We all know about the dispute resolution mechanism under the provisions of

Companies Act, 1956. Till 2002 amendments to the Companies Act, 1956,
significantly, the dispute resolution mechanism was vested with the Company Court
and the Company Law Board. Company Court is nothing but High Court having
jurisdiction to entertain certain company matters like winding-up and amalgamation
petitions etc. Again, a Company Law Board is a dispute resolution mechanism
constituted under section 10E of the Companies Act, 1956 and it is regulated by
Company Law Board Regulations, 1991.

With the object of establishing a specialized dispute resolution mechanism at one

place and without running to various forums for various issues, a National Company
Law Tribunal was proposed to be constituted under section 10FB of the Companies
Act, 1956. Part-1B and Part-1C of Preliminary Chapter are sought to be incorporated
in the Companies Act, 1956 and the parts specifically deals with the issue of
incorporation of National Company Law Tribunal, National Company Law Appellate
Tribunal and other connected issues.

There are very interesting and complicated issues in the process of corporate
adjudication in India. First, let us look at the powers of the Company Law Board and
the powers of the proposed National Company Law Tribunal and National Company
Law Appellate Tribunal. The Company Law Board Regulations, 1991 regulates the
business of Company Law Board and deal with the issue like filing procedures,
powers, rights etc. The important regulations in the Company Law Board
Regulations, 1991, are as follows:

Reg.11. Petitions etc. to be in writing.

Reg.12. Application, reference or petition to be divided into paragraphs.
Reg.13. General heading to be in Form No.1 in Annexure II.
Reg.14. Procedure for filing petition.
Reg.15. Presentation and scrutiny of the Petition.
Reg.16. Contents of the Petition.
Reg.17. Contents of Interlocutory application.
Reg.18. Documents to accompany the Petition.
Reg.19. Right of a Party to appear before the Bench.
Reg.20. Plural Remedies.
Reg.21. Service of notice and process issued by the Bench.
Reg.22. Filing of reply and other documents by the Respondents.
Reg.23. Filing of the Counter reply by the Petitioner.
Reg.24. Power of Bench to call for further information/evidence.
Reg.25. Hearing the Petition.
Reg.26. Procedure to be followed where any party does not appear.

The regulations referred to above summarizes the procedure to be followed before

the Company Law Board. Among the regulations referred to above, two regulations
deserve specific reading. Regulations 24 and 25 of Company Law Board Regulations,
1991 are extracted hereunder.

Reg.24. Power of Bench to call for further information/evidence. The Bench may,
before passing orders on the petition, require the parties or any one or more of
them, to produce such further documentary or other evidence as the Bench may
consider necessary

(a)for the purpose of satisfying itself as to the truth of the allegations made in the
petition; or

(b)for ascertaining any information which, in the opinion of the Bench, is necessary
for the purpose of enabling it to pass orders on the Petition.

Reg.25. Hearing of Petition. The Bench may, if sufficient cause is shown at any
stage of the proceeding, grant time to the parties or any of them and adjourn the
hearing of the petition or the application. The Bench may make such order as it
thinks fit with respect to the costs occasioned by such adjournments.

If we look at the two regulations extracted above, it is very clear that there is no
specific reference for oral evidence before the Board though one can assume that
the Company Law Board is conferred with extraordinary powers under Regulation 24
itself.

Company Law Board might have been facing difficulties in the process of
adjudication as it will not normally conduct any trial for deciding disputed facts and
with the presence of assumed legal principle that the disputed facts can not be
decided with a summary procedure. Again, there was no specific bar before the
2002 amendments on the Civil Courts Jurisdiction in respect of company matters
and we used to see many simultaneous proceedings. I used to think that we need
lot more clarity and reforms in company dispute resolution mechanism in India.

Now, let us look at the powers and procedure before the proposed National
Company Law Tribunal. Sections 10E and 10FZA of the Companies Act, 1956
specifically deal with the powers of the proposed National Company Law Tribunal
and those are extracted hereunder.

10E. (4C) Every Bench referred to in sub-section (4B) shall have powers which are
vested in a Court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a
suit, in respect of the following matters, namely:-

(a) discovery and inspection of documents or to other material objects producible as

evidence;
(b) enforcing the attendance of witnesses and requiring the deposit of their
expenses;
(c)compelling the production of documents or other material objects producible as
evidence and impounding the same;
(d) examining witnesses on oath;
(e) granting adjournments;

10FZA. (1) The Tribunal and the Appellate Tribunals shall not be bound by the
procedure laid down in the Code of Civil Procedure, 1908 (5 of 1908), but shall be
guided by the principles of natural justice and, subject to other provisions of this Act
and of any rules made by the Central Government, the Tribunal and the Appellate
Tribunals hall have power to regulate their own procedure.

(2) The Tribunal and the Appellate Tribunal shall have, for he purposes of
discharging its functions under this Act, the same powers as are vested in a civil
court under the Code of Civil Procedure, 1908 (5 of 1908) while trying a suit in
respect of the following mattes, namely:-

(a) summoning and enforcing the attendance of any person and examining him on
oath;

(b) requiring the discovery and production of documents;

(c) receiving evidence on affidavits;

(d) subject to the provisions of sections 123 and 124 of the Indian Evidence Act,
1872 (1 of 1872), requisitioning any public record or documents or copy of such
record or document from any office;

(e) issuing commissions of reexamination of witness or documents;

(f) reviewing its decisions;

(g) dismissing a representation for default or deciding it ex parte;

(h) setting aside any order of dismissal of any representation of default or any order
passed by it ex parte; and

(i) any other matter which maybe prescribed by the Central Government.

(3) Any order made by the Tribunal or the Appellate Tribunal maybe enforced by
that Tribunal in the same manner as if it were a decree made by a court in a suit
pending therein, and it shall be lawful for the Tribunal or the Appellate Tribunal to
send in case of its inability to execute such order, to the court within the local limits
of whose jurisdiction,

(a) in the case of an order against a company, the registered office of the company
is situate; or

(b) in the case of an order against any other persons, the person concerned
voluntarily resides or carries on business or personally works for gain.

(4) All proceedings before the Tribunal or the Appellate Tribunal shall be deemed to
be judicial proceedings within the meaning of sections 193 and 228, and for the
purpose of the section 196, of the Indian Penal Code (45 of 1860) and the Tribunal
and the Appellate Tribunals hall be deemed to be a civil court for the purpose of
section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).
If we compare the powers of the Company Law Board and the proposed National
Company Law Tribunal, we can find lot of difference and the provisions conferring
powers on the National Company Law Tribunal are detailed and specific. On the
issue of Civil Courts jurisdiction, section 10GB deals with the issue and the same is
extracted hereunder.

10GB. No civil court shall have jurisdiction to entertain any suit or proceeding in
respect of any matter which the Tribunal or the Appellate Tribunal is empowered to
determine by or under this Act or any other law for the time being in force and no
injunction shall be granted by any court or other authority in respect of any action
taken or to be taken in pursuance of any power conferred by or under this Act or
any other law for the time being in force.

Thus, the issue of simultaneous proceedings is sought to be addressed in the 2002

amendments to the Companies Act, 1956 and an honest effort has been made to
give clarity on company dispute adjudication forums under the provisions of
Companies Act, 1956.

If we ask a legal expert as to what is the difference between a Tribunal and the
Court, we can hear lot of explanation with specific reference to Code of Civil
Procedure. We were of the settled opinion that the Code of Civil Procedure is the
cause for delay before the Traditional Courts. But, logically, there can not be any
difference between Courts or the Tribunal and we can consider Tribunal as a Special
Court. The issue is summarized by Honble Justice Gajendragatkar in Associated
Cement Companies Ltd. V. P.B.Sharma, AIR 1965 SC 1595 and the relevant
paragraph is extracted hereunder.

..Special matters and questions are entrusted to them for their decision and in
that sense, they share with the courts one common characterizing; both the courts
and the Tribunals are constituted by the State and are invested with the judicial as
distinguished from purely administrative or executive functions. They are both
adjudicating bodies and they deal with and finally determine disputes between
parties which are entrusted to the jurisdiction.As in the case of courts, so in the
case of Tribunals, it is the States Inherent judicial power which has been transferred
and by virtue of the said power, it is the States inherent judicial function which they
discharge. Judicial functions and judicial powers are one of the essential attributes
of a sovereign State, and on considerations of policy, the /State transfers its judicial
functions and powers mainly to the courts established by the Constitution; but that
does not affect the competence of the State, by appropriate measures, to transfer a
part of its judicial powers and functions to Tribunals by entrusting to them the task
of adjudicating upon special matters and disputes between parties. It is really not
possible or even expedient to attempt to describe exhaustively the features which
are common to the Tribunals and the courts, and feature which are distinct and
separate. The basis and the fundamental feature which is common to both the
courts and the Tribunals is that they discharge judicial functions and exercise
judicial powers which inherently vest in a sovereign state.

Now, let us look at the style of functioning of the Company Court and the Company
Law Board. High Court is conferred with jurisdiction to entertain certain company
matters like winding-up etc. under the provisions of Companies Act, 1956. We know
the power of High Court being a Constitutional Court. High Court enjoys
extraordinary power under Article 226 of Constitution of India. We can see many
orders by the High Court ignoring the technicalities and directing towards effective
adjudication or settlement of the dispute. Many gives so much respect to High Court
and an order of High Court is adhered to in most of the cases and we will be seeing
contempt issues etc. when the order is directed against the Government or
Governmental organs. That is a different issue altogether.

But, if we look at the procedure before the Board and style of functioning of
Company Law Board and the manner in which the adjudication is being done, we
can very clearly see the difference between the High Court and the Company Law
Board barring the issue that the Company Law Board is a specific forum. The
Company Law Board which is conferred with the powers to entertain applications
under section 397/398 excises very important functions having impact on the
corporate world. Winding-up is the last stage of the Company and represents a bad
state of affairs of the Company though the issue should not be taken lightly. But,
regulating the affairs of the Company or preventing the illegal actions by a group in
the Company, are very vital functions discharged by the Company Law Board and
the proposed National Company Law Tribunal. Companies or the shareholders
approaching the Company Law Board or the proposed National Company Law
Tribunal may require emergent relief even ex-parte in many cases and the Board or
the National Company Law Tribunal should be prepared to passed ex-parte orders
and orders without insisting on technicalities. I strongly feel that the High Court
functions like an Arbitrator where technicalities are ignored and the dispute
resolution is directed towards doing justice. We need a powerful dispute resolution
mechanism to resolve the company matters under the provisions of Companies Act,
1956.

I am of the strong opinion that the purpose may not be solved with the constitution
of special tribunals like National Company Law Tribunal and it is very difficult to
create an atmosphere present in the High Court anywhere else. I am sure on that.

We all know that the constitution of National Company Law Tribunal is stayed by
Madras High Court in R.Gandhi Vs. Union of India. Senior Advocate Shri Aravind
P.Datar has appeared for the Madras Bar which is the Petitioner in the case referred
to seeking stay of constitution of National Company Law Tribunal. The discussion in
the case dealwith by Justice Jyasimha Babu gives a complete idea on constitution of
special tribunals like National Company Law Tribunal.

If we look at the powers conferred on the proposed National Company Law Tribunal
and especially section 10FZA, it is very much similar to section 22 of the Recovery
of Debts Due to Banks and Financial Institutions Act, 1993. Section 22 as referred to
is extracted hereunder.

Section 22. Procedure and Powers of the Tribunal and the Appellate Tribunal.-

(1) The Tribunal and the Appellate Tribunal shall not be bound the procedure laid
down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the
principles of natural justice and, subject to other provisions of this Act and of any
rules, the Tribunal and the Appellate Tribunal shall have powers to regulate their
own procedure including the places at which they shall have their sittings.

(2) The Tribunal and the Appellate Tribunal shall have, for the purpose of discharging
their functions under this Act, the same powers as are vested in a civil court under
the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the
following matters, namely:-

(a) summoning and enforcing the attendance of any person and examining him on
oath;

(b) requiring the discovery and production of documents;

(c) receiving evidence on affidavits;

(d) issuing commissions for the examination of witnesses or documents;

(e) reviewing its decisions;

(f) dismissing an application for default or deciding it ex-parte;

(g) setting aside any order of dismissal of any publication for default or any order
passed by it ex-parte;

(h) any other matter which may be prescribed.

(3) Any proceeding before the Tribunal or the Appellate Tribunal shall be deemed to
be a judicial proceeding within the meaning of sections 193 and 228, and for the
purpose of section 196, of the Indian Penal Code (45 of 1860) and the Tribunal or
the Appellate Tribunal shall be deemed to be a civil court for all the purposes of
section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974)

Thus, the Debt Recovery Tribunal can conduct a Trial, but, practice differs and it is
very rare to see a Trial before the Debt Recovery Tribunal.

Section 385 of the Companies Bill, 2009 deals with the powers of the National
Company Law Tribunal and it is similar to section 10FZA incorporated pursuant to
2002 amendments to the Act.