The Company Law Board and the Board for Industrial and Financial Corporation handled the companies’ rights and responsibilities prior to the creation of the National Company Law Tribunal and National Company Law Appellate Tribunal. In accordance with Companies Act of 2013, Section 408 of the Central government established NCLT. It was established based on the Justice Eradi Committee’s recommendations, and it went into effect on June 1, 2016.
What is NCLT?
The National Company Law Tribunal (NCLT) was established as a quasi-judicial body to settle disagreements pertaining to Indian companies. It is the Company Law Board’s replacement. The Central Government has formulated the regulations that govern it. Cases pertaining to civil court have been excluded from the jurisdiction of NCLT, a special court.
Powers and functions:
- DEREGISTRATION:
According to Section 7(7) of the Companies Act of 2013, the tribunal may make any of the following orders if it learns that the company provided false or incorrect information at the time of incorporation or by hiding any material facts, information, or declarations that the company filed:
•Give any orders it deems appropriate.
•Give directives to wind up the business.
•Members’ direct liability will never expire.
- RE-OPENING OF ACCOUNTS::
The Companies Act of 2013 specifies this in Section 130.
•The company will not be permitted to open its accounts or recast its financial statements unless directed to do so by the central government, income tax authorities, SEBI, statutory bodies, or a court of competent jurisdiction. In the following situations, the company may be permitted to do so:
*Previous accounts were prepared fraudulently.
*The company’s affairs were improperly handled, raising questions about the accuracy of the financial statements.
*The tribunal will notify the relevant authorities prior to making any such orders.
REFUSAL TO TRANSFER THE SHARES
According to the Companies Act of 2013, Section 58:
•A public company or a private company restricted by shares that declines to record the transfer of the transferor’s shares must notify the transferor and transferee of the refusal within thirty days of the transfer.
•In exchange, the transferee must file an appeal with the tribunal within thirty days of receiving the notice; if the transferee does not receive a notice from the company, they must file an appeal with the tribunal within sixty days of the transfer document.
•After hearing the orders, the tribunal will either reject the appeal or give the company instructions.
*within ten days of receiving an order, to transfer the shares.
*Immediately correct the register and order the aggrieved party’s damages, if any, to be reimbursed.
INVESTIGATION POWERS:
According to the Companies Act of 2013, Section 213:
*When one of the following parties files an application with the tribunal:
•Company with share capital; Members holding at least one hundred shares or more of the company’s total voting power;
•A business without share capital is one that has at least one-fifth of the individuals listed on its membership roster.
*When a non-member of the company applies to the tribunal citing one of the following circumstances:
• the company’s operations have only been carried out with the intention of defrauding its creditors, members, or any other person.
•The purpose of the business operation is either fraudulent or illegal.
•Members are subjected to oppression in the way that business is being conducted.
•A business is only being formed with the intention of committing fraud or other illegal acts.
•Individuals involved in the establishment of the company or overseeing its operations were found to have committed fraud, mismanagement, or other wrongdoing against the company or any of its members.
•After providing the parties with a reasonable opportunity to respond, the tribunal may determine that the company’s affairs should be looked into. For this reason, the central government will designate an inspector. If members of the company have neglected to provide the company with all the information they are required to provide regarding the company’s affairs, including the information relating to the calculation of commission payable to the managing director, director, or any other manager of the company.
OPPRESSION AND MISMANAGEMENT:
According to Section 241 of the Companies Act of 2013, any employee of the company who is entitled to file a complaint with a tribunal under Section 244 of the Act of 2013 must do so by stating the following:
•The way the business conducts its affairs may be detrimental to the public interest, oppressive to him or any other member, or detrimental to the business itself.
•A substantial shift in the company’s management or control has been implemented by the company, going against the interests of the company’s shareholders, debenture holders, and creditors. This change has occurred in:
*modification of the manager,
* Modification of the member,
* Modification of the board of directors,
*or for any other cause.
Due to these factors, the company’s members believe that its operations have been handled in a way that is detrimental to its interests.
When the Central Government believes that a company’s operations have been carried out in any of the following ways, and the tribunal determines that these actions have been oppressive or detrimental to the public interest:
*a company member has been found guilty of fraud, misfeasance, persistent negligence, breach of trust, or defaulting on legal obligations and functions;
*the management of the company has not been carried out in accordance with sound principles or prudent commercial practices;
*or the company is being operated in a way that seriously harms trade, business, or industry.
A company must file an application with the tribunal to request a remedy when its management is solely focused on defrauding its members or creditors, or when its actions are illegal or fraudulent and go against the interests of the public.
CONCLUSION:
What was once the Company Law Board is now NCLT. With the creation of NCLT, disputes pertaining to company law will now have a quick remedy and can be resolved quickly. A party that feels wronged by a decision or order made by NCLT may file an appeal with NCLAT within 45 days of the party receiving the order or decision. In addition, the NCLAT renders a decision six months after the appeal is received. When NCLT and NCLAT are empowered to make decisions, no civil court has the authority to do so.
Author: Mr. Aman Sethi, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at IIPRD.
