Functioning of NCLTs requires to be litigant friendly and effective: Bombay HC [Read Judgment]

The Bombay High Court recently observed that remedial measures need to be taken as working and functioning of the National Company Law Tribunals (NCLT) requires to be litigant friendly and effective.

The Court also noted that Tribunals lack trained and competent staff to exercise judicial functions and same can be drawn from already functioning Courts.

A Division Bench of Justices SC Dharmadhikari and RI Chagla made these observations in its judgment pronounced on November 29, this year setting aside the NCLT Mumbai Bench order that initiated insolvency proceedings against software firm Rolta India Limited (Rolta). The Court had set aside NCLT order not on merits but on procedural grounds and directed the Tribunal to decide it afresh. The Court had held that NCLT Order that had admitted Rolta into insolvency was not pronounced in open court as required under the NCLT Rules and held it as a nullity.

In its judgment, the Division Bench referred to the decision of the Supreme Court in RK Jain v Union Of India decided in the year 1993. The Apex Court was dealing with a matter taken up by leading newspapers with regard to Customs, Excise and Gold Control Appellate Tribunal, as it was then known, being without a President for more than six months. The Supreme Court had noted that the functioning of the tribunal was seriously hampered and there was no proper business discharged and adjournments were granted as a matter of course.

In light of this, Justice SC Dharmadhikari, who authored 120-paged judgment noted,

“…Thus, remedial steps were suggested in this judgment and we find that two decades and more have passed after this judgment, but all remedial measures have not been taken. One of the remedial measures appears to be apparent to us and that is to make the working and functioning of these tribunals litigant friendly and effective.”

The Court said that it can be done only by placing the trained staff at the disposal of the Judicial members. Properly trained and experienced staff from the existing courts can be sent and deputed to assist the tribunals, Court said.

The Division Bench went on to observe,

“We have noticed that presently the Members of such tribunals do not have the required degree of experience themselves much less availability of trained, competent staff so as to enable them to effectively discharge judicial functions. Very often we have noticed that the support staff comprises of members of the concerned Government department.”

In this regard, the Court noted that the Central Government can monitor and supervise functioning of NCLT.

It was suggested by the Court,

“In other words, if the functioning of the tribunal is monitored and supervised by a particular department of the Central Government, then, that departmental staff is appointed to assist the tribunal.”

Moreover, the Court said that staff for the NCLT can be drawn from already functioning Courts.

“Effective work cannot be done unless the Registrar, Superintendent and other staff members are drawn from the courts already functioning and discharging judicial functions.  The trained staff of such courts can be deployed as a temporary measure and thereafter, by a proper selection process, the staff to assist and support the Judicial Members and the President should be selected and appointed. The staff ought to be drawn from legal field. If any administrative staff or departmental member is appointed or deputed to work in the tribunals, he may not have any experience of working in a court.”

In respect of the case in hand, the Court noted,

“We have noticed in this case that the NCLT lacks such a staff. It is on account of the staff members that in this case both the judicial Members have been embarrassed. The litigants suffer by a requirement to hold the proceedings afresh.”

Moreover, setting aside the NCLT order, a Division Bench clarified that though it has nullified the order, it did not quash the proceedings themselves.

“The proceedings remain on the file, in the sense, the application can be pursued and decided in accordance with law afresh and therefore, our judgment and order should not be construed as expression of any opinion on the merits of the controversy.” 

While concluding its judgment, the Court allowed the plea by Rolta and asked the Tribunal to decide the application seeking its insolvency afresh.

Ultimately, Justice SC Dharmadhikari observed,

“We were concerned with the issue of conduct of judicial proceedings and the legality and validity of the impugned unpronounced, undeclared order. We have not in any manner stripped the NCLT and its power, authority and jurisdiction to decide the application in accordance with law.  It should so proceed and decide it.”

[Read Judgment dated November 29, 2019]