India: Companies Bill, 2012 And The Constitution Of NCLT And NCLAT


Companies Bill has been in talks for past few years and has time and again been amended to adjust to the changing corporate environment. The Companies Act tries to balance two competing factors of management autonomy and investor protection. The economy of India has been witnessing continuous changes, it is going through consistent growth and expansion. In this background of continuous change and growth of economy, the Central Government after due deliberations decided to repeal the Companies Act, 1956 with the introduction of new enactment in the form of legislation to provide for new provisions to meet the continuous changing dynamics of national and international economic environment . These new changes in the proposed legislation are directed towards further acceleration of growth and diversification of the economy in the corporate scenario. It addresses the public concern over corporate accountability and responsibility.


After much delay and deliberations, The Companies Bill, 2012 (hereinafter referred to as the "The Bill") which seeks to repeal existing Company Law, 1956, has been passed by Lok Sabha i.e. the lower house of the Indian Parliament, on December 18, 2012. The Bill still needs to be approved by the Rajya Sabha i.e. the upper house of Indian Parliament, and it may therefore undergo further changes. Before the Bill can be notified as a statute replacing the existing Companies Act, 1956, it may possibly undergo modifications.

A completely revamped legislation will be in place with the introduction of The new and amended Companies Act to completely change the operation of cooperates. The Companies Bill has many amended provisions to meet the ever evolving corporate scenario. The Bill has 470 Clauses and 7 Schedules. The bill has been divided into 29 Chapters. With the introduction of Companies Bill, 2012, many new chapters have introduced, such as viz., Registered Valuers (chapter 17); Government Companies (chapter 23); Companies to furnish information or statistics (chapter 25); Nidhis (chapter 26); National Company Law Tribunal & Appellate Tribunal (chapter 27); Special Courts (chapter 28). The Bill has been drafted after great deliberation and critically analyzing various factors revolving around present corporate environment and the changes/ problems that may arise of new situations created by these changes. The Bill is the result of detailed constructive progress adopted by the Government thereby providing self regulatory process and stringent compliance regime. The Companies Bill tries to take into consideration and meet the dynamics of business, governance and accountability.


One of the important change proposed to be introduced by the Companies Bill, 2012 is in the form of Constitution of National Company Law Tribunal i.e. NCLT and National Company Law Appellate Tribunal i.e. NCLAT

2Constitution of National Company Law Tribunal and Appellate Tribunal [Clause 408 & 410]:

The Central Government shall, by notification, constitute, a Tribunal to be known as National Company Law Tribunal and an Appellate Tribunal to be known as National Company law Appellate Tribunal.

Clause 408 corresponds to Section 10FB of the Companies Act, 1956 and seeks to deal with the constitution of National Company Law Tribunal (NCLT). The NCLT shall consist of President and such members as the Central Government may deem necessary.

Clause 410 corresponds to Section 10FR of the Companies Act, 1956 and seeks to deal with the formation of National Company Law Appellate Tribunal (NCLAT) consisting of Chairperson and Judicial and Technical Members which shall not exceed eleven. This may seem to be a pragmatic approach. With the introduction of the bill and the constitution of a National Company Law Tribunal and National Company Law Appellate Tribunal, it is also provided that any proceedings presented before the Tribunal or appeals filed before the Appellate Tribunal shall be disposed of as expeditiously as possible and Tribunal shall make every possible endeavor to dispose of the proceedings.


Whenever some change is proposed, there is bound to be opposition to such change. There have been judicial pronouncements discussing the constitutional validity of some of the provisions of the Companies Bill.

The constitutional validity of NCLT and NCLAT was challenged in Thiru R. Gandhi President, Madras Bar Association vs. Union of India, Department of Company Affairs (2004) (Mad).

3Earlier, the amendment to the Companies Act, 1956 to set up the NCLT was rendered unconstitutional by Madras High Court for several reasons; few of amongst those were as under:

"The issue is not whether judicial functions can be transferred from courts to Tribunals. Rather the issue is whether judicial functions can be transferred to Tribunals governed by persons who are not suitable or qualified or competent to discharge such judicial powers or whose independence is suspect"

"A lifetime of experience in administration may make a member of the civil services a good and able administrator, but not a necessarily good, able and impartial adjudicator"

Result and its implication : The Supreme Court of India on 11th May, 2010 gave a ruling validating the provisions of Companies (Second Amendment) Act, 2002 pertaining to transfer of several judiciary and quasi-judiciary powers under the act to an independent tribunal, called NCLT. The creation of a new substitute judicial forum which is to carry out the work which is now being carried out by different High Courts in the country for over nine decades, is to be done with great care so that the new Tribunal will be efficient and effective alternate institutional forum to the High Courts and the Company Law Board. Once the tribunal is established, all company-related matters pending with the Company Law Board (CLB), Board for Industrial and Financial Reconstruction (BIFR), Appellate Authority for Industrial and Financial Reconstruction (AAIFR) and different High Courts across the country will be transferred to the NCLT.

4Difference between Court and Tribunals: There are certain well-recognized differences between courts and tribunals which are as under,

  • While courts are governed by detailed statutory procedural rules and evidence, requiring an elaborate procedure in decision making, tribunals many a times frame their own procedures and are not generally governed by the provisions of procedural and evidence law.
  • Court's proceedings are generally conducted in public, whereas tribunal's proceedings are not required to be conducted in public.
  • Lawyers are entitled to appear before the courts, they are bodies of general jurisdiction; the Judge sitting in a Court himself hears and decides a case and gives reasons for his decision; and above all, they are independent of the executive as Judges have tenure independent of the executive will. Whereas tribunals have a specialized jurisdiction; there may be statutory prohibition on the lawyers to appear before them (though very often it is not so). "


"Growth" is directly proportional to change, so it can be concluded that Growth in the various dimensions of corporate environment ignited the necessity for change in age old legislation controlling the governing of such corporates. There has been tremendous corporate growth in the recent past like with the introduction of technological advancement in the form of e-governance, the management, functioning and governance of the companies have become very easy and effective. The tremendous growth of the corporate requires a sound mechanism, to handle any disputes that may arise from its working and complications. Therefore, going by the dynamism of the proposals as contained the Companies Bill, 2012, merits of the constitution of the NCLT and NCLAT can't be denied, provided it functions well in the eyes of law intended by the legislature. This is so because establishment of NCLT and NCLAT will surely reduce many delays in the corporate law proceedings as well as multiplicity of litigations involved in such proceedings. Problem arises at the level of implementation and execution front because of the fact that the inefficient structured corporate framework has many pitfalls arising out of bureaucracy and corruption and less initiative by the corporate.


Mrinalini Gupta, CS Intern

2 Reference: MCA – The Companies Bill, 2012

3 Reference: Thiru R. Gandhi President, Madras Bar Association vs. Union of India, Department of Company Affairs (2004) (Mad).

4 Reference: Thiru R. Gandhi President, Madras Bar Association vs. Union of India, Department of Company Affairs (2004) (Mad).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions