POWERS OF NCLT – A SCIENTIFIC INVESTIGATION.

(Project Report)

Submitted to

Dr. Y. Papa Rao

Faculty Member for Corporate Regulation

By

Bhanu Prakash Joshi

B. A. LL. B. (Hons.) Student
Semester – VII, Section – A, Roll No. 47

HIDAYATULLAH NATIONAL LAW UNIVERSITY

Uparwara Post, Abhanpur, New Raipur – 493661 (C.G.)
 Declaration

I, Bhanu Prakash Joshi hereby declare that, the project work entitled, “Powers of NCLT – A
Scientific Investigation” submitted to H.N.L.U., Raipur is record of an original work done by me
under the able guidance of Dr. Y. Papa Rao, Faculty Member, H.N.L.U., Raipur.

Bhanu Prakash Joshi

Roll 47
Sem VII
Section A

Acknowledgment
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I feel highly elated to work on the topic “POWERS OF NCLT – A SCIENTIFIC
INVESTIGATION”. The practical realization of this project has obligated the assistance of many
persons. I express my deepest regard and gratitude to my teachers for their unstinted support.
Their consistent supervision, constant inspiration and invaluable guidance have been of immense
help in understanding and carrying out the nuances of the project report.

I would like to thank my family and friends without whose support and encouragement, this
project would not have been a reality. I take this opportunity to also thank the University and the
Vice Chancellor for providing extensive database resources in the Library and through Internet.

My gratitude also goes out to the staff and administration of HNLU for the infrastructure in the
form of our library and IT Lab that was a source of great help for the completion of this project

Some printing errors might have crept in, which are deeply regretted. I would be grateful to
receive comments and suggestions to further improve this project report.

Bhanu Prakash Joshi

Roll 47
Sem VII
Section A

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 CONTENTS
DECLARATION ................................................................................................................................. I
ACKNOWLEDGMENT ....................................................................................................................... I
INTRODUCTION ............................................................................................................................... 1
Research Methodology ............................................................................................................... 2
Objectives of the Study ............................................................................................................... 2
Limitation of the Study ............................................................................................................... 2
BACKGROUND OF NCLT ......................................................................................................... 3
BACKGROUND AND VERDICT: ............................................................................................. 3
IMPLICATIONS OF THE JUDGEMENT ................................................................................ 6
THE FRAMEWORK.................................................................................................................... 7
THE PROCEDURE ...................................................................................................................... 7
TRANSITION FROM CLB TO NCLT ............................................................................................... 9
POWERS OF NCLT ..................................................................................................................... 9
1. Class Action: ......................................................................................................................... 11
2. Deregistration of Companies: ............................................................................................... 12
4. Refusal to Transfer shares:.................................................................................................... 12
5. Deposits: ............................................................................................................................... 13
6. Reopening of Accounts & Revision of Financial Statements:.............................................. 13
CONCLUSION ........................................................................................................................... 14
BIBLIOGRAPHY ....................................................................................................................... 15
 Introduction

The National Company Law Tribunal (“NCLT”) is a quasi-judicial body in India that
adjudicates issues relating to companies in India. The NCLT was established under the
Companies Act 2013 and was constituted on 1 June 2016. The Central Government has
constituted NCLT under section 408 of the Companies Act, 2013 w.e.f. 1 June 2016.

In the first phase the Ministry of Corporate Affairs have set up eleven Benches, one Principal
Bench at New Delhi and one each Regional Benches at New Delhi, Ahmedabad, Allahabad,
Bengaluru, Chandigarh, Chennai, Guahati, Hyderabad, Kolkata and Mumbai. These Benches
will be headed by the President and 16 Judicial Members and 09 Technical Members at different
locations.1 Decisions of the NCLT may be appealed to the National Company Law Appellate
Tribunal.

Retired judge M M Kumar would be the president of NCLT and retired judge S J
Mukhopadhaya would take over as chairman of National Company Law Appellate Tribunal.2

According to the provisions of the Companies Act, 2013, NCLT will not only replace CLB, but
also handle various cases of companies currently with the high courts, the Board for Industrial
and Financial Reconstruction, and the Appellate Authority for Industrial and Financial
Reconstruction.

NCLT and Debt Recovery Tribunal (“DRT”) will be the adjudicating agencies for the recently-
passed Bankruptcy Code. While NCLT will resolve insolvency cases of companies and limited
liability partnerships, DRT will handle cases of individual bankruptcy.

In May 2015, a five-judge Constitution Bench of the Supreme Court had struck down several
provisions of the Companies Act 2013, which provided for establishment of NCLT and its
appellate forum. However, it upheld the law providing for the tribunals and asked the
government to set them up without further delay as litigation had stopped their establishment for
years.3

1
Available at : http://nclt.gov.in/ (October 15, 2018)
2
‘National Company Law Tribunal constituted’, http://www.business-standard.com/article/economy-
policy/nationalcompany-law-tribunal-constituted-116060200016_1.html (October 15, 2018)
3
Madras Bar Association v. Union of India, WRIT PETITION (C) NO. 1072 OF 2013

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Research Methodology

This Research Project is descriptive and analytical in nature. Accumulation of the information on
the topic includes use of primary sources such as Companies Act 1956 & 2013, Companies
Amendment Act 2002, Justice Eradi Committee on Law Relating to Insolvency and Winding up
of Companies and other various committee reports as well as secondary sources like e-articles
etc. The matter from these sources have been compiled and analysed to understand the concept.
Websites, dictionaries and articles have also been referred. The structure of the project, as
instructed by the faculty has been adhered to and same has been helpful in giving the project a
fine finish off.

Objectives of the Study

Set in the above perspective or background the broad objectives of the study are to:

 To understand the meaning NCLT

 To explore the rationales for constituting NCLT
 To list down various powers of NCLT.

Limitation of the Study

The current project attempts to find out, analyze the reason behind constituting NCLT. The
project mainly focuses on the documents issued by the Government of India like MCA Circulars
intermittently along with the Companies Act. and also draws its strength from various
authoritative research papers..

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 BACKGROUND OF NCLT

NCLT was conceptualized by Eradi Committee. It was initially introduced in Companies Act,
1956 in 2002 but the provisions of Companies (Second Amendment) Act, 2002 were never
notified as they got mired in litigation surrounding constitutionality of NCLT. 2013 Act was
enacted and the concept of NCLT was retained. However, the powers and functions of NCLT
under 1956 Act and 2013 Act are different. The constitutionality of NCLT related provisions
were again challenged and this case was finally decided in May 2015. The Apex Court upheld
the constitutionality of the concept of NCLT but some of the provisions on constitution and
selection process were found defective and unconstitutional.

BACKGROUND AND VERDICT:

Vide amendment made under the erstwhile Companies Act, 1956 ("Old Act") in 2002 by
Companies (Second Amendment) Act, 2002, certain provisions relating to NCLT and NCLAT
were incorporated under Part 1B and 1C.

The constitutional validity of these provisions was challenged in a writ petition filed by the
Madras Bar Association ("MBA") in the Madras High Court. However, at the same time, the
High Court pointed out certain defects in various provisions of Part 1B and Part 1C of the Old
Act, declaring that those provisions, as existed, offended the basic constitutional scheme of
separation of powers, and it was held that unless these provisions are appropriately amended by
removing the defects which were also specifically spelled out, it would be unconstitutional to
constitute NCLT and NCLAT to exercise the jurisdiction which is being exercised by the High
Court or the CLB.

A further appeal by Union of India as well as MBA was filed against the Judgment of Madras
High Court which was decided by the Constitution Bench. The same was filed as MBA felt
aggrieved by the part of the judgment vide which establishments of NCLT and NCLAT was held
to be constitutional, whereas the Union of India felt dissatisfied by the other part judgment where
provisions contained in part 1B and 1 C of the Old Act was perceived as suffering from 10
various legal and constitutional infirmities. The said appeals were disposed by partly allowing
them via Union of India v. R Gandhi, President, Madras Bar Association, [2010] 11 SCC 1
popularly known as Judgment 2010 whereby it was held that:

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  Creation of Tribunal and vesting in them, the powers and jurisdiction exercised by the
High Court in regard to company law matters, were not unconstitutional.
 Parts 1B and 1C of the Act were found to be unconstitutional; however, they may be
made operational by making suitable amendments.

Though the verdict came in the year 2010, upholding the creation of NCLT and NCLAT, these
two bodies could not be created and made functional immediately thereafter.

Pursuant to the observations of the Supreme Court in the aforesaid case, the requisite changes
were introduced to the scheme of NCLT under the new Companies Act, 2013 ("Act, 2013").

However, another round of litigation ensued inter alia on the ground that not with standing
various directions given in Judgment 2010, the new provisions in the Act, 2013 are almost on the
same lines as were incorporated in the Act, 1956 and, therefore, these provisions suffer from the
vice of unconstitutionality.

Hence, the current ruling of the Supreme Court is essentially an effort to examine the provisions
of the 2013 Act and to consider whether it faithfully adheres to its previous ruling in Judgment
2010. While the court finds that the 2013 Act broadly does so, it also identifies some
discrepancies.

In this light, the Court pronounced its ruling on three principal issues:4

1) Validity of the constitution of NCLT and NCLAT

On this issue, the Court essentially reverberates its decision in R. Gandhi on the ground that all
arguments pertaining to constitutionality were already addressed by the Court in that case and it
"specifically rejected the contention that transferring judicial function, traditionally performed by
the Courts, to the Tribunals offended the basic structure of the Constitution".

2) Qualifications and Other Terms of the President and Members of the NCLT as well
as Chairman and Members of NCLAT

4
Madras Bar Association v. Union of India, WRIT PETITION (C) NO. 1072 OF 2013

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In order to empower CJ H. L. Dattu's emphasis on the principles of independence of judiciary
and separation of powers, the following order was passed with respect to "Principal issues (ii)
and (iii)". The first order was to hold Section 409(3)1 (a) and (c) of the Companies Act, 2013 as
invalid, since these provisions suffered from unconstitutionality. Likewise, Section 411(3)2,
which provided for qualifications of Technical Members, was also held invalid. Simultaneously,
para 120 of 2010 Judgment will have to be scrupulously followed in respect of the appointment
of Technical members to the NCLT.

Also, only officers who are holding the ranks of Secretaries or Additional Secretaries alone can
be considered for appointment as Technical members of the National Company Law Tribunal
and only persons having ability, integrity, standing and special knowledge and professional
experience of not less than fifteen years in industrial finance, industrial management, industrial
reconstruction, investment and accountancy, may however be considered as persons having
expertise in rehabilitation/ revival of Companies and therefore, eligible for being considered for
appointment as Technical Members.

3) Structure of the Selection Committee for appointment of President /Chairperson

/Members.

The 2013 Act provided for a 5-member committee without a casting vote to the Chief Justice of
India (or nominee) which was found at fault by the Constitution Bench in 2010 judgment. The
Court specifically remarked that instead of 5 member Selection Committee, it should be
4member Selection Committee and even the composition of such a Selection Committee was
mandated in Direction No.(viii) of para 120 of 2010 Judgment.

Hence, with the new insertions and directions provided by the Court, it is observed that the
Selection Committee shall broadly be on the following lines:

(a) Chief Justice of India or his nominee – Chairperson (with a casting vote);

(b) A senior Judge of the Supreme Court or Chief Justice of High Court – Member; 12

(c) Secretary in the Ministry of Finance and Company Affairs - Member; and

(d) Secretary in the Ministry of Law and Justice -Member.

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However, now, in the new round of litigation, more provisions have been struck down. The
present Judgment indicated that the legal hurdles for setting up the Tribunals are far from over.
While concluding the Judgment, the court observed that since the functioning of these Tribunals
has not started yet and it's high time that they start functioning now without any further delay,
therefore the government has been asked to modify the rules according to the recommendations
made in the Judgment at the earliest.

IMPLICATIONS OF THE JUDGEMENT

By this Judgment, the Supreme Court has not only paved the way for the establishment of the
NCLT, but it may also potentially lead to the notification of the remaining sections of the 2013
Act so as to make the entire legislation effective.

At a broader level, this development is significant as it might likely alter the face of corporate
litigation in India. While matters such as amalgamations, winding-up, and similar cases being
taken out of the regular Court system, one can expect greater efficiency in resolution of corporate
disputes. Similarly, the most-discussed class action mechanism could potentially alter corporate
behavior. The establishment and constitution of NCLT and NCLAT as exclusive Tribunals for
the administration of all matters arising out of the Companies Act will definitely reduce, if not
wipe out the grave delay involved in the company law proceedings, avoid multiplicity of
litigation before various forums, streamline the process of appeal and reduce the burden on High
Courts.5

Section 409, which allowed a joint secretary to be the technical member of the tribunal, was
found invalid. The court wanted only secretary or additional secretary to be appointed to the
post. Moreover, the provision for cost accountant with 15 years' experience was also held to
13 be invalid. The court held that these provisions went against the "clear and categorical dicta in
the 2010 judgment".

A Constitution Bench had already examined the Companies Act provisions in 2010 and found
several legal hitches. The government, then, amended those offending provisions. "Tinkering
with them would evidently have the potential of compromising with standards which 2010

5
‘National Company Law Tribunal constituted’, http://www.business-standard.com/article/economy-
policy/nationalcompany-law-tribunal-constituted-116060200016_1.html (October 13, 2018)

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judgment sought to achieve, nay, so zealously sought to secure," the judgment written by Justice
A K Sikri said. Another serious illegality found was regarding the constitution of the selection
committee. According to the apex court, the mandate of the 2010 judgment was not followed in
the amended rules when it comes to the composition of the selection committee.

THE FRAMEWORK

The NCLT consolidates the corporate jurisdiction of the Company Law Board, Board of
Industrial and Financial Reconstruction, the Appellate Authority for Industrial and Financial
Reconstruction and Jurisdiction and powers related to the winding up, restructuring, and other
provisions as vested with the High Courts. With the NCLT and NCLAT now in place, the
Company Law Board formed under the Companies Act of 1956 has been made redundant.

While the new tribunals can deal with all company disputes, excluding criminal prosecution as
under the Companies Act, their powers are currently limited. Issues relating to the
investigation of a company’s accounts, freezing of assets, class action suits, and conversion of a
public company to a private one will be decided by the NCLT, while appeals will be looked at by
the NCLAT rather than the High Courts.6 Issues related to compromise, amalgamation, and
capital reduction will continue to be decided by the courts. The aim is to gradually allow
other issues including reduction of share capital, merger, de-mergers, and settlement to be
transferred to the NCLT.

For the NCLT, the government has appointed 11 Benches – two in Delhi and one each in
Ahmedabad, Bangalore, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata, and Mumbai to
use its powers. The NCLT also has two classes of members – Judicial and Technical members.
The NCLAT will have eleven members for hearing appeals. Selection of members is done by a
selection committee headed by the Secretary of the MCA.

THE PROCEDURE

On December 7, 2016, the Ministry of Corporate Affairs (MCA) notified and brought into
operation a significant chunk of sections under the Companies Act, 2013, including provisions

6
Supreme Court Approves Setting Up Of Company Law Tribunals,
http://www.mondaq.com/india/x/438424/Corporate+Commercial+Law/SUPREME+COURT+APPROVES+SETTI
NG+UP+OF+COMPANY+LAW+TRIBUNALS (October 14, 2018)

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relating to compromises, arrangements, reconstructions, mergers and amalgamations, with effect
from December 15, 2016 (the Notification). This marks a paradigm shift in the corporate
restructuring process, which is all set to undergo a transition from the earlier restructuring
processes under the aegis of the High Courts, to National Company Law Tribunals (NCLTs),
constituted with effect from June 1, 2016.

The MCA notified the Companies (Removal of Difficulties) Fourth Order, 2016,7 and the
Companies (Transfer of Proceedings), Rules, 2016,8 on the same date as the Notification,
clarifying that proceedings relating to schemes will stand transferred, forthwith, except where
orders have been reserved.

While applicants with final hearings on or before December 14, 2016, who were expecting
orders to be reserved, heaved a sigh of relief, other applicants were caught in a limbo, while
prospective applicants were left to surmise, and gear up for implementation of the new
provisions, yet to be tested by NCLTs. The Notification was soon followed, on December 14,
2016 by the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016,9 on
sanction of schemes by NCLTs.

The two-step process of filing first motion petitions for convening/dispensing meetings of
members/creditors, and seeking sanction of schemes by way of filing second motion petitions,
after due consideration of reports of chairpersons, and the relevant ROC/Regional
Director/Official Liquidator, has largely been retained under the new rules. Under the earlier
rules, despite there being prescribed formats, varying standards would be followed by the High
Courts with respect to particulars in petitions and documents to be filed. It is expected that
NCLTs will determine uniform processes and formats, in respect of schemes. Although the new
rules do not provide the format of first motion petitions, various requirements are prescribed, in
the nature of disclosures on CDR, capital reduction, basis of identification of classes of
members/creditors, provision of detailed explanatory statements, accompanying
individual notices to members/creditors, and auditors’ certificates confirming compliance with

7
http://www.mca.gov.in/Ministry/pdf/CompaniesROD_08122016.pdf (October 15, 2018)
8
http://www.mca.gov.in/Ministry/pdf/CompaniesROD_08122016.pdf (October 15, 2018)
9
http://taxguru.in/company-law/companies-compromises-arrangements-amalgamations-rules-2016.html (October
15, 2018)

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 10
applicable accounting standards, etc. The new rules have crystallised the corporate
restructuring process in terms of the jurisprudence laid down by the High Courts, such as
permissibility of filing joint applications where two or more companies are involved, exemption
from following a separate process of capital reduction, effected as a result of schemes, etc.
Further, dispatch of notices by emails, voting through electronic means and postal ballots have
been recognised as effective modes of service and voting, respectively, and can be granted in
conjunction with each other. This is a welcome change, since the High Courts have on earlier
occasions, rejected prayers for grant of electronic voting, even in the case of listed companies.

Transition from CLB to NCLT

The Act has set out in detail the procedure to deal with cases which are pending in various
forums in Section 434. The Government has notified 1st June 2016 for transfer of matters from
CLB to NCLT. On that date, all the pending proceedings before CLB will be transferred to
NCLT and Tribunal will dispose of such matters in accordance with the provisions of law.
Tribunal has discretion to take up the pending CLB proceeding from any stage. At its discretion,
it can take up the matter at stage where it was left by CLB or start the proceedings afresh or from
any stage it deems fit.

POWERS OF NCLT

The NCLT has been given wide powers under the Companies Act to adjudicate:

 cases initiated before the Company Law Board (CLB) under the Companies Act, 1956
(Old Act) (which, pursuant to NCLT's constitution, stand transferred to the NCLT);
 all proceedings pending before any district court or High Court under the Old Act
including proceedings relating to arbitration, compromise, arrangements and
reconstruction and winding up of companies (which, upon the relevant notification being
issued, shall stand transferred to the NCLT);
 references/inquiries/proceedings pending before the Board for Industrial and Financial
Reconstruction (BIFR), including those pending under the Sick Industrial Companies
(Special Provisions) Act, 1985 (SIC Act), which would be abated, upon relevant

10
http://www.icsi.edu/WebModules/Programmes/PCS/7PCS/BG%20PCS-6-Grover.pdf (October 15, 2018)

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 notification being issued, and referred to the NCLT within 180 days from the date of
abatement;11
 appeals or any other proceedings pending before the Appellate Authority for Industrial
and Financial Reconstruction (AAIFR), including those pending under the SIC Act,
which would be abated, upon relevant notification being issued, and referred to the
NCLT within 180 days from the date of abatement; 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.12

In addition, the recently enacted Insolvency and Bankruptcy Code, 2016 (Bankruptcy Code),
also provides wide powers to the NCLT to adjudicate upon the 'insolvency resolution process'
and liquidation of corporate debtors. However, the Bankruptcy Code is yet to be notified and
made effective.
In light of the limited provisions under the Companies Act which have been made effective,
presently, the NCLT has jurisdiction to:
 entertain any claims of oppression and mismanagement of a company and to pass any
order that the NCLT may deem fit in this regard;
 adjudicate proceedings and cases initiated before the CLB under the Old Act, which now
stand transferred to the NCLT; and13
 exercise powers under various sections of the Companies Act which have been notified
and made effective by the Government of India, including (a) power to pass any order
against a company incorporated by providing false information or by fraud, (b) power to
grant approval for alteration of articles of a company, if such alteration changes its nature
from public to private, and (c) power to provide approval for issuance of redeemable
preference shares by a company under certain circumstances.

11
http://www.icsi.edu/WebModules/Programmes/PCS/7PCS/BG%20PCS-6-Grover.pdf (October 15, 2018)
12
Supreme Court Approves Setting Up Of Company Law Tribunals,
http://www.mondaq.com/india/x/438424/Corporate+Commercial+Law/SUPREME+COURT+APPROVES+SETTI
NG+UP+OF+COMPANY+LAW+TRIBUNALS (October 15, 2018)
13
‘National Company Law Tribunal constituted’, http://www.business-
standard.com/article/economypolicy/national-company-law-tribunal-constituted-116060200016_1.html (October 15,
2018)

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All appeals against any order of the NCLT may be filed by the aggrieved parties with the
NCLAT. Any appeal against the orders of the CLB before the constitution of the NCLT would
continue to lie before the relevant High Court and not the NCLAT. Currently, for matters
pertaining to the winding up of companies and sick companies, parties would have to continue to
approach either the concerned High Courts, the BIFR or the AAIFR.
The formation of the NCLT and the NCLAT is a significant step towards attaining fast and
efficient resolution of disputes relating to affairs of the Indian corporates. It is expected that once
all relevant provisions under the Companies Act and the Bankruptcy Code are made effective,
these tribunals would provide holistic solutions to issues being faced by companies, including
those of winding up, oppression/mismanagement and insolvency. Being the sole forum dealing
with company related disputes, these tribunals would also eliminate any scope for overlapping or
conflicting rulings and minimize delays in resolution of disputes, thus, proving to be a boon for
litigants.
The other important powers of NCLT are:

1. Class Action:

Protection of the interest of various stakeholders, especially non-promoter shareholders and

depositors, has always been the concern of company law. There were several frauds and
improprieties that were noticed where the key losers were the shareholders and depositors. The
shareholders who invested in listed companies saw their investments and savings drying up when
the companies that they invested in cheated the investors.
The Companies Act, 2013 has provided a very good combination of remedies where the offender
will be punished and the people who are involved (whether it is the company or directors or
auditor or experts or consultants) will be liable even for a civil action (namely class action),
wherein they have to compensate the shareholders and depositors for the losses caused to them
on account of the fraudulent practices or improprieties.
A class action is a procedural device that permits one or more plaintiffs to file and prosecute a
lawsuit on behalf of a larger group, or “class”. It is in the nature of a representative suit where
the interest of a class is represented by a few of them. A huge number of geographically
dispersed shareholders/depositors are affected by the wrongdoings. It is a useful tool where a few
may sue for the benefit of the whole or where the parties form a part of a voluntary

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association for public or private purposes, and may be fairly supposed to represent the rights and
interests of the whole.
Section 245 has been introduced in the new company law to provide relief to the investors
against a large set of wrongful actions committed by the company management or other
consultants and advisors who are associated with the company.
Class action can be filed against any type of companies, whether in the public sector or in the
private. It can be filed against any company which is incorporated under the Companies Act,
2013 or any previous Companies Act. The Act provides only one exemption i.e. banking
companies.

2. Deregistration of Companies:

The procedural errors at the time of registration can now be questioned at any time. The Tribunal
is empowered to take several steps, including cancellation of registration and dissolving the
company. The Tribunal can even declare the liability of members unlimited. Sec 7(7) provides
this new way for de- registration of companies in certain circumstances when there is registration
of companies is obtained in an illegal or wrongful manner. Deregistration is a remedy that is
distinct from winding up and striking off.14
3. Oppression and Mismanagement:
The remedy of oppression and mismanagement is retained in 201 3 Act. The nature of this
remedy has however changed to certain extent and it needs to be seen in light of the changes
made to the Companies Act, 2013. The 2013 Act has reset the bar for oppression to a little lower
level but has set the bar of mismanagement a little higher by applying the test “winding
up on just and equitable grounds” even to mismanagement matters. The Act permits dilution of
the eligibility criteria with the permission of Tribunal, where a member below the eligibility
criteria can apply in deserving cases.

4. Refusal to Transfer shares:

The power to hear grievance of refusal of companies to transfer securities and rectification of
register of members under Section 58 and 59 of the new Act were already notified and were
being taken up by CLB. Now. The same are transferred to NCLT. The remedy for refusal to

14
https://www.indiafilings.com/learn/national-company-law-tribunal-powers-jurisdiction/ (October 15, 2018)

12 | P a g e
transfer or transmission were restricted only to shares and debentures under 1956 Act. The
provisions for refusal to transfer and transmit under Companies Act, 2013 Act extends to all
securities. These sections gives express recognition to contracts or arrangements for transfer of
securities entered into between two or more persons with respect to shares of a public company
and thus clears any doubts about the enforceability of these contracts.

5. Deposits:

Chapter V dealing with deposits was notified in phases in 2014 and powers to deal with the cases
under it were assigned in CLB. Now the said powers will be vested in NCLT. The law on
deposits is quite distinct under the Companies Act, 2013 as compared to the Companies Act,
1956. The provision for deposits under 2013 Act were already notified. Aggrieved depositors
also have the remedy of class actions for seeking redressal for the acts/omissions of the company
which hurt their rights as depositors.

6. Reopening of Accounts & Revision of Financial Statements:

Several instances of falsification of books of accounts were noticed under the Companies Act,
1956. To counter this menace, several measures have been provided in the Companies Act, 2013.
One such measure is the insertion of Section 130 and 131 read with sec 447, 448 in the new Act.
Section 130 read with sec 131 are newly inserted provisions that prohibit the company from suo
motu opening its accounts or revising its financial statements. This can be done only in the
manner provided in the Act. Section 130 and 131 provides the instances where financial
statements can be revised/reopened. Section 130 is mandatory, where the Tribunal or Court may
direct the company to reopen its accounts when certain circumstances are shown. Section 131
allows company to revise its financial statement but do not permit reopening of 21 accounts. The
company can itself approach the Tribunal under sec 131, through its director for revision of its
financial statement.15

15
https://www.indiafilings.com/learn/national-company-law-tribunal-powers-jurisdiction/ (October 10, 2018)

13 | P a g e
 CONCLUSION

The introduction of both these tribunals is a step in the right direction as the government looks to
make India more business friendly. Once stipulations under the Companies Act and Bankruptcy
Code are effective, the tribunals will provide necessary solutions for companies facing issues
related to winding up, mismanagement, and insolvency of businesses. Being the only tribunals
for arbitrating company disputes, they will eliminate the overlap of or occurrence of conflicting
rulings and will minimize the delays in the resolution of disputes, which is a big relief for
litigants.

The constitution of the National Company Law Tribunal and the National Company Law
Appellate Tribunal is a paradigm shift with the intention of establishing a specialized forum to
adjudicate all disputes/issues pertaining to companies in India. The primary objective of
constituting these tribunals is to provide a simpler, speedier and more accessible dispute
resolution mechanism.

The real challenge for Prime Minister Narendra Modi’s government will be to deliver on its
promise of the NCLT being a specialized tribunal handling corporate cases with expertise. The
real competency of the tribunals will be decided by the technical strength of their membership
and once the Insolvency and Bankruptcy code comes into implementation. Time will tell how
things shape up, but for now companies can hope to get speedy justice.

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 BIBLIOGRAPHY

 Prachi Manekar-Wazalwar, ‘NCLT – Powers & Functions under Cos. Act, 2013’, June
22, 2016.
 Taxmann ‘Law Practice & Procedure of National Company Law Tribunal’, 2016
Edition
 Purushottam Grover, ‘National Company Law Tribunal - A Single Window Institution
For Corporate Justice’
 Justice Eradi Committee on Law Relating to Insolvency and Winding up of Companies.
 Malimath Committee Report on the Problem of Arrears (1989-90).
 The Companies Act, 1956
 The Companies (Second Amendment) Act, 2002

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