A five-member bench of the National Company Law Tribunal (NCLT) on 1 September stayed the operation of the 25 August verdict by a smaller bench of the tribunal in the personal insolvency case against Zee Group founder Subhash Chandra.
The Bench, which comprised President Justice (retd) , Judicial Members Bachu Venkat Balaram Das and Mahendra Khandelwal, and Technical Members Atul Chaturvedi and Ravindra Chaturvedi, said today that no clear majority view exists with respect to the previous verdict, legal news website Bar and Bench reported.
The dispute concerns a repayment plan proposed by Zee Group founder Subhash Chandra in personal insolvency proceedings initiated by Indiabulls Housing Finance Limited under Section 95 of the (IBC).
Under the plan, Chandra proposed to pay ₹6.25 crore to creditors against admitted claims of ₹22,006.57 crore. Another ₹25 lakh was earmarked for insolvency process costs.
Separately, Canara Bank and Union Bank of India have approached the (NCLAT), challenging the NCLT order approving Subhash Chandra’s repayment plan in his personal insolvency proceedings.
The lenders have sought an urgent hearing and are likely to press for a stay on the NCLT order.
But what is the NCLT, and how does it differ from the NCLAT? Mint explains.
Why were NCLT and NCLAT established?
Both the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) are part of the corporate legal landscape in India.
The establishment of the NCLT and the NCLAT is described in the Companies Act, 2013. Sections 407 to 434 of Chapter 27 of the Companies Act, 2013, outline the legal framework for the NCLT and NCLAT. Section 408 provides the constitution of the NCLT, and Section 410 provides the constitution of the NCLAT. Sections 421 to 424 set out the procedures for filing and hearing appeals.
The purpose behind establishing the two tribunals to streamline the adjudication process for corporate disputes, insolvency proceedings, and other company-related matters. While they operate within the same legal framework, understanding the distinctions between the NCLT and the NCLAT is crucial for professionals, businesses, and legal practitioners seeking effective legal remedies.
The NCLT is the primary court of first instance for corporate disputes, while the NCLAT is the higher body that reviews appeals against NCLT orders.
Basically, the NCLT is a that deals with corporate disputes and insolvency matters at the first instance. The NCLAT, on the other hand, is an appellate authority that hears appeals against orders passed by the NCLT.
What is NCLT?
The NCLT started functioning on June 1, 2016 under Section 408 of the Companies Act, 2013. It replaced several older bodies, including the(CLB), the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) and the Official Liquidator.
This consolidation was made to make NCLT a single forum for resolving various company-related disputes.
What are NCLT objectives?
Primarily, the NCLT has 4 objectives:
-Resolving corporate disputes: Cases related to shareholder disagreements, mismanagement, and oppression.
-Handling insolvency and bankruptcy cases: Deals with companies and Limited Liability Partnerships (LLPs) that cannot pay their debts.
-Overseeing mergers and acquisitions: Approves and supervises corporate restructuring.
-Facilitating voluntary winding-up: Companies that want to shut down can apply to the NCLT for liquidation.
What is NCLT structure?
The NCLT operates through 14 benches across India, with the Principal Bench in New Delhi. These benches are managed by a President,, and Technical Members:
Currently, the NCLT has 16 judicial members and 9 technical members. This setup ensures that corporate disputes are handled by experts who understand both legal and business matters.
What are Powers of NCLT?
The NCLT is a quasi-judicial body with powers similar to a civil court, meaning it functions like any other court but focuses only on company-related matters.
Its powers includes:
–Insolvency and Bankruptcy Cases: Resolving cases of companies and Limited Liability Partnerships (LLPs) under the IBC that cannot repay debts.
–Investigating Mismanagement: If company members feel that their rights are being misused or the company is being mismanaged, they can approach the NCLT.
–Mergers and Acquisitions: Approving large corporate deals and restructuring plans.
–Revising Financial Statements: Ordering changes to a company’s financial records if they are incorrect.
–Paying Creditors: Directing companies to pay back debts.
-Voluntary winding up: Companies can approach the NCLT for liquidation.
How is NCLAT different?
The NCLAT was also established and started functioning on June 1, 2016 under Section 410 of the Companies Act, 2013.
It acts as an appellate body, meaning it reviews and decides on appeals against decisions made by the NCLT. If someone is dissatisfied with the NCLT’s decision, they can approach the NCLAT for relief.
What are NCLAT Objectives?
The NCLAT was primarly created to
-Hear Appeals Against NCLT decisions
-Handle Insolvency Appeals
-Review Competition Commission of India (CCI) Orders
-Address Financial Reporting Issues
What is NCLAT Structure?
The NCLAT is headed by a Chairperson and includes Judicial and Technical Members. Its Principal Bench is in New Delhi, and there is an additional bench in Chennai.
The current Officiating Chairperson of the National Company Law Appellate Tribunal (NCLAT) is Justice Yogesh Khanna
What are NCLAT powers?
The NCLAT has the authority to:
-Review and modify decisions of the NCLT.
-Handle appeals under the IBC.
– Oversee appeals against orders from the CCI and NFRA.
– Provide legal remedies for corporate and insolvency disputes.
Landmark Cases Handled by NCLT and NCLAT
-Tata Sons vs. (NCLAT 2019): The NCLAT reinstated Cyrus Mistry as the head of Tata Sons. The ruling was later set aside by the Supreme Court, setting vital precedents on minority shareholder rights and boardroom powers.
-Innoventive Industries vs. ICICI Bank (NCLT / SC 2017): An insolvency case where the NCLT and courts established that the Insolvency and Bankruptcy Code (IBC) overrides conflicting state-level relief laws.
– (RCom) Insolvency: The NCLAT upheld the disqualification of promoters like Anil Ambani under Section 29A of the IBC, barring defaulting management from re-entering or bidding for their own distressed assets.
What is the case of Subhash Chandra?
The dispute concerns a repayment plan proposed by in personal insolvency proceedings initiated by Indiabulls Housing Finance Limited under Section 95 of the Insolvency and Bankruptcy Code (IBC).
Under the plan, Chandra proposed to pay ₹6.25 crore to creditors against admitted claims of ₹22,006.57 crore. Another ₹25 lakh was earmarked for insolvency process costs.
Chandra is chairman of the Essel Group, an Indian media conglomerate that owns Zee Media and the chairman emeritus of Zee Entertainment.
took loans from various institutions for which Subhash Chandra stood as guarantor. When the companies failed to repay the loans, the matter went to the NCLAT, where they were granted relief by paying only ₹6.5 crore against the total guarantee of ₹22,006.57 crore.
Two of the three NCLT judges could not reach a consensus on a decision. Then, under Section 419(5) of the , the matter was referred to the third judge, Nilesh Sharma, who, in his 144-page order passed on August 25, granted Subhash Chandra a major relief.