India: Corporate Litigation Landscape Of India Overhauled!

  • The establishment of Commercial Courts, a renewed arbitration law, passage of Insolvency & Bankruptcy Code, 2016 and constitution of National Company Law Tribunal reflects a completely overhauled judicial set up.
  • The Company Law Board is scrapped and going forward the matters will be taken up by National Company Law Tribunal
  • National Company Law Tribunal is proposed to deal with wide range of matters including corporate insolvency, class action and merger & amalgamation schemes.

Over the last year, India has taken tangible steps in reforming its judicial setup to bring about efficiency and speed in disposal of commercial matters. The constitution of commercial courts1, reforms in the arbitration regime2 and introduction of the Insolvency and Bankruptcy Code, 2016 ("Bankruptcy Code") offer a completely new mechanism for resolution of commercial matters. The government has now constituted the much awaited National Company Law Tribunal ("NCLT") which is expected to consolidate multiple forums that currently exist for resolving company law matters.

It's been more than a decade since the passage of the Companies (Second Amendment) Act, 2002, which provided the legislative framework for constitution of the NCLT. However a constitutional challenge against constitution of NCLT delayed the process. The Hon'ble Supreme Court in Madras Bar Association vs Union of India3 finally upheld the constitutional validity of NCLT and the National Company Law Appellate Tribunal ("NCLAT") while holding that the qualifications of technical members and the composition of the selection committee of such members as prescribed in the statute had defects and required correction. In another judgment in Madras Bar Association vs Union of India4 the Hon'ble Supreme Court found that defects as found in Companies (Second Amendment) Act, 2002 also existed in the provisions of the Companies Act, 2013.

After much debate on the issues prevalent in the constitution of NCLT & NCLAT, it has finally seen the light of day. The government on June 1, 2016 issued notifications5 bringing into effect several key sections of the Companies Act, 2013 and constituting NCLT6 and NCLAT.

Hon'ble Justice S.J. Mukhopadhaya (Retd.), Supreme Court of India is appointed as the Chairperson of NCLAT and the current Chairman of the Company Law Board ("CLB") i.e. Hon'ble Justice M.M. Kumar (Retd.), Chief Justice of Jammu & Kashmir High Court, has been appointed as the President of NCLT.

Currently, the NCLT will take over only from the Company Law Board. The notification brings into force Section 434(1)(a) of Companies Act, 2013 which mandates transfer of cases pending before the CLB to the NCLT and requires the NCLT to dispose of such matters in accordance with the provisions of the Companies Act, 2013.

Section 421 of the Companies Act, 2013 provides that an appeal may be filed against an order of NCLT (not passed with the consent of the parties) within 45 days before the NCLAT.

The table below reflects various types of matters which are going to be or are proposed to be dealt with by the NCLT:

Impact of introduction of NCLT:

  1. Currently matters involving same companies or parties would be spread across various forums such as High Courts for winding up and merger/amalgamation schemes, CLB for oppression and mismanagement and before the Board of Industrial Financial Reconstruction ("BIFR") pursuant to reference under Sick Industrial Companies Act, 1985. On multiple occasions, litigants would adopt the approach of moving various forums causing multiplicity of proceedings and delays. The NCLT aims at consolidating the various forums and providing a one stop shop for adjudication of company matters.
  2. The NCLT and NCLAT are expected to dispose-off appeals, applications and petitions filed before it within a period of 3 months from the date of the filing. An extension of 90 days may be granted by the President of NCLT or Chairperson of NCLAT for disposal of the matter.7
  3. Currently the High Courts were burdened with company matters including winding up proceedings. Transfer of such proceedings to NCLT is expected to reduce the burden. Additionally, as appeal from an order of NCLT will lie before the NCLAT, High Courts will have a further reduced burden, considering that earlier, appeal from the order of Company Law Board was filed before High Court. However, an area of concern is that NCLAT may be faced with a very high volume of appeals which earlier stood divided amongst various High Courts. Thus, there would be a need for multiple members of the NCLAT. However considering the requirements for being appointed as a member of the NCLAT are fairly high, there may be a dearth of such qualified members causing delay in disposition of appeals.
  4. With the notification of the provisions of the Bankruptcy Code, NCLT would form a forum offering a completely new and improved process for liquidation of companies in India.

Class Action

A much awaited reform brought into effect along with the introduction of the NCLT, is the statutory remedy of class action proceedings. Class action proceeding is one where a group or class of people similarly affected can initiate a proceeding collectively. This allows to reduce time and costs and also inspires confidence amongst the parties as they act collectively. Currently, class action proceedings were initiated in form of representative's suits, minority action for oppression & mismanagement, proceedings before the consumer forums or through public interest litigation. However, none of these provided a holistic remedy.

Dearth of such a remedy was felt particularly in the wake of the Satyam Scam, where the public shareholders in India had no remedy as opposed to the bondholders in the United States. With the notification of Section 245 of the Companies Act, 2013, members and depositors in a company have the additional remedy in form of class action proceedings which could be initiated before the NCLT. The recent surge in shareholder activism in India, makes the introduction of class actions remedy highly interesting. It is a critical tool now in the hand of minority shareholders who may question the decisions made by the management and the intent thereof.


The constitution of NCLT marks another seminal shift in the Indian judicial landscape and clearly demonstrates that the judicial system is turning for the better. The CLB stands scrapped and the matters will now be dealt with by the NCLT. Further, the notification of the provisions of Bankrupcy Code is imminent and it is expected that upon such notification NCLT would take over the corporate insolvency matter from courts. Thus, a complete overhaul of the system is taking place. This is further demonstrated by the constitution of the first commercial courts in the country. Commercial courts have been set up in Gujrat and the High Courts of Delhi, Mumbai and Himachal Pradesh have also constituted its commercial divisions. However, introduction of any new reforms brings with it its own set of challenges.The NCLAT may be overburdened with appeals. Further with statutory second appeal on any question of law to Supreme Court being available under Section 423 of the Companies Act, 2013, a large number of cases may be delayed on account of pendency of appeal before the overburdened Supreme Court.




3 (2010) 11 SCC 1

4 (2015) 8 SCC 583

5 Notification No. S.O. 1934(E), S.O. 1935(E) & S.O. 1933(E) dated June 1, 2016

6 11 benches of NCLT have been constituted in the following places: (1) New Delhi (consists of two benches); (2) Ahmedabad; (3) Allahabad; (4) Bengaluru; (5) Chandigarh; (6) Chennai; (7) Guwahati; (8) Hyderabad; (9) Kolkata; (10) Mumbai

7 Section 422 of the Companies Act, 2013

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.

Ashish Kabra
In association with
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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

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