, investment etc.

Now, the NCLAT also functions through its benches. A bench of NCLAT shall have at least one Judicial and one Technical member. These benches ordinarily sit at New Delhi and at other notified places. NCLAT shall try to dispose of the appeal within 3 months from the date of receipt of the appeal. The NCLAT shall send a copy of every order made by it to the NCLT and parties to the appeal. Any person aggrieved by any decision or order of the NCLAT may file an appeal to the Supreme Court within a period of 60 days from the date of communication thereof, on any question of law.

POWERS OF NCLT or NCLAT:

They shall enjoy same powers as are vested in a civil court eg.
– summoning and enforcing attendance of any person
– examining the witnesses on oath
– discovery and production of documents
– receiving evidences on affidavits
– issuing commissions for examination of witnesses or documents

PROCEDURES OF NCLT/NCLAT:

The NCLT and NCLAT shall not be bound by the procedure laid down in the Code of Civil Procedure,1908, but shall be guided by the principles of natural justice in the conduct of their business. They shall have power to regulate their own procedure.

RELEVANT CASE LAWS

Madras Bar Association Vs Union of India & Anr.Writ Petition (C) No. 1072 Of 2013

Facts: The petition was filed by the petitioner alleging that notwithstanding various directions given 2010 judgement, the new provisions in the Companies Act, 2013 are almost on the same lines as well incorporated in the Companies Act, 1956 and therefore, there provisions suffer from the vice of unconstitutionally.
Issue: Whether the constitutional of NCLT and NCLAT under the Companies Act are valid?
Judgement: The Court emphasised the importance of an independent and impartial judiciary to render justice. It held that the reducing standards or qualifications for appointment will result in loss of confidence in the Tribunals. The Court also expressed concern over the erosion of the independence of judiciary and the gradual dilution of the standards and qualifications prescribed for persons to decide cases which were earlier being decided by the High Courts. It is argued that in for as technical members of NCLT/NCLAT are concerned, the provision is almost the same which was inserted by way of an amendment in the Companies Act, 1956 and challenge to those provision was upheld in 2010 judgement. The Court held that only persons with a judicial background, that is, those who have been are Judge of High Court and lawyers with prescribed experience, who are eligible for appointment as High Court Judges, can be considered for appointment of Judicial magistrate. SC held upheld the constitutional of NCLT and NCLAT.

Embassy Property Developments Pvt. Ltd. v. State of Karnataka and Ors. MANU/SC/1661/2019

Facts: M/s Uddhyaman investments Pvt Ltd claimed itself to be the financial creditor (FC) and moved an application before the National Company Law Tribunal (NCLT). The Resolution Professional (“IRP”) had moved a Miscellaneous Application before NCLT, Chennai praying for setting aside the Government of Karnataka order dated September 26, 2018, which rejected the RP’s proposal for deemed extension of the mining lease granted to the Corporate Debtor. The MA also sought a declaration that the lease should be deemed to be valid up to March 31, 2020 and further, a consequential direction to the Government of Karnataka to execute Supplement Lease Deeds for the period up to March 31, 2020. NCLT Chennai, vide order dated December 11, 2018, allowed the MA on the ground that the same was in violation of the moratorium declared on March 12, 2018 in terms of Section 14(1) of IBC.
Aggrieved by the order of NCLT, Chennai in the said MA, the Government of Karnataka moved a writ petition before the Karnataka High Court. As the NCLT Chennai order dated December 11, 2018 had been passed ex-parte, on the ground that the State did not choose to appear despite service of notice, the High Court relegated the matter to NCLT for fresh consideration and decision on merits, vide order dated March 22, 2019.
NCLT Chennai, vide order dated May 3, 2019, overruled the objections of the Government of Karnataka and directed them to execute Supplemental Lease Deeds for the extended period. The Government of Karnataka moved another writ petition before Karnataka High Court challenging the NCLT order dated May 3, 2019.
The High Court, vide order dated September 12, 2019, stayed the operation of the directions contained in the impugned NCLT order. The civil appeals had been preferred before the Supreme Court by the Resolution Applicant, Corporate Debtor through RP and CoC challenging the aforesaid High Court order dated September 12, 2019.
Issue: Whether the High Court ought to interfere, under Article 226/227 when an Order passed by the NCLT, ignoring the availability of a statutory remedy of appeal to the NCLAT and if so, under which circumstances?
 Whether questions of fraud can be inquired into by the NCLT/NCLAT in the proceedings initiated under the IBC, 2016?
Judgement: Apex court examined the scope of jurisdiction of the High Court under Article 226/227 and NCLT and NCLAT, under IBC, 2016, and observed that the contractual agreement between the State Govt. and the CD is a matter of public interest, which is governed statutorily. The MMDR Act, 1957, is a parliamentary enactment and the mining lease was also issued in accordance with the statutory rules namely Mineral Concessions Rules, 1960 and therefore, the relationship between CD and GoK is statutorily governed and not just contractual.
 The Apex Court was of the view that the decision taken by the State govt. is a matter which is of public interest, governed by the statute. Hence, the decision can only be reviewed by a superior court which shall have the power of judicial review.  NCLT is a quasi-judicial body that has been created by a statute and hence, it cannot be elevated to the status of a superior court which will have the power of judicial review. NCLT and NCLAT has the power to inquire fraudulent and collusive allegations. The apex court believed that the appellant are right in this regard as Section 65, IBC, 2016, specifically deals with the fraudulent or malicious intention of proceedings. Hence, fraudulent initiation of CIRP cannot be a ground to bypass the alternative remedy of appeal provided in Section 61, IBC, 2016.
NCLT and NCLAT has jurisdiction and power to try fraudulent questions but they would not have the jurisdiction to adjudicate upon the disputed such as those arising under the MMDR Act, 1957, especially when the disputes run around the decisions of statutory and quasi-judicial authorities. Hence, HC was justified in entertaining the writ petition. Appeals were dismissed and there was no order as to costs.

Present CASE:

Q. 6/2020. If the laws of Tarabh are pari materia with Indian laws, then the law establishing tribunals for corporate disputes is unconstitutional as it violates the principles of separation of powers, independence of the judiciary, and the basic structure doctrine. Drawing from key Indian judgments like Madras Bar Association (2014), the following changes should be made:

1. Increase the proportion of judicial members in the Tribunal.
2. Ensure judicial dominance in the appointment process via a Search-cum-Selection Committee.
3. Guarantee security of tenure, pay parity, and independence for tribunal members.

By incorporating these modifications, Tarabh can achieve a valid tribunalisation system that upholds constitutional principles.