National Company Law Tribunal Constituted: A Phased Induction

Although the Companies Act, 2013 was enacted nearly three
years ago, significant parts of the legislation were not brought into force.
These related to the role of the National Company Law Tribunal (NCLT). Although
the NCLT was conferred legislative status as early as 2002 (under the Companies
Act, 1956), it did not see the light of day as it was mired in litigation.
After two judgments of the Supreme Court in Union of India v. R. Gandhi
(2010) and Madras Bar
Association v. Union of India
(2015) paved the way for its
constitution, the Government took steps to establish and implement the tribunal
system for company law.
Yesterday, the Ministry of Corporate Affairs (MCA) issued a notification
constituting the NCLT with effect from the same date (1 June 2016). The NCLT
would have eleven benches at various locations around the country, with the
principal bench being at New Delhi. Several further provisions of the Companies
Act, 2013 that relate to the NCLT have been notified. Accordingly, the Company
Law Board (CLB) stands dissolved.
A reading of the notification suggests that not all
provisions of the Companies Act, 2013 relating to the NCLT have been notified. The
NCLT would expand to its full capacity only over a period of time. Several
provisions notified include matters relating to oppression, class actions and
other miscellaneous roles and functions assigned to the NCLT under the Act.
Most of these powers were hitherto being exercised by the CLB. In other words, this
exercise largely undertakes the transition from the CLB to the NCLT.
However, absent in the transition are powers that are currently
being exercised by the High Courts, on matters such as amalgamations, capital
reductions, winding up, etc. These matters under the Companies Act, 2013 Act
have not yet been notified and hence would continue to be within the purview of
the High Court. It appears that the Government has sought to undertake a phase
induction of the NCLT, and it is likely that the NCLT will begin exercising
jurisdictions of these matters only after it becomes fully operational.

In any event, the constitution of the NCLT represents the
dawning of a new era from the perspective of corporate law practice and
enforcement in the Indian context. It is a space to watch out for in the near
future.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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