Tribunals have always had an urban legend surrounding them that their proceedings are only summary in nature and they can render only prima-facie findings and are devoid of jurisdiction while adjudicating a matter revolving disputed facts. The perception concerning National Company Law Tribunal (“NCLT”) finds no exception to this. To uncover the same, this article attempts to...
Tribunals have always had an urban legend surrounding them that their proceedings are only summary in nature and they can render only prima-facie findings and are devoid of jurisdiction while adjudicating a matter revolving disputed facts. The perception concerning National Company Law Tribunal (“NCLT”) finds no exception to this. To uncover the same, this article attempts to analyse various provisions and judicial precedents, to answer the whether the NCLT under the Companies Act, 2013 (“2013 Act”) has powers to conduct a full-fledged trial akin to a civil court.
Constitution And Parliamentary Power
The Competence of Parliament to empower Tribunals to conduct a full-fledged trial emanates from Article 323B of the Constitution of India, which states that “(1) The appropriate Legislature may, by law, provide for the adjudication or trial by tribunals of any disputes, complaints, or offences with respect to all or any of the matters specified in clause (2) with respect to which such Legislature has power to make laws.”
NCLT traces its origin to prior the enactment of 2013 Act. Parliament first attempted to establish NCLT and National Company Law Appellate Tribunal (“NCLAT”) vide Companies (Second Amendment) Act, 2002, thereby introducing chapter 1B and 1C in the Companies Act, 1956. As one expects in matters of tribunals, the Madras Bar Association promptly challenged the constitutional validity of the same.
When the matter ultimately reached before the Supreme Court in Union of India v. R. Gandhi[1], one of the questions before the Supreme Court was whether wholesale transfer of powers from courts to NCLT would offend the constitutional scheme of separation of powers and independence of judiciary. The dictum laid by the Supreme Court is reproduced hereunder: -
“33. The argument that there cannot be ‘whole-sale transfer of powers’ is misconceived. It is nobody’s case that the entire functioning of courts in the country is transferred to Tribunals. The competence of the Parliament to make a law creating Tribunals to deal with disputes arising under or relating to a particular statute or statutes cannot be disputed. When a Tribunal is constituted under the Companies Act, empowered to deal with disputes arising under the said Act and the statute substitutes the word ‘Tribunal’ in place of ‘High Court’ necessarily there will be ‘whole-sale transfer’ of company law matters to the Tribunals. It is an inevitable consequence of creation of Tribunal, for such disputes, and will no way affect the validity of the law creating the Tribunal.”
Power Of NCLT As Per Statutory Provisions And Rules
NCLT was established under Section 408 of the 2013 Act. Section 409 of the 2013 Act, provides that inter-alia to qualify for appointment as Judicial Member, a person is or has been judge of a High Court, or is or has been a District Judge for at least five years. Therefore, Parliament requires for a highly seasoned judicial mind to preside as Judicial Member in a Court of first instance under the scheme of 2013 Act.
Section 420 of the 2013 Act vests powers in NCLT to rectify its any mistake apparent from the record in its order and amend the same. Section 422 of the 2013 Act provides for expeditious disposal of matters as possible as within three months. Sections 424 and 425 of the 2013 Act gives bundle of powers to NCLT to conduct proceedings and discharge its functions. Same are produced briefly hereunder: -
| Section | Power |
| 424(1) | Power to regulate their own procedure. |
| 424(2) | Same powers as are vested in a civil court while trying a suit (a) summoning and enforcing the attendance of any person and examining him on oath; (b) requiring the discovery and production of documents; (c)receiving evidence on affidavits; (d) subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872, requisitioning any public record or document or a copy of such record or document from any office; (e)issuing commissions for the examination of witnesses or documents; (f) dismissing a representation for default or deciding it ex parte; (g) setting aside any order of dismissal of any representation for default or any order passed by it ex parte; |
| 424(3) and 424(4) | NCLT deemed to be civil court for purpose of section 195 of CrPC. Order enforced as a decree made by a court in a suit and can be sent for execution. Proceedings before NCLT deemed to be judicial proceedings within meaning of section 193 and 228. |
| 425 | Power to punish for contempt |
Therefore, in light of the various powers, equivalent to a civil court, which are vested in favour of NCLT, the 2013 Act outs the jurisdiction of civil courts vide section 430 in respect of any matter which the NCLT is empowered to determine.
Even if powers entrusted to NCLT under section 424 and 425 may at first blush do not appear to be conclusive enough to argue that NCLT does not have power to conduct trial, the co-joint reading of the same with various rules framed under the National Company Law Tribunal Rules, 2016 (“NCLT Rules”) overwhelmingly brings home the point that NCLT can conduct a full-fledged trial.
An illustrative table of various powers conferred upon NCLT under NCLT Rules,2016 is produced hereunder: -
| Rule | Power |
| 11 | Inherent powers of NCLT to make such orders as may be necessary for meeting the ends of justice. |
| 39 | Production of Evidence by Affidavit. NCLT can also order cross-examination of any deponent on point of conflict. |
| 40 | Production of additional evidence oral or documentary before NCLT. |
| 43 | Power of NCLT to call for further information or evidence. When in a petition of oppression and mismanagement, any party raises issue of forgery or fabrication, NCLT can on application order forensic examination. |
| 47 | Witness can be administered oath in NCLT. |
| 49 | Power to proceed Ex-Parte. |
| 51 | Power to regulate its own procedure. |
| 52 | Summoning of witnesses and recording Evidence |
| 54 | Power to call in assessor or valuer in any enquiry into a claim |
| 56-57 | For Execution of order passed by NCLT, holder of order to make application to the NCLT itself. NCLT can issue process for execution in form as provided in CPC and consider objections raised and issue attachment or recovery warrant as provided in CPC. |
| 61 | Power to appoint amicus curiae |
| 70(5) | In a petition under section 59( rectification of register of members), NCLT may decide any question relating to title of any person and/or generally decide any question necessary in connection with application for rectification. |
| 131 | Power of NCLT to entertain application for production of documents. |
| 132 | Power to suo motu issue summons for production of public documents. |
| 135 | Procedure for examination of witnesses, issue of commissions |
| 136 | Power to examine any witness in camera |
| 145 | Taking of specimen handwriting, signature etc |
Case Laws
The Delhi High Court in SAS Hospitality Pvt. Ltd. v. Surya Construction Pvt. Ltd.[2], was seized of maintainability of suit seeking declaration of allotment of shares in favour of defendants as null and void. Defendant challenged the maintainability of the same on the ground that NCLT has exclusive jurisdiction u/s 59 read with 430. The Court considered the earlier decision of full bench in Ammonia Supplies Corp v. Modern Plastic Container Ltd.[3] which had held that complex question cannot be decided by Tribunal as procedure in Tribunal was summary in nature and Tribunal do not enjoy the same powers as exercised by civil court. The Court distinguished the full bench decision in Ammonia by holding that position no longer remains to be so owing to complete change in scheme of NCLT and powers vested in it. In order to ascertain whether NCLT has jurisdiction, the Court relied upon the two tests i.e., whether tribunal’s order is attributed finality and whether tribunal would be able to do what a civil court could do.
The Supreme Court in Shashi Prakash Khemka v. NEPC Micon[4] was seized of the issue of transfer of shares. The counsel of the appellants contended that the view expressed in Ammonia Supplies Corp v. Modern Plastic Container Ltd.[5] that in case of serious dispute as to title the matter could be relegated to a civil suit, however, subsequent legal development i.e., introduction of section 59 has changed the landscape. The Apex Court, noting the aforesaid, held that civil suit remedy would be completely barred and power would be vested with NCLT considering the manner in which section 430 is widely worded.
In Vikram Jairath v. Middleton Hotels Pvt. Ltd.[6], the facts of the case were that Defendants owed Plaintiffs approx. Rs. 30 crs. Def. No. 2-5, who held entire shareholding in Def. 1 Company pledged their shareholding. They failed to make payment and transferred entire share to Plaintiff by signing on transfer deeds. Plaintiff later came to know that Def. had increased authorised share capital of Def 1 Company and issued bonus shares to Def No. 2 to 5. Plaintiffs claimed they had oral agreement with Def. that no changes would be made in shareholding and therefore Defs. Played fraud. Plaintiff filed civil suit before HC. The Calcutta High Court, while refusing interim reliefs sought by the Plaintiff held that: -
“15. Upon coming into force of the Companies Act, 2013, the intention of the legislature seems to be quite clear. If one were to keep in mind the preamble of the Companies Act, 2013 that states “an Act to consolidate and amend the law relating to companies” as also Section (1) sub-Section (4)(a) of the Companies Act, 2013 that states that the provision of this Act shall apply to “companies incorporated under this Act or under any previous company law”, it would inevitably lead one to the conclusion that the legislature intended to bring all matters under the gambit of the new enactment. It is to be further seen that proviso to Section 58(2) states “provided that any contract or arrangement between two or more persons in respect of transfer of securities shall be enforceable as a contract”. This power under Section 58 read with Rule 70(5)(b) that gives the power to the Tribunal to generally decide any question which is necessary or expedient to decide in connection with the application for rectification read with Section 70(4)(a) that gives the power to the Tribunal to pass any interim order including any orders as to injunction or stay makes it clear that it is the Tribunal that has the power to decide all issues in relation to transfer of shares by way of an oral or written contract..”.
In Viji Joseph v. P. Chander,[7], the Madras High Court was seized of the issue that whether an election dispute of a company would be amenable to jurisdiction of NCLT. The Madras High Court held that power of NCLT under section 242 of 2013 Act is exhaustive. The High Court after considering Chapter XXVII, section 424 to 430, 241, 241 observed that :-
“24. The powers of the Tribunal cannot be termed as summary per se. A summary proceedings would come into place when a Court acts upon a common law principle as against a different procedure authorised by law. However, a proceeding cannot be termed as a summary when further procedural strengthening was done by the enactment along with the common law principles. As discussed above, common law principles are not given a go-by in the proceedings of the Tribunal, but it can go beyond. Once this position is made clear, then it is very easy to understand the scope and ambit of Section 241. The intendment of the legislature is to redress the disputes, more particularly, internal ones of a company within the four walls of the Tribunal. Therefore, the contention that complex or disputed issues to be adjudicated upon only through the Civil Court would never arise at all. Though, summary proceeding may be required by the Tribunal in a given case, the Tribunal is not meant to follow it in all cases. Such a leverage and flexibility is conferred on the Tribunal either act as a regular or a special Court depending upon the nature of the complaint behind it.”
In Delhi & District Cricket Association v. Sudhir Kumar Aggarwal[8], the question before the Delhi High Court was whether election to boards of directors of a company, wrongful appointment of an ombudsman in violation of Articles of Association could be adjudicated by civil court or exclusively by NCLT. Appellants argued that Companies Act and NCLT Rules are together a complete code and perusal of various rules of NCLT show that powers of NCLT cannot be terms summary in nature. NCLT can conduct a full trial and powers of NCLT cannot be termed summary as held in Viji Joseph. The High Court relying on the same held that NCLT has all the powers to hear all the issues raised under the suit. The scope of section 430 is vast as held by Supreme Court in Shashi Prakash Khemka.
Provisions of 2013 Act read with vast powers conferred on NCLT under the NCLT Rules 2016, show a stark departure undertaken by legislature in arming and empowering NCLT with complete powers of that of a civil court and thereby not only giving the NCLT option to conduct summary proceedings but also to conduct trial as may be required for the ends of justice. The subsequent legal development in guise of enactment of 2013 Act and NCLT Rules, 2016 nullify all previous judicial precedents which held that tribunal cannot decide on complex question of facts. NCLT has all powers as that of a civil court to conduct a trial. However, application of these powers has to be in terms of section 430 of 2013 Act inasmuch as jurisdiction of civil court is barred only in respect of matter which the NCLT has been empowered under the Act to determine.
Views are personal.