Tuesday, May 11, 2010

Supreme Court upholds NCLT

The Business Standard reports that the Supreme Court of India has upheld the validity of the National Company Law Tribunal. A Constitution Bench of the Court delivered the judgment more than a year after hearing arguments on an appeal filed against a decision of the Madras High Court in R. Gandhi v. Union of India. In an earlier post, I had stated:

The principal challenge to the constitutionality of the NCLT is based on the wholesale transfer of jurisdiction of the High Court in company matters to a quasi-judicial tribunal. It was argued by the petitioners that this transfer resulted in the vesting of intrinsic judicial functions in a quasi-judicial/executive body. Jaisimha Babu J. of the Madras High Court had accepted this contention, holding that the power of the Parliament to create Tribunals does not ‘extend to rendering such new forums an extension of the legislative or executive branches of the Government, or as forums controlled, or designed to be dominated, or potentially dominated, by the legislative or executive wing of the state…’ It was held that the proposed model of the NCLT violated the constitutional principles of separation of powers and independence of the judiciary by vesting essential judicial functions in a non-judicial body.” 

The Supreme Court judgment comes at the end of Justice K.G. Balakrishnan’s tenure as Chief Justice of India. Besides the Chief Justice, the other judges on the Bench were Justices R V Raveendran, D K Jain, P Sathasivam and J M Panchal. Of course, the conditions imposed by the Court (if any) on the functioning of the NCLT will have to be scrutinized; and I will post a detailed note on the decision shortly.

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