National Company Law Appellate

Tribunal: A Brief Overview

-By Rahul Pardasani
Introduction

The National Company Law Tribunal (NCLT) & The National Company Law
Appellate Tribunal (NCLAT) were established on 1st June 2016 under
the Companies Act, 2013. The NCLT & NCLAT are quasi-judicial bodies in
India that adjudicate issues relating to Indian Companies.

The Appellate Tribunal has the power to control its procedure, and the Code of
Civil Procedure Code doesn’t decide the course of conduct followed by the
Tribunal as the Tribunal is bound by the principles of natural justice, subject to
the other provisions of the Act and of any rules that are made by the Central
Government. Furthermore, no civil court has the jurisdiction to decide any suit
or proceeding concerning any matter which the Appellate Tribunal is
empowered to determine.

Rule 11 of the NCLAT Rules, 2016 provide that, “Nothing in these rules shall
be deemed to limit or otherwise affect the inherent powers of the Appellate
Tribunal to make such orders or give such directions as may be necessary for
meeting the ends of justice or to prevent abuse of the process of the Appellate
Tribunal.” These inherent powers assert equity as an essential part of the
Tribunal.

Powers of the National Company Law Appellate Tribunal

An appeal is a procedure or a complaint filed with a higher court against an
order of a lower court for any injustice or error committed by the lesser court in
its decision or judgement, and the superior court is asked to remedy or reverse
it.

As a result, every law contains the notion of appeal in its scope in order to keep
a control on and avoid arbitrary and erroneous acts by lower courts, therefore
affording relief to the party who has been wronged. Needless to add, the same
may be said about corporate laws.
This provides a specialised mechanism for company law matters because the
jurisdiction of NCLT and NCLAT is confined to matters under the Company
Act, 2013 and the Insolvency and Bankruptcy Code 2016 ("Code"), thus
significantly improving the ease of doing business in India. This is a
move welcomed by corporations and litigators alike.

Section 53-0 of the Act provides that the Appellate Tribunal shall not be bound
by the procedure laid down in the Code of Civil Procedure, 1908 but shall be
guided by the principles of natural justice and subject to the other provisions of
this Act and of any rules made by the Central Government, the Appellate
Tribunal shall have powers to regulate its own procedure including the places at
which they shall have their sittings.

The Appellate Tribunal shall have, for the purposes of discharging its functions
under the Competition Act, the same powers as are vested in a civil court under
the Code of Civil Procedure Code, 1908 while trying a suit in respect of the
following matters-

 Summoning and enforcing the attendance of any person and examining

him on oath;
 Requiring the discovery and production of documents;
 Receiving evidence on affidavits;
 Subject to the provisions of Sections 123 and 124 of the Indian Evidence
Act, 1872 requisitioning any public record or document or copy of such
record or document from any office;
 Issuing commissions for the examination of witnesses or documents;
 Reviewing its decisions;
 Dismissing a representation for default or deciding it ex-parte;
 Setting aside any order of dismissal of any representation for default or
any order passed by it ex-parte;
 Any other matter which may be prescribed

Ambit and jurisdiction of the National Company Law Appellate

Tribunal
The National Company Law Appellate Tribunal (NCLAT) was constituted
under Section 410 of the Companies Act, 2013 to hear appeals against the
orders of the National Company Law Tribunal(s) (NCLT). NCLAT is the
Appellate Tribunal for hearing appeals against the orders passed by NCLT(s)
under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC). It is also
involved in hearing appeals against the orders passed by the Insolvency and
Bankruptcy Board of India under Section 202 and Section 211 of the IBC. It is
also involved in hearing and disposing of appeals against any direction issued or
decision made or order passed by the Competition Commission of India.

In India, miscellany bodies act as an expeditious and advantageous alternative

to courts of law, with additions to the list being the National Company Law
Tribunal (NCLT) and the National Company Law Appellate Tribunal
(NCLAT). As the two tribunals have been recently established with an aim to
regulate and resolve disputes between civil corporations, there is not much
awareness about quasi-judicial body like these

The National Company Law Tribunal (NCLT) consolidates the corporate

jurisdiction of the Company Law Board (CLB), Board for Industrial and
Financial Reconstruction (BIFR), The Appellate Authority for Industrial and
Financial Reconstruction (AAIFR) and the powers relating to Winding up or
restructuring and other provisions, vested in High Courts. Hence, the National
Company Law Tribunal will consolidate all powers to govern the companies
registered in India. With the establishment of the NCLT and NCLAT, the
Company Law Board under the Companies Act, 1956 has now been dissolved.

Like any other tribunal, the National Company Law across the country, and the
National Company Law Appellate Tribunal have inherent powers that are
exercised to meet the ends of justice and prevent the abuse of process of the
Tribunal. It is well settled that the Tribunals cannot go beyond the purpose and
objectives of the Insolvency and Bankruptcy Code, 2016, this implies that the
Tribunals cannot interfere with the commercial decision of the Committee of
Creditors (hereinafter ‘CoC’), unless it is unjust or violates the provisions of the
IBC. This principle implies that the NCLTs’ and the NCLAT’s inherent powers
cannot go beyond the commercial decision of the Committee of Creditors unless
it is patently unjust or against the provisions of the IBC.

Procedure for appeal before the Appellate Tribunal

 A memorandum of appeal shall be in the prescribed form.
 Every memorandum of appeal presented to the Appellate Tribunal shall
be in English.
  In case it is on some other Indian language, it shall be accompanied by a
copy transacted in English.
 No appeal, application, document or other papers contained in any
language, other than English, shall be accepted by the Appellate Tribunal
unless the same is accompanied by a translation thereof English attested
by a translator and countersigned by the party concerned.
 The appeal shall be fairly and legibly typewritten, lithographed or printed
in double spacing on one side of standard petition paper with an inner
margin of about four centimetres width on top and with a right margin of
2.5 cm and left margin of 5 cm duly paginated, indexed and stitched
together in paper book form.
 Every memorandum of appeal shall be in five copies.

Applicable limitation period to file Appeal

Section 61 of the Code on Insolvency and Insolvency ('IBC') lays forth the
procedure for appealing the order of the Adjudicating Authority (NCLT) to the
NCLAT. The appeal may be made by "any person aggrieved" by the
order/decision of the NCLT. Section 61 (1) of the Code states that
"Notwithstanding.... any person aggrieved by the order of the Adjudicating
Authority under this part may prefer an appeal to the National Company Law
Appellate Tribunal."

In accordance with Section 61(2) of the IBC, the time limit for appeal of the
decision of the NCLT is 30 days from the date of the order of the NCLT.
NCLAT shall have the authority to allow an appeal submitted after the above
thirty days have elapsed, provided that there is a fair and adequate reason for the
delay to exist, such a relief is granted, by a condition set forth in Section 61(2)
of the IBC. The Code does not define the phrase "sufficient cause."  The term
"sufficient cause" in general is suitably elastic to allow the tribunal to apply the
law in a reasonable fashion that sustains the purposes of justice.

The timeline for filing an appeal is not directory, but mandatory in nature. In
Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd (2018) 1 SCC 353.
Hon’ble Supreme Court, while laying emphasis on the adherence to timelines
provided under the Code, held that “An appeal can then be filed to the Appellate
Tribunal Under Section 61 of the Act within 30 days of the order of the
Adjudicating Authority with an extension of 15 further days and no more.”

The Central Government, vide Insolvency and Bankruptcy Code (Removal of

Difficulties) Order, 2017 [Notification S.O. 1683(E)] , provided for a period of
ninety days to prefer an appeal to NCLAT, as against the thirty-day period
prescribed in the Code. This gave rise to the issue: “Whether the provision to
prefer the appeal within ninety-days before the NCLAT, as made by the Central
Government Notification dated 25th May, 2017 is in conflict with Section 61(2)
of the ‘I&B Code’, which provides thirty-days period to prefer an appeal before
the NCLAT? [This one of the issues before the Hon’ble Supreme Court in the
case of Pr. Director General of Income Tax (Admn. and TPS) and Ors. vs.
Spartek Ceramics India Ltd. and Ors. (28.05.2018 – NCLAT) :
MANU/NL/0112/2018]. The decision of the Hon’ble Supreme Court in the case
of Pr. Director General of Income Tax (Admn. and TPS) and Ors. vs. Spartek
Ceramics India Ltd. and Ors. brought clarity to this point, and it was observed
that the aforesaid notification of the Central Government providing for the
scheme for filing appeal was framed prior to December 01, 2016, i.e. around
177 days before coming into force of the Code. The court further went on to
state that the time period envisaged under Section 61 of the Code is mandatory,
and held that “As per sub-section (2) of Section 61, the appeal is required to be
filed within thirty days before the NCLAT. The Appellate Tribunal is
empowered to condone the delay of ‘another fifteen days’ after the expiry of the
period of thirty days in preferring the appeal that too for sufficient cause. It has
no power to condone the delay if appeal under Section 61 is preferred beyond
fifteen days from the date of the expiry of the period of thirty days. Meaning
thereby, no appeal under sub-section (1) of Section 61 can be entertained after
forty-five days of knowledge of the order passed by the Adjudicating
Authority.” Therefore, while the Proviso to Section 61(2) empowers NCLAT to
excuse the delay on being satisfied of existence of sufficient cause behind the
same, this does not imply that the condonation can be sought as a matter of
right. The right to appeal is exhausted on expiry of a period of thirty days and
then it falls within the ambit of discretion of the court to condone the delay.
Therefore, expiration of the limitation period not only extinguishes the right but
also the remedy.
Limitation Act applicable or not?

The provisions of the Limitation Act, 1963 shall, to the extent possible, apply to
proceedings and appeals before the NCLAT, according to Section 238A of the
Code. However, it should be noted that Section 5 of the Limitation Act, which
allows for the condonation of delays in appeals and civil cases where the statute
of limitations has run out, does not extend to appeals under the Code. Section 5
of the Limitation Act, does not provide for an extension of time to file an appeal
or a lawsuit, instead requiring only that the court be satisfied that there is
“sufficient cause.”
Section 61 read with Section 238 of the Code makes it clear that the delay
cannot be condoned beyond fifteen days, and therefore the Code prevails over
the Limitation Act in matters of condonation of delay.
Further, the appellants must exercise due care and be assured of the fact that
preferring an appeal is the appropriate remedy, and that is not preferred in a
court not having jurisdiction to entertain it. This is because Section 14 of the
Limitation Act which provides for exclusion of time period in which the party
prosecuted proceedings in another court not having jurisdiction, is not
applicable to appeal under Section 61 of the Code. Hon’ble NCLAT, in the case
of Radhika Mehra v. Vaayu Infrastructure LLP (2020 SCC OnLine NCLAT
118) held that “Section 14 of the Limitation Act relates to exclusion of time of
proceeding bona fide in court without jurisdiction, but it relates to period of
limitation for any suit the time during which the plaintiff had been prosecuting
with due diligence another civil proceeding. The other provision of Section 14
of the Limitation Act cannot be made applicable in this Appeal preferred under
Section 61 of the I&B Code.” In the present case, the appellant had filed a writ
petition in the High Court instead of preferring an appeal against the order of
NCLAT. However, NCLAT refused to exclude this time period from the forty-
five day period prescribed under Section 61 of the Code.

Appeal to the Supreme Court

Section 62 of the Insolvency and Bankruptcy Code talks about Appeals to the
Hon’ble Supreme Court. Any person aggrieved by an order of the National
Company Law Appellate Tribunal may file an appeal to the Supreme Court on a
question of law arising out of such order under this Code within forty-five days
from the date of receipt of such order. (2) The Supreme Court may, if it is
satisfied that a person was prevented by sufficient cause from filing an appeal
within forty-five days, allow the appeal to be filed within a further period not
exceeding fifteen days.
CONCLUSION REMARKS

The constitution of the NCLT and NCLAT is a welcome move to deal with
company law matters. The earlier regime of the Company Law Board had a lot
of bottlenecks which did not help to revive Sick Companies and instead led to
prolongation of cases. Though NCLT and NCLAT are doing great work in
streamlining the system, a lot more needs to be done. There is a need for
improving the infrastructures at these Tribunals, increasing the Number of
Benches which will help in deciding cases speedily and effectively and thus
proves to be time saving and cost effective for the companies which would
ultimately lead to growth of the economy of India. The NCLT and NCLAT are
constituted to provide justice. The powers vested in NCLAT and NCLT should
be used in a fair way and should act diligently while dealing with any of the
cases. The fundamental principle of law that is the principle of natural justice
must be adhered to by every courts and tribunal so that miscarriage of justice
does not take place. One size doesn't fit all. Introduction of any new reform
comes with its own set of challenges. With only 11 benches currently operative,
there will be a huge burden on the tribunal to deal with cases transferred from
CLB and other forums. This may serve as an impediment in the transition
process. Further, all provisions with respect to NCLT have been notified
Overall the constitution of NCLT and NCLAT has paved way for a much
needed judicial reform. For now all that can be said is that in the light of
increasing globalization and the need to move in-sync with changing times, a
landmark step has been taken to promote better corporate dispute redressal
mechanism.