Supreme Court to review NCLT bar association venue to challenge members’ 3-year terms

The Supreme Court said on Monday it would review the locus standi of the National Bar Association of the Corporate Law Court to challenge the Center’s notice setting the terms of 23 NCLT members appointed in 2019 to 3 years instead of 5 year.

A holiday bench comprising Judges CT Ravikumar and Sudhanshu Dhulia adjourned the motion in writ filed by the bar association NCLT observing that the petitioner’s locus standi is the primary issue to be considered in the case. The bench noted that none of the members, who accepted the nominations on the basis of the 3-year term with “wide eyes”, disputed the notification. Whether the members can continue beyond the three-year term can be decided in the motion in brief if the locus issue is resolved in favor of the petitioner, the bench noted in the order.

The matter will be considered next on the 20th of July with the consent of the petitioner and the Union Government.

The Association contested the notification issued by the Ministry of Corporate Affairs on 20.09.2019 that the term of 23 members was set at 3 years or until the age of 65, whichever comes first. He argues that said notification violates Sec. 413 of the Companies Act 2013 which prescribes the term of office of members for 5 years. Moreover, he says that in the Madras Bar Association judgment (2021), the Supreme Court considered that the mandate of the members of the Tribunal should be 5 years and observed that a longer mandate was necessary to guarantee independence.

When the case was heard, the bench questioned the petitioner on the place of dispute, particularly when none of the named persons approached the Court.

“SSuppose if any of the appointees approached the court in 2022, having accepted the appointing order, our question would certainly have been – you accepted the 3 year notice with your eyes open, without any objections. These people did not contest, now the bar filed in 2022, when people were named in 2019, after accepting notification with their eyes open. Now, with their term about to end, we can’t hear from anyone else’s request. »

“They received the nomination letter and they knew they would be nominated for 3 years and they opted for that. To this day, these appointees have not challenged that,” Judge Ravikumar added.

Senior Counsel VK Chaudhary appearing for the Association argued that all members made representations. Judge Ravikuar replied that simply giving a representation will not create any rights.

Association counsel argued that his concern was for the “collapse” of the Tribunal if so many members were allowed to resign. He informed that of the 23, the Center granted a two-year extension to 8 members, excluding 15 members and alleged that this amounted to “cherry-picking”.

“This is the court that prevented the entire banking system from collapsing. This court has recovered hundreds of thousands of dollars. The total sanctioned membership is 63 members and it is supposed to sit on 28 benches across the country But it’s only operating with 45 members in 19 benches.If 15 members are allowed to retire in July, that will bring the roster down to 30, which will be less than half of the sanctioned roster. we consider the day-to-day work, there is so much pressure on the Courts. Business cases are not processed”, the lawyer submitted.

The petitioner also referenced an order passed by another bench extending the membership of CAT members in a petition filed by the CAT Bar Association.

The bench said it could not pass a general extension order because the second part of section 413 of the Companies Act prescribes an upper age limit of 65 for members. Therefore, the individual age of the members must be determined.

The bench further said that the order in the CAT Bar Association case was passed citing section 142 and therefore cannot be considered a precedent.

Counsel argued that the statutory requirement of Section 413 is very clear that the term should be 5 years and argued that there can be no waiver of law.

“How can we say that there is a legitimate expectation when the person accepted the appointment with 3 years?“, asked Judge Dhulia.

Solicitor General of India Tushar Mehta, referring to the affidavit filed by the Union government, argued that the terms of 8 members were extended not on the basis of “cherry-picking” but on the basis of the background check of character and aptitude. The SG argued that the audit reports were submitted to the search and selection committee headed by the Chief Justice of India. The CJI-led committee left it to the government to take appropriate action. The committee, which was also comprised of another Supreme Court Justice, Justice Surya Kant, observed that there was no express provision in the rules, which empowers the committee to consider the issue of review. of the membership term, NCLT, and therefore left the matter to the government for a proper decision, the SG said.

“The government has looked at all people’s cases and only considered extending 8 cases. If they were aggrieved, they should have challenged. If they are before us, we would have asked them a question” , Judge Ravikumar watched.

During the hearing, a practicing judicial member of the NCLT appeared by videoconference and requested permission to make submissions. However, the training says it can only hear him if he files a request to intervene.

When the member requested permission to file an application to intervene, Judge Ravikumar said: “Do you need permission to file an intervention request? Do we need to tell a member of the judiciary?”.

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

Case No. WP(C) No. 180/2022

Andrew B. Reiter