Challenge to nclt and nclat
Five judge Constitution Bench of Supreme Court comprising Justice KG Balakrishnan, Justice RV Raveendran, Justice DK Jain, Justice P Sathasivam and Justice JM Panchal delivered judgment on legality of NCLT and NCLAT under Companies Second Amendment Act 2002. Intention was to create single tribunal to take over almost all HC powers under Companies Act 1956 except Article 226 and 227. Sri R Gandhi of Madras Bar Association challenged it. Issue was not legislative competence but independence and effectiveness of mechanism. Madras hc landmark judgment
Justice Jayasimha Babu gave detailed judgment. HC traced history of tribunals from Income Tax Appellate Tribunal 1941, Industrial Tribunals, Law Commission 162nd Report. Object is simpler, speedier and specialist justice. But HC found Parts 1B and 1C defective for breach of separation of powers and judicial independence. It declared it unconstitutional to constitute NCLT and NCLAT in that form until defects are removed. Transfer of some administrative powers to Central Government was upheld. HC expressed apprehension of executive taking over judicial power without safeguards of competence and impartiality. Madras Bar’s Shri Aravind P Datar and Shri V T Gopalan ASG were appreciated for assistance.
Sc upholds madras hc and independence SC appeal confirmed Madras HC view. Court did not question need for NCLT but insisted on independence, quality and structure. This is laudable. Without this, tribunal would become extension of executive. SC message is clear: tribunal must command confidence like court. Separation of powers and judicial function cannot be diluted. This judgment protects basic structure.
Tribunal vs court: no logical difference Many think tribunal and court are different. I disagree. In Associated Cement Companies Ltd V P N Sharma AIR 1965 SC 1595, Justice Gajendragadkar held tribunals discharge judicial power of state like courts. Both adjudicate disputes. Difference is procedure and enactment, not nature. Madras HC also referred this. So NCLT must have same dignity, independence and enforcement as court.
What happens next to companies bill
Companies Bill 2009 is pending to reorganize Act. Government proceeded while NCLT issue was before SC. Now Ministry must amend Bill as per SC directions and then introduce. Infrastructure may be ready, but law must be corrected first. Corporates need effective and speedy redressal. HC was doing well in winding up and 391-394. CLB had limitations and respect issues. NCLT must combine HC effectiveness with specialist speed. Handling company disputes needs care and specialization.
Conclusion
Supreme court nclt nclat judgment 2010 independence is milestone. It upholds Madras HC and sets tone for Companies Bill. Tribunal is court in substance. Now Government must ensure appointments, contempt power and infrastructure meet SC standards. Only then corporates will get justice without delay.
