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Adjudicating Authority for Corporate Persons

Adjudicating Authority for Corporate Persons

Adjudicating Authority for Corporate Persons

Every law is incomplete without an appropriate legislative authority that shall be responsible for monitoring the effective and smooth functioning of that law. The law is crafted keeping into account that there shall be a special authority which shall be responsible for resolving the practical difficulties that arise during the execution and implementation of that law and for justice to the victims that turn up under that law.

Following the above footsteps, the Insolvency and Bankruptcy Code, 2016 has two adjudicating authorities. The two adjudicating authorities enshrined under the Code are as follows:

  1. National Company Law Tribunal (NCLT): For Corporate Persons
  2. Debt Recovery Tribunal (DRT): For Individuals and Partnership Firms

The Insolvency and Bankruptcy recognized the NCLT as constituted under section 408 of the Companies Act 2013 to be the adjudicating authority for the purpose of insolvency and liquidation of corporate persons. The proposal for constituting the NCLT was made by the Eradi Committee.

Also the NCLT was designed to replace the jurisdiction of the erstwhile Company Law Board (CLB), the Board for Industrial and Financial Restructuring (BIFR) and the High Court in exercise of its jurisdiction as Company Court. Once NCLT got constituted and started functioning, the Bankruptcy Law Reforms Committee in its final report NCLT to be the appropriate adjudicating authority under the IBC for corporate persons.

NCLT was considered appropriate because under the Companies Act 2013, NCLT had jurisdiction over the winding up and liquidation process of companies. Similarly the Limited Liability Partnership Act, 2008 also conferred jurisdiction to NCLT for dissolution and winding up of Limited Liability Partnerships.

Role of NCLT under IBC

NCLT being the adjudicating authority for corporate persons under the IBC has been vested with various powers and roles. According to subsection (5) of section 60 of the Code, the NCLT shall have the power to entertain and dispose of the following:

  • Any application or proceeding by or against the corporate debtor or corporate person ;
  • Any claim made by or against the corporate debtor or corporate person including any claims filed by or against any subsidiaries situated in India and
  • Any question of priorities or any question of law or facts arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this code.

Jurisdiction of NCLT

The state of situation of registered office of the corporate entity shall be the deciding criterion for insolvency resolution and liquidation of corporate persons, corporate debtors and personal guarantors thereof.

On this note, the application for initiating the insolvency resolution process or liquidation of corporate debtors shall be filed before NCLT having jurisdiction over the place where the registered office of the corporate entity is situated.

The Section 63 of the code also states that the Civil Courts shall not have any authority to entertain any suit or proceedings in respect to any matter on which NCLT has power to entertain under the code.

Also the Section 9 of the Code of Civil Procedure, 1908 gives power to the courts to try all the suits of civil nature except suits from which such courts are expressly or impliedly barred.Therefore by being barred by section 63 of the code , Civil Courts shall not have jurisdiction over matters on which NCLT has jurisdiction.

The adjudicating authority for corporate persons shall be NCLT. The appeals if any against the order of NCLT shall be filed before NCLAT. Further any person aggrieved by the order of NCLAT may file an appeal to the Supreme Court. The appeal filed before Supreme Court shall be only on question of law arising out of order passed by order of NCLT or NCLAT.

1. NCLT

The adjudicating authority for corporate person as mentioned above shall be the NCLT having territorial jurisdiction over the place where the registered office of the corporate person is located. It is important to note that incase where a corporate insolvency resolution process or liquidation proceedings of a corporate debtor is pending before NCLT, then the application for insolvency resolution or bankruptcy of personal guarantor of such corporate debtor shall also be filed before the same NCLT as that of the corporate debtor.

If the insolvency process or bankruptcy proceedings of personal guarantor of the corporate debtor is appending before any court or tribunal then it shall in such a situation shall transferred to the same adjudicating authority which is dealing with the insolvency resolution process or liquidation proceedings of the corporate debtor.

2. NCLAT

Once the application under IBC is admitted by the NCLT from the corporate person then any person aggrieved by the order of NCLT may prefer an appeal before the NCLAT. Every appeal shall be filed before NCLAT within thirty days. An appeal can be filed beyond thirty days if NCLAT is satisfied that there was a sufficient cause for not being able to file within the thirty days duration , but then within fifteen days period after thirty days only.

3. Supreme Court

If a person is not satisfied and is aggrieved by the order of NCLAT then in such a case he can file an appeal to the Supreme Court. The application to be filed shall be based only on question of law that arouse out of the order only.

The application before Supreme Court shall be filed within forty-five days from the date of receipt of order of NCLAT. However, the Supreme Court may allow extension beyond forty-five days if it is satisfied that person was prevented by sufficient clause. The extension allowed shall be only fifteen days beyond the forty-five days duration.

Time Limit for Disposal of Appeal

The application shall be disposed off by NCLT or NCLAT within the period specified in the Code. However, if the application is not disposed off within the prescribed time limit, then the NCLT or NCLAT shall record the reason for delay in writing .

The President of NCLT or the Chairperson of NCLAT shall take the reason for delay into consideration and thereafter if required may extend the period prescribed in the act by another period not exceeding ten days.

Difference between Companies Act 2013 and the Code 2016

Point for discussion Section 421 of Companies Act 2013 Section 61 of IBC 2016
Authority whose order is appealable NCLT NCLT
When appeal can be filed Where order is made by NCLT with the consent of parties No such provision
Who can file appeal Any person aggrieved Any person aggrieved
Appellate Authority NCLAT NCLAT
Time limit for filling appeal Within 45 days Within 30 days
Extension of time limit Not exceeding 45 days Not exceeding 15 days

Hope this article was informative in providing insight about adjudicating authority for corporate persons. Stay connected with MUDS for updates.

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