Corporate disputes concerning mergers and acquisitions and amalgamations will be decided by the proposed fast-track adjudication body, National Company Law Tribunal (NCLT), the legality of which was approved by the Supreme Court last week with some riders.
Giving its ruling on the long-drawn legal battle, the Supreme Court had approved establishment of the NCLT, a quasi-judicial body which will be manned, said the apex court, by judicial persons.
Commenting on the apex court ruling, senior advocate C A Sundaram said the NCLT is a good idea, but was badly drafted by the government, which had proposed to make retired people head it.
"It was a very badly drafted piece of legislation. Now the Supreme Court has corrected the errors. The government should bring the amendments very soon to make this tribunal an effective tool to deal with corporate issues," Sundaram said.
Leading capital-based law firm Titus and Co senior partner Diljeet Titus echoed similar views saying, "The NCLT will be headed by judicial persons who are experts in company matters. It would help in expeditiously dealing with company law matters, currently being adjudicated by the high courts, Company Law Board (CLB) and Board of Industrial and Financial Reconstruction (BIFR)."
The NCLT, said senior company law advocate U K Chaudhary, "will consolidate the entire corporate jurisdiction in one place. At present, at the CLB, a matter takes six months to two years, while at the BIFR, it takes five-six years. But at the proposed NLT, it may take just three to nine months."
Sundaram further pointed out that the NCLT would bring all company litigation spread across the high courts, the BIFR and CLB -- including matters related to winding up, amalgamations, mergers, corporate recast, rehabilitation and board disputes -- under one roof, thereby reducing the time taken for the adjudication process.
Chaudhary said if the government follows the apex court's direction, the NCLT will be headed by judicial persons and it will be chaired by one retired judge of the apex court.
He further said it will also pave the way for private liquidators and the establishment of LLPs or limited liability partnership firms.
Last week, a five-member Constitutional bench had ruled that the creation of the NCLT, which envisaged the transfer of the supervisory powers of the high courts to the tribunal, was valid. It further said its formation should be at par with the high courts.
The Supreme Court had held that judges serving as district judges for at least five years or advocates who had practiced for a decade could be appointed as judicial members of the NCLT.
The apex court had also clarified that Group A officers could not be appointed as judicial members. Officers holding the rank of secretaries or additional secretaries could only be considered for technical members of the NCLT.
The guidelines further said as the NCLT is going to take over the functions of the high courts, its members must be given status equal to HC judges in terms of salaries and perks.
The court spiked the government proposal to appoint any Group A official having 15 years experience and holding the post of joint secretary or equivalent to be appointed as an NCLT member. However, the court had also said professionals having over 15 years' experience in industrial finance, industrial management, industrial reconstruction, investment and accountancy could be considered for technical members.
It also altered the selection committee and said there would be a four-member committee instead of a five-member committee headed by the Chief Justice of India. Other members would be a senior Supreme Court judge and secretaries of the Ministry of Finance, Company Affairs and Law and Justice.
The apex court had also suggested extending the tenure of NCLT members from the proposed three years to seven years.