Supreme Court Issues Opinion on NCLT Bar Association’s Petition Challenging MCA Notice Setting NCLT Membership Terms at 3 Years

the Short Supreme on Tuesday issued a notice by motion to change the 3-year term set by a notice issued by the ministry for members of the National Company Law Tribunal to 5 years. The notification was issued on 20.09.2019 by the Department of Business Affairs in exercise of powers conferred by Section 408 of the Companies Act 2013. The term was set at 3 years or until age 65, whichever comes first.

A bench comprising Judges L. Nageswara Rao, BR Gavai and Aniruddha Bose issued a Notice to the Central Government regarding the Petition for Writ filed by the National Company Law Tribunal Bar Association (NCLTBA) through its Secretary, Saurabh Kalia Adv.

It has been 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.

Furthermore, a short tenure of tribunal members is anti-merit and has the effect of discouraging deserving candidates from accepting judicial member positions in tribunals.

Last year, in the order of 31.05.2021, the Supreme Court observed that the exhaustion of the staff of the NCLT and the NCLAT would be detrimental to the smooth functioning of the courts.

The bench therefore issued an opinion and, in view of the fact that the members’ term ended in June/July, listed the matter for further consideration after 4 weeks.

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

Case No. GT(C) No 180/2022

Counsel for the Applicant: UK Chaudhary, Sanjiv Sen and P. Nagesh, Sr. Advocates, Supriya Juneja Advocate-on-Record.

Andrew B. Reiter