SC refuses to allow NCLT Bar Association plea to extend terms of NCLT members appointed in 2019

The Bench of the Supreme Court of Judge Dhananjaya Y Chandrachud and Judge Sudhanshu Dhulia declined to uphold the Bar Association’s plea to the National Company Law Tribunal seeking extensions of the terms of 23 individuals from three to five years who were appointed in 2019.

The petition submitted by the bar association NCLT had claimed that the notification issued by the Union government in 2019 appointing 28 candidate members of the NCLT for three-year terms was contrary to the provisions of Section 413 of the Act of 2013 on companies. Section 413(1) of the Companies Act 2013 provides that the term of office of a member of the Tribunal is five years from the date on which he takes office.

Therefore, the Bar Association requested a change in the term of appointment of NCLT members from three years to five years by correcting the Notice of Appointment.

Lawyer Supriya Juneja appeared for NCLT Bar Association while Union of India was represented by Additional Solicitor General Balbir Singh.

The Court observed that when the incongruity in the length of the three-year term was brought to the attention of the Selection Committee chaired by the Chief Justice of India, a report was called by the President of the NCLT on “performance and fitness for duty” of Members.

At the end of the first meeting, the Selection Committee during its meeting held later recalled the sensitive nature of the functions and duties of the Members, the verification carried out on the character and background and the performance and aptitude report . The Union government was therefore requested to take the appropriate measures.

The Court also noted that the question of whether the term of office was less than the term prescribed by law was only raised towards the end of the term and by the Bar Association and not by the members themselves.

In view of this, the Court said “Receiving submissions from the petitioner would incidentally lead the Court to assess 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 Court also pointed out that the members had consciously accepted the position for a term of three years and that, moreover, the selection process for new NCLT member appointments had already begun. Therefore, the Court felt that its orders at this stage would interfere with the selection process.

The Court noted that-

“Although the notice dated 20 September 2019 prescribing a three-year term did not comply with section 413 of the Companies Act 2013, we note that:

(i) the members appointed pursuant to the notification have not raised any objections;

(ii) a new selection process started and some of the members applied again; and

(iii) The Union Government has taken remedial action to extend the terms of certain members after reviewing the report of the NCLT Chairman on their performance and suitability. »

Therefore, the Court refused to accede to the Petitioner’s prayer, however, the Court ordered that the Union Government be bound by the statutory provisions set out in Section 413 of the Companies Act 2013 when appointments to the NCLT in the future.

Title of Case – National Company Law Tribunal Bar Association v. Indian Union

Click here to read/download the judgment

Andrew B. Reiter