Madras Bar Association- NCLT constitutionality

ncltEarlier this month, the Supreme Court of India (Constitution Bench) came out with a judgment that dealt with the provisions of the Companies Act, 2013 dealing with the National Company Law Tribunal and the National Company Law Appellate Tribunal (‘NCLT’ and ‘NCLAT’ respectively) This is a sequel to an earlier judgment (of the SC in 2010; (2010) 11 SCC 1) in which the Court had considered the constitutionality of the NCLT and NCLAT under the Companies Act, 1956. There were three main issues that were considered, namely, the constitutionality of the NCLT/NCLAT, the qualifications to become a Technical Member of the NCLT/ NCLAT, and the constitution of the selection committee to constitute Members of the NCLT/ NCLAT. It can be observed that the issues are analogous to the Madras HC order which dealt with the constitutionality of the provisions in the Trademarks and Patents Act relating to IPAB appointments. The rationales are also similar. Our previous posts on the IPAB order are available here and here.

In this case, on the first issue, the Court noted that the 2010 judgment had expressly upheld the constitutional validity of the NCLT and the NCLAT and that the issue could not be reopened again. Although the National Tax Tribunal had been held unconstitutional in the interim, the Court noted that the NTT had been held unconstitutional after distinguishing the 2010 judgment.

On the second issue, the 2010 judgment had specifically found fault with the qualifications prescribed for the Technical Members. The Court had held that only those holding the post of Secretaries/ Additional Secretaries and having technical expertise could be appointed to the post. It had struck down the parts of the provision which stated that Joint Secretaries with certain experience were eligible for appointment as technical members. In spite of the same, the corresponding section in the Companies Act, 2013, namely, S. 409(3) states that Joint secretaries with certain experience are eligible for appointment as technical members.The SC reiterated that this was a complete dilution of the principles that the Court had zealously tried to protect in 2010 itself and therefore, struck down S. 409(3)(a) and (c).

On the third issue, Section 412 of the Companies Act, 2013 states that the Selection Committee consists of 2 judicial members and 3 administrative members. The analogous provision in the 1956 Act had been discussed in the 2010 judgment wherein the SC had held that it ought to be a four member committee (with equal division between the judicial and administrative members) and that the Chief Justice should have the casting vote.The SC ruled that the 2010 judgment is binding precedent and should be followed. It therefore struck down S. 412(2) and ordered that it be brought in accord with the relevant parts of the 2010 judgment.

Therefore, it is seen that the High Courts as well as Supreme Court has been employing similar rationales in order to bring our Tribunals in line with the Constitution.

Tags: ,

About The Author

Leave a Comment

Scroll to Top