NATIONAL COMPANY LAW TRIBUNAL (NCLT)

Last Updated on 12th November, 2024
3 minutes, 54 seconds

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Picture Courtesy: https://www.financialexpress.com/business/industry-sc-ruling-brings-nclt-under-staffing-to-the-fore-3660192/

Context:

The Supreme Court highlights the National Company Law Tribunal (NCLT) member shortage and inadequate infrastructure.

About National Company Law Tribunal (NCLT)

Established

  • The National Company Law Tribunal (NCLT) was established in 2016 under Section 408 of the Companies Act of 2013.
  • It is a quasi-judicial body, established on the recommendation of the V. Balakrishna Eradi committee on company insolvency and winding up law.
  • It replaced the Company Law Board (CLB) and the Board for Industrial and Financial Reconstruction (BIFR).

Objectives

  • To provide a specialized forum for resolving disputes and matters relating to company law and the Insolvency and Bankruptcy Code (IBC)
  • To ensure corporate governance and protect the interests of shareholders, creditors, and other stakeholders.

Structure  

  • The NCLT operates through a network of 16 benches spread across India. 
  • The benches are headed over by the President of the NCLT, who is supported by 16 judicial and 9 technical members. 
  • Judicial Members have a legal background, whereas Technical Members are experts in fields such as finance and business.
  • The NCLT works under the structure of the Ministry of Corporate Affairs (MCA)

Jurisdiction under the Companies Act 2013

  • It hears cases involving;
      • Company mergers and amalgamations
      • Oppression and mismanagement
      • Suits or claims filed by or against a company
      • Compromises and arrangements made between companies and creditors or members.

Role under Insolvency and Bankruptcy Code (IBC) 2016

  • Under the IBC, the NCLT is an important forum for monitoring the Corporate Insolvency Resolution Process (CIRP) as well as handling cases involving company winding up.

Recent Supreme Court observation 

  • The Supreme Court highlighted the lack of members in National Company Law Tribunals (NCLTs) and insufficient infrastructure to support their operations. 
  • The court noted that a lack of required strength has resulted in slowing down insolvency resolution procedures.
  • The NCLT currently has 43 members, while the sanctioned strength is 63.
  • In FY24, the average duration for resolving insolvency cases at NCLT was 716 days, which was higher than 654 days in FY23.

Must Read Articles: 

SUPREME COURT PLENARY POWERS

INSOLVENCY AND BANKRUPTCY CODE

DOCTRINE OF MERGER

Source: 

Financial Express

Wikipedia

PRACTICE QUESTION

Q.Consider the following statements in the context of the National Company Law Tribunal (NCLT):

1. It is a quasi-judicial body established under the Companies Act 2013.

2. It was established on the recommendation of the V. Balakrishna Eradi committee.

Which of the above statements is/are correct?

A) 1 only

B) 2 only

C) Both 1 and 2

D) Neither 1 nor 2

Answer: C

Explanation:

Statement 1 is correct:

The National Company Law Tribunal (NCLT) is a quasi-judicial body that hears cases involving Indian companies. It was established in 2016 under the Companies Act 2013.

Statement 2 is correct:

It was established under the Ministry of Corporate Affairs in response to the V. Balakrishna Eradi committee's recommendation on company insolvency and winding up laws.

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