What can be done when there is a delay in filing the case before a National Company Law Tribunal?

What can be done when there is a delay in filing the case before a National Company Law Tribunal?

The National Company Law Tribunal (NCLT) is a quasi-judicial body, adjudicating matters related to the companies in India. Established under the provisions of the Companies Act, 2013, it was constituted on 1st June, 2016 on the recommendation of the esteemed Justice Jain Committees’ suggestion on laws imbibing insolvency resolution process/limited liability partnerships under the Insolvency and Bankruptcy Code, 2016 and winding up of companies in India. The objective lies behind attaining fast and efficient resolution of disputes relating to the affairs of the Indian corporations.

The Tribunal regulates all proceedings vested under the Companies Act, 2013, Insolvency and Bankruptcy Code, 2016 (IBC) and some aspects of Competition Commission of India (CCI). which is inclusive of the list to arbitration, arrangements, re-construction, compromise and winding up of the companies. The bench is chaired by a Judicial member, who is usually a retired/serving High Court Judge and a Technical member, who is from the Indian Corporate Law Service [ICLS Cadre].

At present, the Tribunal has 16 benches, six at New Delhi (headed by the Principal Bench), two at Ahmedabad, Chennai, Kolkata; one at Bengaluru, Allahabad, Chandigarh, Cuttack, Jaipur, Kochi, Guwahati; three at Hyderabad; and five at Mumbai.

Powers of NCLT

The National Company Law Tribunal has been conferred with the power to adjudicate on the proceedings relating to:

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

No criminal court possesses jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine. No injunction shall be granted by any other court or authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the Act.[i]

Time frame for suit before NCLT

Companies Act, 2013

Under Section 252 of Companies Act, 2013, an individual aggrieved by an order given by the Registrar can file an appeal to the NCLT in less than three years from the date of the Registrar’s order.

Important points to note:

  1. The Appeal or Application must be made in English. If it is in any other language, it shall be accompanied by a copy in English.
  2. It shall be made on a legal-size paper, written fairly in legible form and printed in double spacing on one side of standard petition paper.
  3. An appeal or petition has to be divided into paragraphs and must be numbered consecutively. Every paragraph has to state separate fact or allegation.
  4. All fresh parties that are brought in have to be numbered in which they are brought in.
  5. Each proceeding states immediately after the cause title the provision of law under which it is preferred.
  6. Three sets of Appeal under Section 252 have to be filed before NCLT. In addition to this, one set has to be filed with the Registrar of Companies (RoC), meaning five sets have to be prepared, from which three have to be filed with NCLT, one for RoC and one for the record. These rules are applicable under Rule 23 of the NCLT Rules, 2016.
  7. All documents enclosed with an appeal or petition must be self-certified.
  8. The name and signature of the representative must be included at the foot of every Appeal or Pleading.
  9. Once the Petition or Application is submitted before NCLT, the court notifies the date and place of hearing to the parties.
  10. The Registry sends a certified copy of the final order passed to the parties without any charges. However, the order published over the NCLT portal and the certified copies can be procured by remitting the scheduled fee.
  11. An Appeal or Application under Section 252 would be filed with a statutory fee of Rs. 1000.

Insolvency And Bankruptcy Code, 2016

Under Section 61 of the IBC, 2016, any person aggrieved by the order of the Adjudicating Authority can approach the NCLT within a period of thirty days.

The grounds for filing the suit can arise from the following cause of actions:

  1. Any liquidation order passed under section 33 may be filed on grounds of material irregularity or fraud committed in relation to such a liquidation order.
  2. The approved resolution plan is in contravention of the provisions of any law for the time being in force.
  3. There has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period.
  4. The resolution plan does not comply with any other criteria specified by the Board.

Competition Act, 2002

NCLAT has powers to entertain matters against the ruling of the Competition Commission under section 53A of the Competition Act, 2002 made within a period of Sixty days from the date on which a copy of the direction or decision or order made by the Commission is received by the Central Government or the State Government or a local authority or enterprise or any person referred to in that case. The grounds for cause of action can be to hear/dispose of matters against the direction issued by the Commission and to adjudicate on claim for compensation against the findings of the Commission.

Limitation Period for filing Appeals against the orders of NCLT

Orders of the Tribunal can further be appealed against to the National Company Law Appellate Tribunal (NCLAT) under Section 410 of the Companies Act, which can furthermore be appealed to the Apex Court of the Country (only on the point of law, thereby reducing delays).

  • Hears Appeals against the orders passed by NCLT under Section 61 of IBC.
  • Hears Appeals against the orders passed by Insolvency and Bankruptcy Board of India under Section 202 and Section 211 of IBC.
  • Hears and dispose of Appeals against any direction issued or decision made or order passed by the Competition Commission of India.

Such Appeal can be filed with a delay of 9 days (or more, it remains at the discretion of the Bench) after expiry of the period of limitation and the grace period[ii] as provided under Section 421(3) i.e. the Appeal is required to be filed within a period of 45 days from the date on which a copy of the said order is made available to the person aggrieved. Section 5 of the Limitation Act provides for condonation of delay only for a sufficient cause in case of appeals beyond the stated period of time.[iii]

Resolution of disputes relating of companies’ affairs has been one the major roadblock in improving ease of doing business in India. NCLT, along with NCLAT, has been a major contributor in easing the process and progress of companies in this track.

It is expected that once the relevant provisions under the Companies Act and the Bankruptcy Code are effectuated, these tribunals would provide holistic solutions to issues being faced by companies, including those of winding up, oppression/mismanagement and insolvency.

“The views of the authors are personal

Reference

[i] Swiss Ribbons Pvt. Ltd & Anr. V. Union of India, SLP No. 28623/2018 (India).

[ii] Bengal Chemists and Druggists Association v. Kalyan Chowdhary, Civil Appeal No. 684/2018 (India).

[iii] Chhattisgarh SEB v. Central Electricity Regulatory Commission, 2010 (5) SCC 23 (India).