India: Supreme Court upholds constitutional validity of National Company Law Tribunal

Significant changes to the way in which company law disputes and the winding-up of companies are dealt with have moved closer. Earlier this week the Supreme Court of India held - in Madras Bar Association v Union of India (11 May, appeal number 3067 of 2004, heard with appeal number 3717 of 2005) - that it was not unconstitutional to create the National Company Law Tribunal and National Company Law Appellate Tribunal and vest in them the powers and jurisdiction exercised by the High Court with regard to company law matters. A copy of decision is available by searching the Supreme Court judgments website here.

The Company (Second Amendment) Act (2002) provided for establishment of the NCLT and NCLAT to take over certain functions performed by the High Court, Company Law Board, the Board for Industrial and Financial Reconstruction and the Appellate Authority for Industrial & Financial Reconstruction. This followed the recommendations of the Eradi Committee, which found that the time taken to wind-up a company (often between 10 and 15 years) was largely due to the multiplicity of court proceedings required.