NCLT, National Company Law Tribal, is a quasi-judicial authority introduced in the Indian
legal system in 2002. It is the outcome of the Eradi Committee with an initial intention to notify it under the framework of the Companies Act, 1956.
Due to the litigations concerning the constitutional validity of NCLT, it was announced under section 408 of the Companies Act, 2013. The Central Government of India implemented NCLT in the year 2016.
NCLT was incorporated to deal with civil and corporate disputes. The competency and functions of NCLT under the Companies Act 1956 and 2013 Act were different.
The Supreme Court decided to preserve the ten years constitutional validity of the NCLT when the constitutional validity of the Tribunal and specified allied provisions were re-challenged.
However, it rendered a few conditions as a violation of the constitutional principles. Being set under Article 245 of the Indian Constitution, NCLT extends to the whole country.
Importance of NCLT
NCLT works on the lines of any regular Court of law in the country. The authority is obliged to determine the facts of each case fairly and without any biases. NCLT decides on matters
following principles of natural justice and offers conclusions in the form of orders.
The orders by NCLT function to resolve a situation and rectify any wrong done by a corporate.
It can even alter the rights, duties, or privileges of the concerned parties. NCLT is not bound to adhere to the rules concerning the appreciation of any shreds of evidence or procedural law.
Functions of NCLT
NCLT performs the following functions:
Registration of Companies
The new Companies Act, 2013 is authorized to cancel the registration of a company and dissolve any company owing to specific procedural errors during incorporation and registration.
NCLT has the power to render the liability or charge of the members of the company unlimited.
NCLT has the authority to de-register any company if the registration certificate has been obtained illegally under section 7(7) of the Companies Act, 2013.
Share Transfer
Under section 58-59 of the Act, NCLT has the power to hear the grievances of the rejection of companies in transferring shares and securities.
The Companies Act, 1956 had a solution limited for rejection of transmission only. However, the revised Companies Act, 2013, has a broader aspect to cover all the securities issued by any company.
Deposits
The Chapter V of the Companies Act, 2013, deals with deposits. The Company Law Board is the prime authority to take up the cases under said chapter.
The provisions concerning the same, offer remedy to unhappy depositors for the omissions, and it acts on the company that impacts their rights as depositors.
The depositors have to go through an added procedure of filing class-action suits for their grievances.
Power of Investigation
The Companies Act, 2013, offers a provision to investigate the company matters with the help of an application of 100 members.
Previously, it needed an application of 200 members for the same. Moreover, a person not related to the company can also persuade NCLT for an investigation.
The investigation ordered by the NCLT can be conducted within India or anywhere outside. One needs to draft the provisions for seeking help from the courts and investigation agencies of foreign countries.
The power of investigation enables one to freeze company assets, place restrictions and halt the distribution of products temporarily.
Freezing Assets of a Company
NCLT can freeze a company’s assets to use them at a later stage of scrutiny. A company is scrutinized at the request of others under specific conditions.
Converting a Public Limited Company into a Private Limited Company
The Companies Act, 2013 has rules to control the conversion of a Public limited company into a Private limited company under sections 13-18.
However, such a conversion needs erstwhile confirmation from the NCLT. Section 459 of the Act gives NCLT the power to grant approvals and impose specific conditions or restrictions to such conditions.
Oppression and Mismanagement
The Tribunal deals with mismanagement in a company under section 241-246 of the Companies Act, 2013.
The Act can strike a balance between the interest of stakeholders and the effective control of the company.
The bar for being accountable for mismanagement is high to lower the threshold to complain of oppression.
Section 397 of the Act allows to approach the Tribunal for cases of abuse of all forms and seek justice.
Advantages of NCLT
1. NCLT is a specialized court for companies registered in India.
2. It considers both judicial and technical members while deciding on matters.
3. The Tribunal has multiple branches and offers exclusive jurisdiction
4. The time taken to wind up a company is significantly reduced after the speedy disposal of cases by NCLT.
5. NCLT provides justice at a close range and reduces the repetition of litigation before
different forums and courts.
Powers of NCLT
1. NCLT can de-register a company if the company is registered illegally.
2. It has the power to hear grievances of the refusal of companies to transfer securities.
3. NCLT provides relief to the investors against wrongful actions committed by the
management of the company.
4. The Tribunal protects the interest of the stakeholders and provides remedies of
oppression and mismanagement.
5. NCLT has the power to investigate or to initiate an investigation even abroad. The
provisions assist the investigation agencies and courts of other countries in investigation
proceedings.
6. The Tribunal can freeze the assets of a company and investigate the power of the
company.
7. NCLT has the power to call for General Meetings if the company has not held an Annual
General Meeting following the Companies Act.
8. The Tribunal has the power to allow a company to revise its financial statement.
Moreover, the company can approach the Tribunal through its director for such revision.
9. Despite imposing restrictions on any securities of the company, NCLT also declares the
liability of the members unlimited.
Corporations have been crucial in determining the financial health of a country. NCLT offers
speedy investigation in corporate matters removing the instances of ambiguity.
Exclusive jurisdiction by a combination of technical and judicial experts ensures insolvency and revival of the body corporate.
