SC upholds tribunals for fast-tracking corporate cases

In a judgement expected to have a strong positive impact on the business environment, a five-judge constitution bench of the Supreme Court has upheld the legality of the Companies (Second Amendment) Act 2002, providing for the establishment of the National Company Law Tribunal and National Company Law Appellate Tribunal to deal exclusively with company cases for their speedy disposal.

At the same time the five-judge bench, comprising Chief Justice K G Balakrishnan and Justices R V Raveendran, D K Jain, P Sathasivam and J M Panchal, came down hard on the practice of filling posts in such tribunals with bureaucrats rather than judicially qualified members, saying adjudication of these matters needed a judicial bent of mind.

Justice Raveendran, writing the judgment for the Bench, said that bureaucrats at best could be made technical members of the tribunals and all appointments to the post of presiding officers had to be made in consultation with a committee headed by CJI (the Chief Justice of India) or his nominee and comprising a judge of the Supreme Court or a HC, secretaries in the ministries of company affairs and law and justice.

The judgement means that by eliminating several intermediate steps, NCLT will expedite the disposal of corporate disputes and winding up petitions.

At present, disputes are first raised at the level of the Company Law Board (CLB) and then the high courts.

Similarly, the winding up of companies is referred to the Board for Industrial and Financial Reconstruction, an appellate body, and then the high courts. Once the changes are implemented, the references will be made directly to NCLT, the appellate tribunal and finally to the Supreme Court.