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Photo: Mint
Photo: Mint

Supreme Court clears the deck for setting up company law tribunals

The move will help in faster disposal of corporate disputes and improve the ease of doing business in India

New Delhi: The Supreme Court on Thursday paved the way for setting up the National Company Law Tribunal and the National Company Law Appellate Tribunal, a move that will help in faster disposal of corporate disputes and improve the ease of doing business in India.

A constitution bench of five-judges comprising chief justice H.L. Dattu, justices A.K. Sikri, Arun Mishra, Rohinton F. Nariman and Amitava Roy laid down requirements for the government to adhere to while making appointments for technical members and the composition of a selection committee responsible for appointing the tribunal members.

In doing so, it quashed the provisions of the 2013 companies law, which allowed members of the rank of joint secretary to be technical members and cut the number of people on the selection committee to four from five.

According to the court’s directions, the technical members would now be limited to only the ranks of additional secretary and secretary, as determined by an earlier constitution bench ruling from 2010.

Further, the selection committee would be composed of four members, instead of the five as provided by the law.

The four members would be the chief justice or his nominee with a casting vote, a senior apex court judge, finance or company affairs secretary, and secretary of the law ministry.

Lawyers’ body Madras Bar Association (MBA) had approached the court claiming that the government had not incorporated changes in the companies law regarding the two tribunals—the NCLT and the NCLAT—which the apex court had directed in a 2010 verdict.

MBA argued that technical members of the tribunal had to be of the rank of additional secretary or secretary, while the law had lowered the eligibility to the rank of joint secretary.

Further, the law made the selection committee for appointing the members of the tribunal a five-member committee of two judges and three secretaries, allowing “primacy to the executive".

This was contrary to the 2010 judgment, which said that there had to be four members with the chief justice with a casting vote.

Entities will now have the option of approaching the NCLAT to appeal against a judgment of NCLT.

To challenge a NCLAT decision, they can now directly approach the Supreme Court.

Sunil Jain, a partner at law firm J Sagar Associates, said specialized tribunals are the need of the hour.

“Be it a tax or a commercial dispute, they are getting more and more complicated. In this context, it is important to have specialized tribunals wherein the members have domain knowledge and understanding of the subject," he said.

“High courts are busy dealing with civil and criminal cases and are faced with a huge backlog. This does not augur well for speedy resolution of disputes," he said.

There were more than 4.45 million civil and criminal cases pending in high courts as of December 2013 and more than 64,000 cases pending in the Supreme Court as of March 2014, according to law ministry data.

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