NCLT

NCLT

Subject: National organization

Context: The Parliamentary Standing Committee on Finance has called out the Ministry of Corporate Affairs on persistent vacancies in National Company Law Tribunals (NCLTs) leading to delays in corporate insolvency under the Insolvency and Bankruptcy Code (IBC).

Concept:

The Parliamentary Standing Committee recommendations

• The committee has also recommended that the IBC be amended to prevent frivolous litigation and non-adherence to deadlines under the IBC that can lead to value destruction.
• The committee noted that delays in the admission of insolvency cases by NCLTs and the approval of resolution plans were the key reasons behind the non-adherence of timelines under the IBC.
• The committee also recommended that the IBC be amended to provide micro, small and medium enterprises (MSMEs), which are operational creditors under the IBC, with greater protection in the current economic environment. The IBC currently prioritises financial creditors over operational creditors.
• The committee called out the Ministry of Corporate Affairs on persistent vacancies in National Company Law Tribunals (NCLTs) leading to delays in corporate insolvency under the Insolvency and Bankruptcy Code (IBC).The combined strength of the current NCLT benches around the country is currently only 29 members against the total sanctioned strength of 63 members.

NCLT:

• It is a statutory body constituted under the section 408 of the Companies Act, 2013.
• The current NCLT traces its formation to the recommendations of the Justice Eradi Committee which was set up by Central Government in the year 1998
• It is a quasi-judicial authority incorporated for dealing with corporate disputes that are of civil nature arising under the Companies Act.
• It has power to regulate its own procedures.
• The NCLT composition is of the President and other Judicial and Technical members, to exercise and discharge powers and functions as prescribed by the Act or any other power delegated to them by way of any other enactment or a Notification by Ministry Of Corporate Affairs.
• Appeals against the order of the NCLT will go to NCLAT, exclusively dedicated for this purpose.
• It has been given jurisdiction over:

1. Board for Industrial and Financial Reconstruction. (“BIFR”)
2. The Appellate Authority for Industrial and Financial Reconstruction. (“AAIFR”)
3. Jurisdiction and powers relating to winding up restructuring and other such provisions, vested in the High Courts.
4. Company Law Board (“CLB”).

It has following power:

1. Most of the powers of the Company Law Board under the Companies Act, 1956.
2. All the powers of BIFR for revival and rehabilitation of sick industrial companies;
3. Power of High Court in the matters of mergers, demergers, amalgamations, winding up, etc.;
4. Power to order repayment of deposits accepted by Non-Banking Financial Companies as provided in section 45QA of the Reserve Bank of India Act, 1934;
5. Power to wind up companies;
6. Power to Review its own orders.