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Term Of Future NCLT Members Should Be 5 Years, Supreme Court Tells Centre While Refusing To Extend 3 Yr Term Of Those Appointed In 2019

Sohini Chowdhury
1 Aug 2022 4:26 PM GMT
Term Of Future NCLT Members Should Be 5 Years, Supreme Court Tells Centre While Refusing To Extend 3 Yr Term Of Those Appointed In 2019
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The Supreme Court, on Monday, turned down a plea seeking modification of the tenure of members of National Company Law Tribunal (NCLT) appointed pursuant to the notification dated 20.09.2019 issued by the Ministry of Corporate Affairs, from 3 years to 5 years. It refused to extend tenure for the concerned 23 members, but clarified that while making appointments in future the Central Government would be bound by Section 413 of the Companies Act, 2013, which prescribes the tenure of the members of NCLT to be 5 years. The Apex Court was of the view that an administrative notification for appointment ought to be consistent with the statute.

"...in making appointments in future the Central Government would be bound by provisions of Companies Act. At present we are not exceeding the tenure of all these 23 members from 3 to 5 years",

The Court was considering a writ petition filed by the NCLT Bar Association against the 2019 notification.

A Bench comprising Justices D.Y. Chandrachud and Sudhanshu Dhulia reckoned that the issue of tenure of members of NCLT is not something that its Bar Association should be interested in. It indicated that the Bar Association should be concerned with the vacancies being filled up at the earliest so that there is no impediment in the justice delivery system. Considering the fact that the process to fill up the vacancies is going on, it refused to interfere and stall it in any manner.

"The plea of the Bar Association can only be that the vacancies be filled at the earliest. Bar Association cannot have a choice in who is a member of the tribunal and for what length of time they are members."

Additional Solicitor General, Mr. Balbir Singh submitted that at present there are 30 vacancies in the Tribunal. In respect of 15 vacancies, the Selection Committee has shortlisted candidates and made recommendations. He submitted that the process is expected to be completed and final orders of appointment will be made in 4-6 weeks. The Bench was apprised that for the remaining 15 vacancies, on the direction of the Selection committee advertisement had been issued. The last date for submitting applications in that regard is 12.08.2022. It was clarified that 30 vacancies include the vacancies which have arisen due to expiry of the 3 year term of the 23 concerned members. Mr. Singh indicated that some of these 23 members have also applied afresh and their candidature is being considered along with that of the other applicants.

As the tenure of the 23 members was coming to an end in June-July, 2022, and considering the vacancies have not yet been filled, a question regarding extension of tenure of the 23 members fell before the High Powered Committee chaired by the Chief Justice of India. Upon perusal of relevant documents regarding antecedence, performance etc. it passed direction to take necessary steps. Accordingly, on 14.06.2022 notification was issued extending the tenure for 2 judicial and 6 technical members for 5 years or till they attain 65 years.

The Counsel for the Bar Association had argued that if the 23 members were unfit, then they should have been removed in terms of the procedure enumerated in Section 417 of the Companies Act, 2013. The Bench refused to entertain the plea as the NCLT members themselves have not moved the court. It added that the appropriate course should be to expedite the selection process.

"Entertaining the submission would incidentally lead the court into evaluation of the suitability, character and performance of individual members in a petition they are not parties. Such exercise would be inappropriate. The apt course would be the selection process to continue so that it can be concluded at an early date."

The notification dated 20.09.2019 prescribed the period as 3 years or until attainment of 65 years, whichever is earlier. On 11.09.2021, a notification was issued for appointment of 18 members for a term of 5 years. The Bench decided not to disturb the appointments made pursuant to both the notifications.

[Case Title: National Company Law Tribunal Bar Association Vs Union Of India]

Citation : 2022 LiveLaw (SC) 665

Headnotes

Companies Act 2013 - Term of members of National Company Law Tribunal - Section 413- Appointment of persons as members of the NCLT for a period of three years is not contemplated by the provisions of Section 413(1). An administrative notification for appointment has to be consistent with the statute which governs appointments to the Tribunal (Para 17)

Companies Act 2013 -Centre directed to ensure that the term of NCLT members appointed in future is 5 years as per Section 413 - We however direct that in making appointments to the NCLT in the future, the Union Government shall be bound by the statutory provisions embodied in Section 413 of the Companies Act 2013 (Para 27,28)

Tribunal appointments - Court refuses to entertain the challenge made by the NCLT Bar Association against the Centre's 2019 notification fixing the term of members as 3 years, as the members themselves have not challenged the same-The issue in regard to the term of appointment being less than the term prescribed statutorily has only been raised towards the tail end of the tenure and by the Bar Association and not the Members themselves. Entertaining the submissions of the petitioner would incidentally lead the Court into an evaluation of the suitability, character and performance of individual Members in a petition to which they are not parties. Such an exercise would, in the circumstances, be wholly inappropriate.- The Bar Association cannot have a choice in regard to who should be a Member of the Tribunal.(Para22, 26)

Click here to read/download the order



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