National Company Law Tribunal Government asked to amend laws

A constitutional bench of 5 judges led by Chief Justice K.G. Balakrishnan and comprising Justices R.V. Raveendran, J.M. Panchal, D.K. Jain and P. Sathasivam yesterday upheld the order of the Madras High Court, regarding the formation of the NCLT, contrary to several media reports.

A constitutional bench of 5 judges led by Chief Justice K.G. Balakrishnan and comprising Justices R.V. Raveendran, J.M. Panchal, D.K. Jain and P. Sathasivam yesterday upheld the order of the Madras High Court, regarding the formation of the National Company Law Tribunal (NCLT), contrary to several media reports.

Several media reports quoting PTI said, “Upholding the validity of amendments made to the Companies Act in 2002, the Supreme Court today paved the way for the establishment of the National Company Law Tribunal to deal with matters related to companies.” Speaking to Bar & Bench, Counsel for Madras Bar Association, Nikhil Nayyar said that the Supreme Court struck down the provisions of the Companies Act, in addition to upholding the judgment of the Madras High Court, contrary to several media reports. “The government has to amend the laws before instituting the National Company Law Tribunal and the Appellate Tribunal,” he said.

A Division Bench of the Madras High Court comprising Justices R. Jayasimha Babu and M. Karpavinayagam had, in 2004 stuck down the amendment to the Companies Act. The High Court held that the provisions were drafted in haste and have not received the kind of attention that they should have, the court declared that, “... until the provisions in parts 1B and 1C of the Companies Act introduced by the Companies (Amendment) Act, 2002, which have been found to be defective in as much as they are in breach of the basic constitutional scheme of separation of powers and independence of the judicial function, are duly amended, by removing the defects that have been pointed out, it would be unconstitutional to constitute a Tribunal and Appellate Tribunal to exercise the jurisdiction now exercised by the High Courts or the Company Law Board.”

Coming down particularly hard on the Government, the High Court had said, “If they (Amendments) are the result of careful deliberation it only makes matters worse.” They added, “The creation of a new substitute judicial forum which is to carry out the work which is now being carried out by 21 different High Courts in the country which work has been done in the High Court for over nine decades, is to be done with great care....”

Senior Counsel Arvind P. Datar briefed by counsel P.H. Arvind Pandian appeared for the petitioner, R. Gandhi, in his capacity as the President of the Bar Association of Madras before the Division Bench of the Madras High Court. The then Additional Solicitor General V.T. Gopalan appeared on behalf of the Union of India.

Union of India subsequently filed an appeal before a three Judge bench before Justices K.G. Balakrishnan, D.K. Jain and V. Sirpurkar in 2004. The then Additional Solicitor General and present Solicitor General Gopal Subramaniam appeared for the Union with Senior Counsel Datar appearing for the Madras Bar Association. The three Judge bench had referred the matter to the Constitutional bench stating, “Since the issues raised in the appeals are of seminal importance and are likely to have serious impact on the very structure and independence of the judicial system, we are of the view that the issue with regard to the constitution of the Tribunals and the areas of their jurisdiction needs to be given a fresh look and therefore, the matter deserves to be heard by a Constitution Bench.”

The constitutional bench in an unanimous verdict written by Justice Raveendran, held that the tribunal must include judicial and technical members with requisite qualifications. The Apex Court also held that the technical members should not exceed judicial members and the tenure of the members should be increased from three years, to five or seven years. Subject to the amendments, the decks are cleared for the establishment of a NCLT.

In the High Court, Counsels Nikhil Nayyar appeared for the Bar Association of Madras, with Senior Counsel Aravind Datar briefed for arguments.  P. Parameswaran appeared on behalf of the Union of India.

However, questions as to why the Madras Bar Association was the only association that chose to appeal the amendment remains. “The amendment means a loss of work for the Madras Bar. If and when it comes through, it will mean that the Company Law Board and consequently the Madras Bar, will be out of work,” says a Bangalore-based litigator on the condition of anonymity, who regularly appears before the Company Law Board in Chennai.  

A copy of the judgment can be found here.

Reference:

Civil Appeal No. 3067 of 2004, Union of India Vs. R. Gandhi, President, Madras Bar Association; Civil Appeal No. 3717 of 2005, Madras Bar Association Vs. Union of India.