New Delhi: The Supreme Court Constitution Bench is examining a petition filed by the Madras Bar Association challenging the creation of National Company Law Tribunal and National Company Law Appellate Tribunal under the Companies Act 2013.
The constitutional validity of Chapter XXVII comprising Sections 407 – 434 of the Companies Act 2013 which constitute NCLT and NCLAT is the issue before the five judges’ bench comprising CJI Ranjan Gogoi, and Justices N V Ramana, D.Y. Chandrachud, Deepak Gupta and Sanjiv Khanna.
The petitioner has alleged that the creation of NCLT and NCLAT impinges on the basic structure of Constitution by affecting judicial independence. It argues that the members of these tribunals, which are to exercise powers otherwise enjoyed by the High Courts, can be easily removed by the central executive and therefore judicial independence is heavily compromised.
The National Company Law Tribunal (NCLT) is a quasi-judicial body in India that adjudicates issues relating to Indian companies. Decisions of the NCLT may be appealed at the National Company Law Appellate Tribunal (NCLAT). The NCLAT decisions can be challenged at the Supreme Court on a point of law. The Supreme Court of India has upheld the Insolvency and Bankruptcy Code in its entirety.
Tasked with a key job of helping recover corporate loans, the NCLT has helped resolve insolvency and bankruptcy proceedings involving more than Rs 80,000 crore in 2018 and the kitty is expected to swell beyond Rs 1 trillion in 2019 with several big-ticket default cases pending. So far NCLT has cleared resolutions in Bhushan Steel which is now owned by Tata Steel. Similar resolutions include those of Electrosteel, which is now with Vedanta, Monnet Ispat & Energy (JSW Steel) & AION Capital. The Essar Steel resolution has already paved the way for ArcelorMittal.
The NCLT was established under the Companies Act 2013 and was constituted on 1 June 2016 by the government of India. It is based on the recommendation of the justice Eradi Committee on law relating to insolvency and winding up of companies. All proceedings under the Companies Act, including proceedings relating to Arbitration, Compromise, arrangements and reconstruction and winding up of companies shall be disposed of by the NCLT.
The National Company Law Tribunal is the Adjudicating Authority for Insolvency resolution process of Companies and Limited Liability Partnerships under the Insolvency and Bankruptcy Code, 2016.