Powers of NCLT & Company Law

Powers of NCLT & Company Law

National Company Law Tribunal (NCLT) is a quasi-judicial authority dealing specifically with the cases with respect of Companies. It consolidates the various functions of corporate jurisdiction, industrial and financial restructuring and winding up procedures other than a criminal prosecution for offences mentioned under the Companies Act.

For good governance in corporate law, The Companies Act, 2013 has undergone many amendments. As per the Law Commission’s 124th report, various types of litigation were increasing, and so was the backlog, thus the need to establish a separate tribunal for corporate matters.

It is pertinent to note herein that a company registered under the Companies Act, 2013 or any previous company law, whether owned by Indians or Non-resident Indians, is subject to the same provisions. A Non-resident Indian (NRI) who is the member, director, or auditor of the company registered under the Company Act 2013 will be governed by the powers of the Tribunal like any other citizen.

The NCLT has many powers as prescribed under the Companies Act, such as:

  • De-Registration of companies The Tribunal has the power to cancel the registration, dissolve the company or declare the company as an unlimited company if the company is registered illegally, wrongfully or defrauds the creditors at any point in time. 
  • Conversion of Public Company into Private Company Suppose a Public Company desires to convert itself into a Private Company; in that case, it requires the Tribunal’s approval, subject to such terms and conditions as the Tribunal may impose/decide.
  • Refusal of Transfer of shares 

Suppose the company refuses to transfer the shares; in that case, the transferee can appeal to the Tribunal, which can either reject the appeal or order the company to transfer the shares, rectify the register of shares, and pay damages.

  • Convening of Annual General Meeting 

On an application by the member of the company, Tribunal may convene the company’s meeting if the company had failed to convene the meeting within a particular period. 

  • Reopening of accounts 

The Tribunal may order any company to reopen their accounts if they seem to be fraudulent or affairs of the company were mismanaged to the extent that they create doubt regarding the reliability of financial statements of the company.

  • Power to Investigate

Suppose any member or other person is affected by the affairs or business of the company conducted in a fraudulent manner or for unlawful purposes or with the intent to defraud the creditors. In that case, he can apply to Tribunal for an investigation into the matter and pray for an appropriate order in that regard.

  • Oppression and Mismanagement 

Any member or Central Government can apply to the Tribunal for relief/remedy if, in its opinion, the affairs of the company are conducted in a prejudicial or oppressive manner.

  • Winding up of Company 

If the Tribunal deems that the company’s affairs have been conducted in a prejudicial or oppressive manner, it can order a winding-up.

  • Power of Class Action

Class action is a benefit provided by the Companies Act, 2013. This action in such cases where the management of affairs of the company is conducted in a prejudicial manner towards the company’s interest or its members or depositors. In such a situation, the interest of members, depositors and the company, as a whole, can be represented by a few of the members or depositors in instituting a suit against the management of the company before the said Tribunal.

The key difference between the NCLT and NCLAT is that the NCLT is primary jurisdiction, and the NCLAT has appellate jurisdiction. The former’s role is to collect the evidence and witnesses’ evidence for adjudication of the matter, whereas the latter is responsible for reviewing the orders/decisions passed.

An aggrieved party can make appeals from any decision or order passed by NCLT. This can be done within forty-five days of the receipt of an order or decision to NCLAT. NCLAT then gives its decision within six months from the date of receipt of the appeal.

The establishment of the NCLT certainly implies a speedy remedy in resolving the company law disputes and expeditious redressal of all the company’s concerns. Parties aggrieved by order of the National Company Law Tribunal can approach the NCLAT, i.e., the appellate Tribunal, within the 45 days of the receipt of the order. An aggrieved party can make appeals from any decision or order passed by National Company Law Tribunal within forty-five days of the receipt of an order or decision to NCLAT. The advantage of having the Tribunal is, of course, reduction of the multiplicity of cases before other courts, specialised benches for deciding corporate matters that include judicial and technical members and most importantly, branches spread across the country.

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