Companies Act Section 408

Companies Act, Section 408: Constitution of the National Company Law Tribunal (NCLT)

Section 408 of the Companies Act, 2013 provides for the formal establishment and structure of the National Company Law Tribunal (NCLT), a dedicated judicial body created to handle corporate law matters in India. 

This section grants the Central Government the authority to set up the Tribunal and determine its functional framework in order to promote faster, more specialized adjudication in business and company-related disputes.

1. Establishment through Official Notification

The Central Government shall constitute the Tribunal by issuing a notification published in the Official Gazette.
The notification will specify the date from which the NCLT becomes operational.

This gives legal validity to the Tribunal and marks the commencement of its jurisdiction.

The creation of NCLT replaced the earlier fragmented system of corporate dispute resolution, where responsibilities were divided among various authorities such as:

Company Law Board (CLB), High Courts (for areas like winding up and mergers), the Board for Industrial and Financial Reconstruction (BIFR), and the Appellate Authority for Industrial and Financial Reconstruction (AAIFR).

Through this consolidation, the Government aimed to strengthen efficiency, professionalism, and consistency in company law administration.

2. Composition and Appointment of Members

A President, who heads and supervises the entire Tribunal system.

Judicial Members, who bring legal and judicial expertise.

Technical Members, who contribute specialized business, financial, and corporate knowledge.

The number of members, both Judicial and Technical, will be determined by the Central Government based on necessity, workload, and administrative requirements.

All appointments of the President and Members shall be made by notification of the Central Government, ensuring a transparent and formal appointment process. This mixed composition ensures:

Legal correctness in judgments, Practical understanding of business complexities, Balanced evaluation in corporate disputes.

3. Jurisdiction, Powers & Functions

The Tribunal is empowered to exercise and discharge:

All powers specifically granted under the Companies Act, 2013. Additional powers under other laws currently in force, if assigned to it. Key matters under NCLT jurisdiction include:

Company incorporation issues and rectification of registers, oppression and mismanagement cases, corporate restructuring including mergers, amalgamations, and arrangements.

Winding up and liquidation proceedings, Investor protection matters, Share capital and deposit-related disputes.

Matters under the Insolvency and Bankruptcy Code (IBC), where NCLT acts as the Adjudicating Authority for companies and LLPs.

This centralized authority eliminates the complexities and delays corporations formerly faced with multiple legal forums.

4. Purpose and Objectives of Establishing NCLT

Ensure faster and more efficient disposal of company law cases.

Reduce the burden on High Courts and streamline the judicial process.

Provide a specialized forum with both legal and technical expertise.

Improve institutional performance in insolvency and corporate governance matters.

Enhance business confidence and contribute to a healthier corporate environment in India.