What is National Company Law Tribunal?

When there is a dispute between two people, they appear in court and lay out their case. The judge passes a judgment based on the law. However, have you ever considered what a corporation would do if there were a dispute with another corporation? The National Company Law Tribunal (NCLT) has been established to settle disputes between companies.

In this blog, we will explore NCLT in detail and understand its functions.

What is NCLT?

The Companies Act of 2013 established the National Company Law Tribunal, or NCLT, as a special court to handle business-related disputes. NCLT doesn’t handle criminal cases for violations of the Companies Act. The NCLT has several benches around the nation and, thus, provides a simpler way for corporations to resolve their problems. 

The Justice Eradi Committee recommended the creation of the National Corporate Law Tribunal as a quasi-judicial entity to handle insolvencies and malpractices of Indian companies. The tribunal was established on 1 June 2016 under Section 408 of the Companies Act, 2013. 

Objective of NCLT

NCLT plays an important role in protecting the rights of all stakeholders and aims to achieve the following objectives:

1. Its primary goal is to resolve disputes involving companies through its numerous benches across India.
2. NCLT assists businesses in streamlining their insolvency procedures. 
3. NCLT protects the rights of all stakeholders and promotes a business-friendly environment.
4. It ensures restructuring processes follow the regulations and are in the interest of stakeholders.

Functions of NCLT

The major tasks performed by NCLT are as follows:

• Registration of Companies: The NCLT is authorized to settle disputes about company registration. It has the authority to cancel a company’s registration at any moment and hold members accountable for not meeting legal requirements. 
• Class action: It prevents companies from engaging in activities outside the Memorandum of Association (MOA) and Article of Association (AOA). A class action can be filed against both private and public companies.
• Transfer of Shares: The NCLT handles complaints about company shares and securities transfers. NCLT intervenes if a company refuses to transfer securities.
• Deposits: Since the NCLT was established, they have handled all deposit-related matters. Disgruntled depositors now have the option to sue the corporation and seek compensation for any acts that affect their rights as depositors. 
• Investigation: Based on the application of 100 members, the NCLT has the complete authority to look into any matter about the corporation. An individual can also convince NCLT to look into the matter even if they have no connection to the business. An investigation can be launched in India or around the globe. 
• Asset Freezing: According to section 221 of the Companies Act of 2013, the NCLT is authorized to freeze the company’s assets and can initiate investigations. 
• Conversion of Company’s Status: Sections 13 to 18 of the Indian Companies Act 2013 state that a company may only change from a public limited company to a private limited company after the NCLT’s approval. In addition, section 459 of the Companies Act 2013 permits the NCLT to impose further requirements. 

Benches of NCLT

The NCLT operates across India through its various benches –

Advantages of NCLT

The advantages of NCLT are as follows:

1. It serves as a specialized court for corporate disputes, which results in quick resolution of the disputes.
2. NCLT consists of judicial and technical members to give a fair judgment on the dispute.
3. It has multiple branches and helps reduce the time to resolve disputes.
4. NCLT encourages better corporate governance and protects stakeholder’s interests.

Conclusion

In conclusion, the National Company Law Tribunal was established on 1 June 2016 to settle business-related conflicts like insolvency and other corporate concerns. It has various branches across the country, resulting in quick dispute resolution. It helps businesses by giving them a better working environment and also safeguards the interests of the stakeholders. However, the decisions of NCLT can be challenged in the National Company Law Appellate Tribunal, which can be further appealed in the Supreme Court of India. 

Frequently Asked Questions (FAQs)