On 01 June 2016, the Ministry of Corporate Affairs has issued three notifications for setting and developing the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT). Now, MCA after the constitution of NCLT and NCLAT has come up with the notification of rules, the procedure for filing the application, petition or appeal on 21 July 2016.
The Government establishes the Tribunals under section 8 of the Companies Act, 2013 with effect from 01 June 2016. They have also established the Debt Recovery Tribunal to deal with all insolvency cases speedily.
In the first phase, eleven benches have been set up. The Principal Bench is located at New Delhi and regional benches at New Delhi, Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guwahati, Jaipur, Hyderabad, Kolkata and Mumbai. Any company that wants to continue against its debtors can approach NCLT for Winding Up, Liquidation to recover their dues or Strike Off.
'The Corporate Insolvency Resolution Process (CIRP)’ can be initiated by making an application to the NCLT by the Financial Creditors under Section 7 of Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "IBC") or by Operational Creditors under Section 9 and by the Corporate Debtor himself under Section 10.
Significance of NCLT and NCLAT
It is a semi-legal specialist institution formed by the suggestion provided by the Eradi Committee to promote the amicable settlement amongst corporate matters. It is formed by the notification provided in the official gazette and with an intent to reduce the burden on the traditional court of law. NCLT helps to set off corporate claims, declare the corporate rights, undo the wrong done further deciding the punishment and penalties for the person held liable for the violation of the provision of Companies Act, 2013 and matters incidental to. NCLT is an institutional version of courtroom specifically dealing in matters relating to companies/ corporate entity for filtering the futile claims in providing a conclusion to request coming up to the authority smoothly without unnecessary delays. NCLT is the product of the Eradi Committee which filtered or eliminated all the lacunas of the previous institutions established previously. NCLAT, on the other hand, is a type of audit institution on the decisions provided by NCLT. It is an appellate tribunal handling appeals of in cases filed with the NCLT, by the aggrieved by the decision was given, then to file an appeal against the same. Further, if any person is aggrieved by the decision given by the NCLAT, then he/she may refer the matter to the High Court or Supreme Court.
National Company Law Tribunal powers
NCLT, as a new institution, has been given a few additional powers that were attributed to the previous authorities, all the powers had to be read as additional to previous powers and not in isolation.
Following are the powers of NCLT:
Class Action Suit: A class action suit is to be filed in National Company Law Tribunal when suit consisting of claims are standard for more than one person or people at large. This new pattern of filing a complaint against the company was new method making it is more accessible to people located in different areas, for claims like this an agent is appointed to deal with the matter that had been filed in NCLT.
Registration of Companies: A new stringent scrutinizing committee has been formed to scrutinize the document and other incidental requirements for registering a company under the guidelines issued by the NCLT. It also has been allotted with the powers of wiping out the registration of the company/ companies. A new method of de-registration has supplemented the powers given by the law to authorities.
Order for the Investigation: NCLT now can order a special investigation under the certain order established by the law in this behalf, an order for investigation of the companies result in in-depth checking of the transaction, company affairs and any other matter incidental to company or stated in the investigation order.
Conversion of Company from Public Ltd. to Private Ltd.: A prior approval from NCLT is to be taken for the process of changing status from public to private ltd company, Nclt may after receiving the application for such change of status provide direction to reduce the deviation or providing the precautionary measure for avoiding the violation of provisions of Companies Act, 2013.
The stages of Resolution Process are as below;
- Notice Publication - The RP publishes a notice in newspapers to call for filing claims against the Corporate Debtor by a stipulated time.
- Processing of Claim - After RP receives the claims, it will check the same from the records of the Corporate Debtor.
- Memorandum - After the claims have been verified, the RP prepares the Memorandum which contains all information of Assets and Liabilities of the Corporate Debtor. Moreover, that Memorandum will be sent to all Financial Creditors of the Corporate Debtor, whose claims have been accepted.
- Meetings of Committee of Creditors - After sending the Memorandum, a meeting of Committee of Creditors will decide whether the information mentioned in the Memorandum has been correctly prepared or not. The Committee of Creditors will include the financial creditors of the Corporate Debtor.
- Resolution Plan - The RP after the formation of the Memorandum will invite the resolution plans for the debtor by an advertisement in the newspaper.
- Rejection or Acceptance of Resolution Plan - After receiving the plan of the resolution, the RP will conduct a meeting of Committee of Creditors to check the plan which will result in acceptation or rejection, and after that, the plan is submitted before NCLT for final approval.
- Extension - The duration for the completion of the CIRP is 180 days, and if the Committee Of Creditors (COC) does not accept the Resolution Plan within 180 days then they can extend the duration for not less than 90 days.