Supreme Court adjourns NCLT Bar Association’s plea challenging 3-year terms of NCLT members until tomorrow

The Supreme Court on Wednesday adjourned until tomorrow a motion filed by the bar association NCLT challenging the Department of Corporate Affairs notice setting three-year terms for members of the National Company Law Tribunal.

A holiday bench comprising Judge JK Maheshwari and Justice Hima Kohli granted a day’s time to the Solicitor General to record two sets of resolutions from the committee chaired by the Chief Justice of India and comprised of Justice Surya Kant and the Secretary of the MCA.

The court had previously postponed the hearing after being informed by the Solicitor General of India that a committee was holding a meeting to deliberate on the tenure of 23 NCLT members appointed in 2019.

Today the bench expressed their dissatisfaction with a set of resolutions to be split between two judges.

You gave us a set for us to share? You didn’t even give two sets for the judges?remarked Judge Hima Kohli

The SG then moved that the case could be taken up tomorrow so that two copies of the resolutions could be placed in court.

The association argued that said notification violates Sec. 413 of the Companies Act 2013 which prescribes the term of office of members for 5 years. In addition, early warrant expiry will create a vacuum and add to the backlog of cases before the courts. Furthermore, the notification is contrary to judgments rendered by the Supreme Court in Madras Bar Association v. Union of India & Anr. (2010) and Madras Bar Association v. Union of India & Anr. (2021) where the Court ruled that the term of members should be 5 years. Further, in Madras Bar Association, the Supreme Court frowned on a shorter term and observed that a longer term was necessary to secure independence.

It is claimed that a three year term is very short and that by the time members acquire the required knowledge, expertise and efficiency, a term will be completed. Therefore, the full five-year discharge is necessary for the courts to operate effectively and efficiently.

A bench headed by Justice L Nageswara Rao had issued a notice on the petition to the Center on April 5.

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

Case No: WP(C) No 180/2022

Andrew B. Reiter