National Company law Tribunal

NCLT: Has The Tribunalisation Experiment Failed?

Summary: The National Company Law Tribunal was created to consolidate fragmented corporate dispute resolution into a unified forum. However, the tribunalisation experiment has proven contentious, with critics questioning the adjudication quality, consistency, and constitutional validity. The absence of horizontal precedent between co-equal NCLT benches has created conflicting rulings and legal uncertainty. The Supreme Court has criticised the tribunal’s lack of domain expertise and judicial discipline. Successful international models in the UK and US suggest specialised court divisions, not separate tribunals, may have been a more effective approach.Continue Reading NCLT: Has The Tribunalisation Experiment Failed?

New Delisting Regime: Key Highlights

The Securities and Exchange Board of India (“SEBI”) has amended the SEBI (Delisting of Equity Shares) Regulations, 2021 (“Amendment”). The new regime introduces fixed price delisting as an option for take-private transactions. In addition to the reverse book building (“RBB”) route, existing promoters can now use this new route, depending on the viability based on case specific nuances to take their listed entity off the exchange. The key parameters are summarised below:Continue Reading New Delisting Regime: Key Highlights

NCLT rejects a scheme of merger citing public interest concerns

Introduction

In a recent case, the National Company Law Tribunal (“NCLT”) rejected a scheme of merger of three related entities on the ground that it was against public interest. Unlike the other cases of arrangements and schemes where the NCLT focused on the technical compliance of the provisions of the Companies Act, 2013 (“the Act”), in the instant case, the NCLT, in addition to analysing the scheme and verifying its satisfaction of the technical requirements, also went through the facts presented and the reports submitted by the Ministry of Corporate Affairs (“MCA”) and the Income Tax Department (“ITD”), who had carried out their separate investigations. The trend of recent decisions appears to show that the NCLT is not just mechanically sanctioning schemes of merger but is also going beyond the facts provided and reviewing them holistically.Continue Reading NCLT rejects a scheme of merger citing public interest concerns

Administrative Adjudication under the Companies Act – Need for a relook at appeal provisions

Constitutional Perspective

The Central Government recognised the importance of setting up tribunals outside the judicial system that would help alleviate the overburdened judicial machinery. In 1976, the Constitution of India (“Constitution”) was amended through the 42nd Amendment to add two new provisions to the Constitution, viz., Articles 323A and 323B. This change laid the foundation for tribunal system and for the evolution of the system of administrative adjudication in India.Continue Reading Administrative Adjudication under the Companies Act – Need for a relook at appeal provisions

Declaration of Dividend: Interplay of law and business dynamics

Context

The aim of any business organisation is to earn profit and distribute it among the owners. In case of a company, such distribution of profits is connoted as Dividend. The Companies Act, 2013 (“the Act”), inter alia provides for declaration of dividend out of profits. Profit here is the net profit of a company, as determined for preparing financial statements, as per the provisions of Section 129 of the Act and after complying with all the applicable accounting standards notified under Section 133 of the Act.Continue Reading Declaration of Dividend: Interplay of law and business dynamics

The ability to undertake corporate restructuring and M&A through private or statutory arrangements has served as a touchstone in deal making globally. Statutory arrangements, at times, offer several advantages over contractual/ private arrangements. There are, however, several commercial, legal and tax considerations that have to be considered before opting between a statutory and private arrangement. The speed and ease with which a business can undertake an arrangement also plays an important part in such decision-making. In India, private arrangement is more popular than statutory arrangement for undertaking M&A as the latter is contingent on receipt of regulatory authorisation. Statutory arrangements in India were initially permitted only by way of National Company Law Tribunal (“NCLT”) approval.Continue Reading Mergers on a Fast-Track

The lack of a fixed time limit for adjudication of applications for proper stamp duty under the provisions of the Indian Stamp Act, 1899 (“Act”) often results in inordinate delays in stamping of instruments. In a judgment that will exponentially expedite the process of adjudication, the Delhi High Court (“Delhi HC”) has now opined that the Collector of Stamps shall communicate to the parties the proper stamp duty within 30 days of the date of the application.Continue Reading Application for Payment of Stamp Duty must be Adjudicated within 30 Days: Delhi High Court

Introduction

Ease of doing business also includes the ease with which companies can shut operations and exit the marketplace in a country. Under Indian law, companies (or limited liability partnerships (“LLP”) have various options to wind down operations voluntarily, either under the Companies Act, 2013 (“Companies Act”), (or the Limited Liability Act, 2008, for an LLP) or the Insolvency and Bankruptcy Code, 2016 (“IBC”).Continue Reading Ease of closing a Business in India

On July 12, 2022, the Supreme Court of India (“Supreme Court”) passed a judgment in Vidarbha Industries Power Limited v. Axis Bank Limited[1] (“Vidarbha”), which considered the question whether Section 7(5)(a) of the Insolvency and Bankruptcy Code, 2016 (“Code”), is mandatory or discretionary in nature. Section 7(5)(a) of the Code states that the National Company Law Tribunal (“NCLT”) “may” admit an Application filed under Section 7 of the Code (“Application”), if (a) a default has occurred; (b) the Application is complete; and (c) there is no disciplinary proceeding pending against the proposed resolution professional. The Supreme Court held that Section 7(5)(a) of the Code allows the NCLT to reject an Application even if the financial creditor establishes ‘debt’ and ‘default’ on the part of the corporate debtor.Continue Reading The Vidarbha Aftermath

Companies Act

Background

Key Managerial Personnel (“KMP”) play an integral role in the management and functioning of a company. Earlier, the Companies Act, 1956 under Section 269, provided for the appointment of managing or whole-time director or manager in certain cases. However, the Dr. J.J. Irani Report[1], recognized that the board of directors (“Board”) typically look towards KMP for formulation and execution of policies and recognized their role in conducting the affairs of the company. The Committee highlighted the need to recognise the concept of KMP, govern such appointments and identify them as officers responsible for certain functions of the company, along with making them liable for any related non-compliances. Further, the Parliamentary Standing Committees on the Companies Bill in 2009 and 2011[2] also discussed the necessity for the concept of KMP to be included in the Companies Act, 2013 (“Companies Act”). Accordingly, the Companies Act, re-envisioned the importance of KMP and for the first time provided for a detailed definition of KMP along with the provisions governing their appointment.Continue Reading Key Managerial Personnel Appointments: Applicability of Section 203 of the Companies Act, 2013 to private companies: does the NCLAT order cast the net too wide?