Centre Creates 6 Additional Posts Of NCLAT Members For Circuit Benches

The National Company Law Appellate Tribunal (NCLAT), which is currently functioning from New Delhi, is likely to have circuit benches soon with the Centre having created six additional posts of its Members.

In response to an RTI query, the Ministry of Corporate Affairs has said that "in order to set up circuit benches, 6 additional posts of Members of NCLAT have been created by the government".

The RTI query was made by advocate Nipun Singhvi who sought to know the steps taken by the Ministry of Corporate Affairs to comply with the directions of the Supreme Court in case titled Swiss Ribbons Pvt Ltd & Anr vs Union of India & Ors with regard to setting up of circuit benches of NCLAT and transferring administrative support of tribunals from the Ministry of Corporate Affairs to the Ministry of Law and Justice.

It is to be noted that the Supreme Court had on January 25 delivered its judgment in the Swiss Ribbons case which challenged the Constitutional validity of the Insolvency and Bankruptcy Code, 2016.

While upholding the validity of IBC, the court had asked the Centre to set up Circuit Benches of the NCLAT within a period of 6 months. It had also asked the Centre to transfer the administrative support of all Tribunals from the Ministry of Corporate Affairs to the Ministry of Law and Justice.

Singhvi had queried about steps taken by the government to comply with these two directions.

While responding to the query about steps taken to set up circuit benches, the Ministry of Corporate Affairs forwarded the application to the Ministry of Law and Justice stating that the latter is handling the matter of administrative support to all Tribunals.

Singhvi says, "RTI reveals that positions have been increased but the SC order says everything will go to ministry of law as far as tribunals is concerned. It is unclear as to who has increased positions as the RTI says government. After ILFS crisis it is important that judge should not be appellant in own case.

"MCA is moving for various relief and appointing own board in companies. It as of now controls appointment, transfer and promotion which is absolutely against the basic independent judiciary principle. Law has been settled long back by SC but government seems to ignore".

NCLAT is the Appellate Tribunal for hearing appeals against the orders passed by NCLT(s) under Section 61 IBC. It is also the Appellate Tribunal for hearing appeals against the orders passed by Insolvency and Bankruptcy Board of India under Section 202 and Section 211 of IBC. The NCLAT currently functions from CGO Complex, Lodhi Road, New Delhi.

In Swiss Ribbons case, the apex court looked into the aspect of "NCLAT benches only in Delhi". Its attention was drawn to its own judgement in Madras Bar Association (II) case wherein it had examined the validity of Section 5 of the National Tax Tribunals Act which mandated that the National Tax Tribunal (NTT) would ordinarily have its sittings in the National Capital Territory of Delhi.

In that case, the court had opined that at least a Circuit Bench was required to be established at every place where an aggrieved party could avail of his remedy considering the physical and financial hardship suffered by a litigant assessee from a far-flung state in approaching the Tribunal and the manner in which it deprived him of the convenience of approaching the jurisdictional High Court in the State to which he belonged.

When the Attorney General assured the court that the government would establish circuit benches of NCLAT, the court noted in its judgement in Swiss Ribbons case, "The learned Attorney General has assured us that this judgment will be followed and Circuit Benches will be established as soon as it is practicable. In this view of the matter, we record this submission and direct the Union of India to set up Circuit Benches of the NCLAT within a period of 6 months from today".

On the aspect of administrative support of all tribunals to be transferred to the Ministry of Law and Justice, the apex court had in year 2010 in case titled Union of India vs R Gandhi, commonly known as Madras Bar Association (I), specifically directed that "The administrative support for all Tribunals should be from the Ministry of Law and Justice. Neither the Tribunals nor their members shall seek or be provided with facilities from the respective sponsoring or parent Ministries or Department concerned".

This, it had said, to ensure against conflict of interests and fairness.

During the hearing in Swiss Ribbons, the court noted, "Even though eight years have passed since the date of this judgment (Madras Bar Association I), the administrative support for these tribunals continues to be from the Ministry of Corporate Affairs. This needs to be rectified at the earliest".

On the Attorney General pointing out Article 77(3) of the Constitution of India to say that the rules of business, having allocated matters which arise under the Insolvency Code to the Ministry of Corporate Affairs, are mandatory in nature and have to be followed, the court said, "It is obvious that the rules of business, being mandatory in nature, and having to be followed, are to be so followed by the executive branch of the Government. As far as we are concerned, we are bound by the Constitution Bench judgment in Madras Bar Association (I). This statement of the law has been made eight years ago. It is high time that the Union of India follow, both in letter and spirit, the judgment of this Court.