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IMPACT OF RECENT OF SUPREME COURT JUDGMENT ON NCLT AND NCLAT

Corporate Laws / Banking / SEBI / LLP - By: - Mr. M. GOVINDARAJAN - Dated:- 10-12-2015 Last Replied Date:- 30-12-1899 - Brief facts The Companies (Second Amendment) Act, 2002 inserted Part IB, containing of Sections 10FB to 10FP and Part IC, consisting of Section 10FQ to 10GF. Part 1B provides for the constitution of National Company Law Tribunal ( NCLT for short) the replace the powers of the Company Law Board the powers vested on High Court by Companies Act, 1956. Part 1C provides for the cons .....

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SUPREME COURT OF INDIA] challenging the constitution of NCLT and NCLAT along with certain other provisions. The High Court, in its judgment, held that the creation of NCLT and vesting the powers hither to exercise by the Company Law Board and the High Court was not unconstitutional. At the same time the High Court pointed out certain defects in various of Sections viz., 10 FD(3)(f)(g)(h), 10FE, 10FF, 10FL (2), 10FR (3), 10FT and declared that the said sections offended the basic constitutional .....

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place the Companies Act, 1956. In the new Act the Government provides provisions for the constitution of NCLT and NCLAT, the provisions relating to appointment of President/Chairperson and members of both the Tribunals and also provides for the constitution of Selection Committee of the said members. The Madras Bar Association challenged the said provisions before the Supreme Court alleging that these provisions are analogous to the provisions relating to the NCLT and NCLAT despite the clear dir .....

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Supreme Court directed to set right the defects in Section 409(3) as per the directions of Supreme Court in its 2010 judgment. The Supreme Court also held that Section 411(3), which provides for the qualification for the appointment of technical member, is invalid and directed to comply with the directions in its 2010 judgment. The Supreme Court further held that Section 412 (2) which deals with the constitution of selection committee, is deviated from the directions given by the Supreme Court .....

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on of NCLT and NCLAT under the provisions of new Companies Act. But in respect of other aspects the Government is to comply with the directions of Supreme Court in 2010 judgment. In respect of appointment of technical members the Government has to follow the directions of Supreme Court in its 2010 judgment as detailed below: As NCLT takes over the functions of High Court, the members should as nearly as possible have the same position and status as High Court Judges. This can be achieved, not by .....

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ied to be appointed as technical members. Persons having ability, integrity, standing and special knowledge and professional experience of not less than 15 years in industrial finance, industrial management, industrial reconstruction, investment and accountancy, may be considered as persons having expertise in rehabilitation/revival of companies and therefore, for being considered for appointment as technical members; In respect of constitution of selection committee the Supreme Court directed t .....

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ct which should be passed in the Lok Sabha and Rajya Sabha and after that to obtain the sanction of the President, the process of which would take some time. Impact on judgment The constitution and functioning of the NCLT and NCLAT are definite subject to the condition that the Government is to comply with the directions in appointing the technical members and for the constitution of selection committee. Let us hope that the Government will do so. In the erstwhile Companies Act most of the power .....

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red Accountants or Company Secretaries or Cost Accountants or legal practitioners or any other person to present his case before the Tribunal or the Appellate Tribunal as the case may be. By virtue of Section 432 the area of practice for the professionals is widened if the provisions relating to Tribunal come into effect. The following sections give the details of the matters that may be dealt with NCLT: MATTERS THAT MAY BE DEALT WITH BY NCLT Chapter II - Incorporation of company and matters inc .....

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shareholders rights; Section 55(3) - Petition for the approval of Tribunal for the issue of further redeemable preference shares equal to the amount due, including the dividend thereon in respect of the unredeemed preferences shares; Section 61 - proviso to (1)(b) - which provides that no consolidation and division which results in changes to the voting percentage of shareholders shall take effect unless it is approved by the Tribunal on an application made in the prescribed manner; Section 62 ( .....

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71 (11) - Penalty on disobedience of the order of the Tribunal under Section 71 (10); Chapter V - Acceptance of deposits by companies Section 74(2) - The Tribunal may on an application made by the company, after considering the financial condition of the company, the amount of deposit or part thereof and the interest payable thereon and such other matters, allow further time as considered reasonable to the company to repay the deposit; Section 75 - Damages payable by the company if it fails to .....

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Sections 96 to 98; Section 119 (4) - In case of refusal or default in allowing inspection of minute books of general meeting, the Tribunal may direct immediate inspection of minute books or direct that the copy required shall be sent to the person requiring it. Chapter IX - Accounts of companies Section 130 - Re-opening of accounts on Tribunal s orders; Section 131 - Voluntary revision of financial statements of Board s report; Chapter XIV - Inspection, inquiry and investigation Section 216 (2 .....

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file application before the Tribunal for its order in the case of fraud by the company; Chapter XV Section 230 - Power to compromise or make arrangements with creditors and members; Section 231 - Power of Tribunal to enforce compromise or arrangement; Section 232 - Merger and amalgamation of companies; Section 233 (5) - Merger or amalgamation of certain companies; Section 234 - Merger or amalgamation of company with foreign company; Section 235 - Power to acquire shares of shareholders dissentin .....

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mination or modification of certain agreement; Section 244 - Right to apply under Section 241; Section 245 - class action; Section 246 - Application of certain provisions to proceedings under Section 241 or Section 245. Chapter XVIII - Removal of names of companies from the Register of Companies Section 248 - Power of Registrar to remove name of company from register of companies; Section 249 - Restrictions on making application under Section 248 in certain situations; Section 252 - Appeal to Tr .....

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d rehabilitation; Section 262 - Sanction of scheme; Section 263 - Scheme to be binding; Section 264 - Implementation of scheme; Section 265 - Winding up of company on report of company administrator; Section 266 - Power of Tribunal to assess damages against delinquent directors etc., Section 267 - Punishment for certain offences; Section 268 - Bar of Jurisdiction; Section 269 - Rehabilitation and Insolvency Fund. Chapter XX - Winding up Part I - Winding up by the Tribunal Section 271 - Circumsta .....

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on of Tribunal; Section 281 - Submission of report by Company Liquidator; Section 282 - Directions of Tribunal on report of Company Liquidator; Section 283 - Custody of company s properties; Section 284 - Promoters, directors etc., to co-operate with Company Liquidator; Section 285 - Settlement of list of contributories and application of assets; Section 286 - Obligations of directors and managers; Section 287 - Advisory Committee; Section 288 - Submission of periodical reports to Tribunal; Sect .....

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- Adjustment of rights of contributories; Section 298 - Power to order costs; Section 299 - Power to summon persons suspected of having property of company etc., Section 300 - Power to order examination of promoters, directors etc., Section 301 - Arrest of person trying to leave India or abscond; Section 302 - Dissolution of company by Tribunal; Section 303 - Appeals from orders made before commencement of Act; Part II - Voluntary winding up Section 304 - Circumstances in which company may be w .....

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ar; Section 313 - Cesser of Board s powers on appointment of Company Liquidator; Section 314 - Powers and duties of Company Liquidator in voluntary winding up; Section 315 - Appointment of Committees; Section 316 - Company Liquidator to submit report on progress of winding up; Section 317 - Report of Company Liquidator to Tribunal for examination of persons; Section 318 - Final meeting and dissolution of company; Section 319 - Power of Company Liquidator to accept shares, etc., as consideration .....

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iding preferential payments; Section 327 - Preferential payments; Section 328 - Fraudulent preference; Section 329 - Transfer not in good faith to be void; Section 330 - Certain transfers to be void; Section 331 - Liabilities and rights of certain persons fraudulently preferred; Section 332 - Effect of floating charges; Section 333 - Disclaimer of onerous property; Section 334 - Transfers etc., after commencement of winding up to be void; Section 335 - Certain attachments, executions etc., in wi .....

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ers and members of company; Section 343 - Company Liquidator to exercise certain powers subject to sanction; Section 344 - Statement that company is in liquidation; Section 345 - Books and papers of company to be evidence; Section 346 - Inspection of books and papers by creditors and contributories; Section 347 - Disposal of books and papers of company; Section 348 - Information as to pending liquidations; Section 349 - Official Liquidator to make payments into public account of India; Section 3 .....

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on 357 - Commencement of winding up by Tribunal; Section 358 - Exclusion of certain time in computing period of limitation. Chapter XXI - Companies authorized to register under this Act Part II - Winding up of unregistered companies Section 375 - Winding up of unregistered companies; Section 376 - Power to wind up foreign companies, although dissolved; Section 377 - Provisions of Chapter cumulative; Section 378 - Saving and construction of enactments conferring power to wind up partnership firm, .....

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e Tribunal; Section 423 - Appeal to Supreme Court; Section 424 - Procedure before Tribunal and Appellate Tribunal; Section 425 - Power to punish for contempt; Section 426 - Delegation of powers; Section 427 - President, Members, Officers etc., to be public servants; Section 428 - Protection of action taken in good faith; Section 429 - Power to seek assistance of Chief Metropolitan Magistrate etc., Section 430 - Civil court not to have jurisdiction; Section 431 - Vacancy in Tribunal or Appellate .....

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