The curious case of the National Company Law Tribunal, Kochi

Bar & Bench February 8 2019
NCLT Kochi, Sirpur Paper Mills, Merger, Indian Company

Rahul Unnikrishnan

On July 27, 2018, the Ministry of Corporate Affairs issued a notification constituting a bench of National Company Law Tribunal (NCLT) at Kochi.

This Tribunal was given jurisdiction over matters from the State of Kerala and the Union Territory of Lakshadweep. Until then, the NCLT at Chennai had jurisdiction over Kerala and Lakshadweep. The notification further stated that it will come into force on the first day of August, 2018. 

Section 419 (1) of Companies Act, 2013 delegates power to the Central Government to constitute new benches of the National Company Law Tribunal through Gazette notifications.

Exercising its powers under section 419(1) of the Companies Act, 2013, the Central Government had earlier, on June 1, 2016, issued a notification constituting 10 Benches of the National Company Law Tribunal. In this notification, Sl.No.6 provided for a Bench of the NCLT at Chennai with jurisdiction over the States of Kerala and Tamil Nadu and the Union Territories of Puducherry and Lakshadweep. 

The notification of July 27, 2018 modifies this earlier notification and removes “State of Kerala” and “Union Territory of Lakshadweep” from Sl. No.6 of the previous notification. The net result is that the NCLT at Chennai has been divested of its jurisdiction to hear matters arising out of Kerala and Lakshadweep. As provided in the recent notification, this change came into force on the first day of August, 2018. 

Immediately after this notification was issued, the NCLT at Chennai stopped passing final orders in cases from Kerala and Lakshadweep. This includes matters arising out of the Companies Act, 2013, and the Insolvency and Bankruptcy Code (IBC), 2016. Moreover, several cases had been transferred from the Kerala High Court to NCLT Chennai when the Companies Act, 2013 was enacted. The High Court’s jurisdiction under the Companies Act, 1956 was taken away by the new Companies Act 2013. 

Currently, there are many cases that are pending before the NCLT, Chennai, in which pleadings are complete and which are ready for final hearing. These cases include those falling under oppression/mismanagement provisions under the Companies Act, 2013, and those of financial creditors under the IBC. 

The stand taken by NCLT Chennai, and rightly so, is that pursuant to the notification of July 2018, it does not have any jurisdiction to entertain matters from Kerala and Lakshadweep. 

In other words, even if the parties subject themselves to the jurisdiction of a particular court, if that court does not have jurisdiction under a statute or the rules thereunder, it cannot adjudicate those matters. 

It is seen that the Ministry of Corporate Affairs is yet to appoint judicial members and technical members to the NCLT, Kochi. Moreover, it is learnt that the recruitment process for the supporting staff including registrar, deputy registrar, stenographers, etc. is yet to get completed. 

As such, the NCLT at Kochi is yet to begin its operations, and most likely, it would take another couple of months for the Ministry to appoint the supporting staff and judicial/technical members. 

The net result is that for the last six months, litigants from Kerala and Lakshadweep have been stranded with nowhere to go. 

Any prudent person would have first appointed judicial/technical members and the entire supporting staff to the new tribunal before divesting the powers of an already existing tribunal. 

It is sincerely hoped that the Ministry of Corporate Affairs withdraws this notification with immediate effect so that the litigants from Kerala and Lakshadweep can approach the NCLT at Chennai to address their grievances under the Companies Act, 2013 and the IBC, 2016. Once the selection process is complete and the supporting staff appointed, the Ministry can issue a fresh notification setting up a Bench of the NCLT at Kochi, and transfer all the related cases from NCLT, Chennai to the newly set up bench at Kochi. 

The author is an advocate practicing at the Madras High Court.