Supreme Court upheld the constitutionality of the National Company Law Tribunals and National Company Law Appellate Tribunal.

On Thursday, Supreme Court made tribunals function to deal with company law matters and upheld that Companies Act’s provisions are constitutionally valid in establishing National Company Law Appellate Tribunal and National Company Law Tribunal.

All the cases which were dealt by High Courts, Board for Industrial, Company Law Board, Financial Reconstruction and Appellate Authority for Industrial will be dealt by these tribunals now. Bench headed by Chief Justice H L Dattu, held that few provision in that was not valid as the selection committee consisted of 5 members whereas the previous judgment states that it should be 4 members. The Court struck down the provisions that allowed civil servants to be selected to the level of joint secretary. Supreme Court however held that the previous order of 2010 given by it where the person below the rank of secretary cannot be appointed to be member of NCLT should not be fiddled. The court further stated that Section 412 of the new Act was invalid as it was decided in 2010 judgement as to selection of committee and which is binding.  Bench held that since this issue was concluded in 2010 judgment and it is valid and clearly binding on the respondent too. Court held that Chief Justice of India should be given the final words about the selection committee where in 2010 it was held that this committee should consist of 4 members.

Further the Court asked the central government that these bodies start to function as soon as possible and ensure that they are manned properly. Bench comprising of Justices A K Sikri, R F Nariman, Arun Mishra, and Amitava Roy, said that NCLT and NCLAT should start functioning at the earliest possible. Court told the centre to appoint NCLAT’s chairperson and its members and NCLT’s president and its members as early as possible. The constitutional validity was challenged by Madras Bar Association.  Bench had rejected the associations’ argument where it had asked the court to hold the NCLT and NCLAT as unconstitutional.  Earlier UPA led government in the centre wanted to set up NCLT and NCLAT as a quasi-judicial body which would help in reducing the pending winding up cases reducing the time of High courts.

by Sushma Javare.