National Company Law Tribunal (NCLT) - Definition, Jurisdiction, Functions, Significance, Powers & More!

In India, the National Company Law Tribunal is a quasi-judicial organization. It is tasked with handling cases concerning Indian businesses. The tribunal was created by the government of India on 1 June 2016 under the Firms Act 2013 and is based on the proposal of the V. Balakrishna Eradi committee on legislation pertaining to insolvency and the winding up of companies. The Central government formed the National Company Law Tribunal in 2016. It was established under Section 408 of the Companies Act of 2013. National Tribunal shall not have power to review its own decisions.

The National Company Law Tribunal, which succeeded the Company Law Board, was established as a quasi-judicial authority to oversee businesses incorporated in India.

This article will examine the National Company Law Tribunal, its functions, and its powers in depth. This topic of UPSC Polity is essential for both the UPSC Prelims and Mains Exams.

Recent Update

• The government has nominated Justice Ashok Bhushan, a former Supreme Court judge, to lead the National Company Law Appellate Tribunal (NCLAT).
• The National Company Law Appellate Tribunal (NCLAT) has granted Infrastructure Leasing & Financial Services (IL&FS) the authority to reclassify ‘amber’ corporations as ‘green’ companies.
• The government has nominated 31 persons to the National Company Law Tribunal (NCLT) and the Income Tax Appellate Tribunal (ITAT) as judicial, technical, and accounting members (ITAT).

What is National Company Law Tribunal?

The National Company Law Tribunal (NCLT) is a specialized quasi-judicial body in India. Under the Companies Act 2013, it was established to handle matters related to corporate disputes and insolvency proceedings. NCLT has jurisdiction over cases involving companies, limited liability partnerships, and other entities specified under the Companies Act. It has benches located in various cities across India to facilitate accessibility. NCLT is responsible for resolving disputes related to company law, mergers, amalgamations, and company winding up. It plays a crucial role in promoting efficient and timely resolution of corporate disputes and insolvency matters in the country.

Characteristics of NCLAT

• Under Sections 202 and 211 of the IBC, the NCLAT also serves as the Appellate Tribunal for judgments issued by the Insolvency and Bankruptcy Board of India.
• The NCLAT is also the Appellate Tribunal to hear and dispose of appeals against any directive issued, judgment, or order passed by the Competition Commission of India (CCI).
• The Ministry of Corporate Affairs established eleven Benches in the first phase, one Principal Bench in New Delhi, and 10 Benches in New Delhi, Ahmadabad, Allahabad, Bengaluru, Chandigarh, Chennai, Gauhati, Hyderabad, Kolkata, and Mumbai.
• At various locations, NCLT benches were led by the President, 16 Judicial Members, and 9 Technical Members. More members have joined, and benches have been established in Cuttack, Jaipur, Kochi, Amravati, and Indore.

NCLAT Recent Developments

• The NCLAT decided 2016 that Cyrus Pallonji Mistry’s removal as Executive Chairman of Tata Sons was illegal.
• The Tribunal has overturned a July 2017 judgment of the Mumbai bench of the National Company Law Tribunal (NCLT) that supported Mistry’s dismissal.
• The NCLAT also ruled that the Registrar of Companies’ change of ‘Tata Sons Limited’ from ‘Public Company’ to ‘Private Company’ was unlawful.
• It stated that the decision to go private was ‘prejudicial’ and ‘oppressive’ to the minority shareholders.
• The NCLAT ruling will empower minority shareholders, and Independent Directors will be forced to take their concerns more seriously.

Objectives of NCLT

• Initiated before the Company Law Board under the previous act (the Companies Act 1956)
•  Pending before the Board for Industrial and Financial Reconstruction (BIFR), including those pending under the Sick Industrial Companies (Special Provisions) Act, 1985
• Pending before the Appellate Authority for Industrial and Financial Reconstruction
• Pertaining to claims of oppression and mismanagement of a company, winding up of companies and all other powers prescribed under the Companies Act.

National Company Law Tribunal (NCLT), 2013

• The National Company Law Tribunal (NCLT) is a quasi-judicial organization established to oversee businesses formed under the Companies Act of 2013.
• It has jurisdiction over various procedures under the Companies Act, including arbitration, agreements, compromise, reconstruction, and company winding up.
• NCLT is the successor entity to the Company Law Board and was established based on the recommendations of the Justice Erandi Committee for insolvency and company winding up.
• Additionally, NCLT serves as the Adjudicating Authority for insolvency proceedings under the Insolvency and Bankruptcy Code, 2016.
• Civil courts do not have jurisdiction over matters handled by NCLT.
• Once NCLT grants an insolvency petition under the IBC, 2016, the case cannot be dismissed even if the parties agree to settle, except under the authority of the Supreme Court citing Art. 142.
• NCLT can summon a General Meeting if a company fails to hold an Annual General Meeting or Extraordinary General Meeting as required by the Companies Act.
• It also has the authority to change a corporation's fiscal year established in India.

National Company Law Tribunal Jurisdiction

NCLT Bench	Jurisdiction
Bengaluru Bench	State - Karnataka
Allahabad Bench	State - Uttar Pradesh
Guwahati Bench	State - Arunachal Pradesh State - Mizoram State - Sikkim State - Assam State - Nagaland State - Tripura State - Meghalaya
Principal Bench	Union territories of Delhi
Delhi Bench
Kolkata Branch	State - West Bengal State - Sikkim State - Bihar State - Jharkhand Union Territory of Nicobar and Andaman Islands
Chennai Bench	State - Tamil Nadu Union Territory of Pondicherry Union Territory of Lakshadweep
Hyderabad Bench	State - Andhra Pradesh
Chandigarh Bench	State - Haryana State - Punjab State - Jammu and Kashmir State - Himachal Pradesh Union Territory of Chandigarh
Ahmedabad Bench	State - Gujarat Union Territory of Daman and Diu Union Territory of Dadra and Nagar Haveli
Cuttack Bench	State - Odisha
Amaravati Bench	State - Andhra Pradesh
Indore Bench	State - Madhya Pradesh
Mumbai Bench	State - Goa State - Maharashtra
Kochi Bench	State - Kerala Union Territory of Lakshadweep

Functions of the National Company Law Tribunal (NCLT)

• The function of NCLT entails jurisdiction over cases previously handled by the Board for Industrial and Financial Reconstruction (BIFR) and cases under the Sick Industrial Companies (Special Provisions) Act of 1985.
• It can relieve investors affected by unlawful conduct committed by corporate management or affiliated consultants and advisers.
• Depositors who have harmed their rights can seek recourse through class lawsuits against the company.
• NCLT can instruct the company to reopen or modify its financial statements, but reopening accounts is not permitted.
• The company's director can apply to the Tribunal to modify financial statements.
• NCLT has the authority to conduct investigations worldwide and assist foreign investigation agencies and courts.
• Provisions are in place to support the inquiry processes of investigation agencies and courts from other countries.

Significance of NCLT

• The NCLT is a quasi-judicial organization established to deal with civil company disputes originating under the Companies Act.
• NCLT operates along the lines of a normal Court of Law in the country and is required to fairly and without bias determine the facts of each case.
• Under the Insolvency and Bankruptcy Code of 2016, the NCLT adjudicates the insolvency resolution process of corporations and limited liability partnerships.
• The NCLT’s decisions can be appealed to the National Company Law Appellate Tribunal (NCLAT)
• It also decides matters by natural justice principles and offers conclusions from decisions in the form of orders to continue such decisions.
• Concerning accusations of oppression and mismanagement of a company, company winding up, and all other rights given by the Companies Act.

Powers of National Company Law Tribunal

• It can take over the cases pending before the Appellate Authority for Industrial and Financial Reconstruction.
• It can also take on cases of corporate persecutors and mismanagement.
• It has the authority to request the aid of the Chief Metropolitan Magistrate.
• It can deregister companies.
• It can order de-registration of businesses in specific instances where company registration is obtained illegally or incorrectly.
• It has the power to hear complaints against businesses’ refusals to transfer securities and to correct the register of members.
• It gives protection to diverse stakeholders’ interests, particularly non-promoter shareholders and depositors.

Companies Act 2013

• The Companies Act 2013 governs the formation and functioning of corporations or companies in India.
• The first Companies Act after independence was passed in 1956, which governed the business entities in the country.
• The 1956 Act was based on the recommendations of the Bhabha Committee. The Act was amended several times, and major changes were introduced in 2013.
• India became the first country to make Corporate Social Responsibility (CSR) spending mandatory by law by Section 135 of the 2013 Act.
• Presently the Ministry of Corporate Affairs is dministering the following Acts of the Central Government:
  • Companies Act 2013
  • Some provisions of the Companies Act 1956 still apply.
  • Competition Act 2002
  • Insolvency and Bankruptcy Code, 2016
  • Chartered Accountants Act 1949
  • The Companies Act 2013 has replaced the 1956 Act.

Also, read about the Competition Commission of India here.

Benefits of the National Company Law Tribunal

• The NCLT is a specialist court that hears cases involving Corporates or Indian-registered businesses.
• This will be a Tribunal for Corporate Members.
• The NCLT will minimize the number of lawsuits filed in various forums and courts.
• NCLT has various branches and may offer justice at a distance.
• When making decisions, the NCLT includes both judicial and technical experts.
• The time it takes to dissolve a corporation is decreased.
• Cases that are resolved quickly will assist in the number of cases.
• The NCLT and NCLAT have exclusive jurisdiction.

 Income Tax Appellate Tribunal (ITAT)

• The Income Tax Appellate Tribunal (ITAT) reviews appeals against income tax rulings.
• The International Tribunal of Arbitration (ITAT), sometimes known as the “Mother Tribunal,” was the first tribunal to be created on January 25, 1941.
• The Income Tax Appellate Tribunal (ITAT) was established in 1941 under Section 5A of the Income Tax Act of 1922.
• It began with three Benches in Delhi, Kolkata (Calcutta), and Mumbai (Bombay).
• It handles appeals under the Direct Taxes Acts, namely the Income-tax Act of 1961.
• The ITAT’s decisions are final; an appeal to the High Court is only possible if a substantive point of law emerges for resolution.
• The ITAT’s decisions are final; an appeal to the High Court is only possible if a substantive point of law emerges for resolution.

National Company Law Appellate Tribunal (NCLAT)

• On June 1, 2016, the National Company Law Appellate Tribunal (NCLAT) was established.
• It was established by Section 410 of the Companies Act of 2013. Its purpose is to consider appeals from the National Company Law Tribunal(s) (NCLT) decisions.
• NCLAT also serves as the Appellate Tribunal for appeals against NCLT(s) decisions. As of December 1, 2016, it was created under Section 61 of the Insolvency and Bankruptcy Code, 2016. (IBC).
• Section 410 of the Companies Act of 2013 established the NCLAT. Its mission is to consider appeals from the National Company Law Tribunal (NCLT) decisions.
• Any individual who is dissatisfied with an NCLAT order may seek an appeal with the Supreme Court.

Check the Other Notes of Polity for Competitive Exams here.

Board of Industrial and Financial Reconstruction (BIFR)

• The Board for Industrial and Financial Reconstruction (BIFR) was an agency of the Government of India and a division of the Department of Financial Services, Ministry of Finance, created under the BIMARU Industrial Companies Act (SICA), 1985.
• Its purpose was to reshape and recover sick ventures and to close or eliminate the potential for ill exposures to increase or occur in the future or over a longer period.
• The BIFR consists of a chairman and two to fourteen other representatives.
• The pre-requisite for all the members to be elected as judges of the High Court is that they should otherwise have the necessary professional experience of at least 15 years.
• The Board organizes and oversees only large or medium-sized sick industrial enterprises.

Study Important Articles of the Constitution of India here.

National Company Law Tribunal (NCLT)(Polity Notes for UPSC Exam): Download PDF Here!

The UPSC civil services examinations include a Topic on the National Company Law Tribunal (NCLT) in the Syllabus of Polity section. Testbook is an online learning platform that can be used to prepare for any competitive exam. Participants in live coaching sessions, current affairs sessions, and exams available on our Testbook App can enhance their preparedness. It’s time to download the Testbook App Download Now!