Thursday, June 2, 2016

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.

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