PROJECT REPORT ON:

NATIONAL COMPANY LAW TRIBUNAL (NCLT) &

NATIONAL COMPANY LAW APPELLATE
TRIBUNAL

Presented By:
KHUSHBOO ARORA
REGISTRATION NUMBER –140017180/02/2013

Under the supervision of:

CS DINESH AGARWAL
(Company Secretaries)
FCS: 6315
CP: 5881

Place: Kolkata
Date: 16/11/2018
INDEX

CONTENTS PAGE.NO.

Introduction 3-5
Appeals& Legal Representation 6-7
Background 8

Powers 9-13

Replacement of Company Law Board by the NCLT 14-16

Constitution of NCLT 17-19

Constitution of Selection Committee& Qualification of the 20-21
members of NCLT
Conclusion 22
Bibliography (website links for this project’s information 23
source)

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 NCLT: A New Beginning

Introduction

In 2000, when the Eradi Committee on Insolvency and Bankruptcy recommended setting
up specialized tribunals to adjudicate all matters relating to companies, it was probably
inconceivable that it would take 16 years for these specialized company law tribunals to
see the light of the day. Although they existed in the statute since 2002, the creation of
company law tribunals was fraught with difficulties until recently when, in May 2015, the
Supreme Court in Madras Bar Association v Union of India upheld the constitutionality
of the National Company Law Tribunal (NCLT) and the National Company Law
Appellate Tribunal (NCLAT) and gave the go ahead for the creation of the NCLT and the
NCLAT.
By way of June 1 2016 notifications, the Ministry of Corporate Affairs notified:
 the constitution of the NCLAT and NCLT along with their locations;
 the dissolution of the Company Law Board, which had been constituted under the
Companies Act 1956, and the transfer of all its matters and proceedings to the NCLT; and
 various sections of the Companies Act 2013.
The constitution of the NCLT and NCLAT is an important step towards facilitating
business for companies in India, as it seeks to consolidate jurisdiction for various aspects
of corporate litigation which were previously divided between a number of forums –
namely:
 the Company Law Board, which had jurisdiction over company law matters;
 the High Court, which had jurisdiction over the winding-up of companies and
amalgamation and merger schemes;
 the Board for Industrial and Financial Reconstruction, which had jurisdiction over
the revival and rehabilitation of sick companies; and

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 the Appellate Authority for Industrial and Financial Reconstruction, which heard
appeals of Board for Industrial and Financial Reconstruction orders.
Certain provisions of the Companies Act 2013 and the Insolvency and Bankruptcy Code
2016 are notified in a phased manned. The vesting of jurisdiction with the NCLT and
NCLAT is also being carried out. Therefore, a complete consolidation of jurisdiction is
achieved. The Companies Act 2013 and the Insolvency and Bankruptcy Code 2016 are
notified in their entirety, the NCLT is the sole forum for matters regarding:
 company law;
 the winding-up of companies;
 the rehabilitation and revival of sick companies; and
 insolvency and bankruptcy.
The consolidation of jurisdiction will prevent overlapping and conflicting judgments and
reduce the burden on the high courts, thereby promoting speedy disposal of corporate
litigation.
The National Company Law Tribunal (NCLT) is a quasi-judicial body in India that
adjudicates issues relating to companies in India. The NCLT was established under
the Companies Act 2013and was constituted on 1 June 2016.
The NCLT has eleven benches, two at New Delhi (one being the principal bench) and
one each at Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guwahati,
Hyderabad, Kolkata and Mumbai. Justice M.M. Kumar, a retired judge of the Punjab and
Haryana High Court has been appointed as President of the NCLT. The NCLT Bench at
Bangalore began functioning on 18 July 2016.
The NCLT has the power under the Companies Act to adjudicate proceedings:
1. Initiated before the Company Law Board under the previous act (the Companies
Act 1956);
2. Pending before the Board for Industrial and Financial Reconstruction (BIFR),
including those pending under the Sick Industrial Companies (Special Provisions) Act,
1985;

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3. Pending before the Appellate Authority for Industrial and Financial
Reconstruction; and
4. Pertaining to claims of oppression and mismanagement of a company, winding up
of companies and all other powers prescribed under the Companies Act.
Decisions of the NCLT may be appealed to the National Company Law Appellate
Tribunal.
The creation of a single forum (NCLT) which is dedicated to corporate
matters is a welcome move, and removes the problem of multiple
regulators.
NCLT = CLB + BIFR + HIGH COURT (Winding Up & Mergers)

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Appeals

The NCLAT is the appellate body and appeals from NCLT orders must be filed before
the NCLAT within 45 days of receipt of a copy of the order. This can be extended by an
additional 45 days if a valid reason prevented the appellant from filing the appeal on
time. Thereafter, an appeal regarding a question of law can be filed before the Supreme
Court within 60 days from receipt of the NCLAT order. This can be extended for an
additional 60 days if a valid reason prevented the appellant from filing the appeal on
time.
The NCLAT has also become operational and comprises one chair and a maximum of 11
judicial and technical members.

Legal representation
In consonance with the nature of corporate litigation, the Companies Act allows chartered
accountants, company secretaries and cost accountants to appear before the NCLT and
NCLAT. The Companies Act 2013 thus broadens the opportunities available to these
professionals, as they can now argue matters like winding up or approval of a scheme of
arrangement or compromise – actions which were previously filed before the high court

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and under the exclusive jurisdiction of lawyers. However, appeals to the Supreme Court
arising from an NCLAT order still fall under the exclusive jurisdiction of lawyers.
With the phased notification of the Companies Act 2013 and the Insolvency and
Bankruptcy Code 2016, India is still a bit away from the complete consolidation of
jurisdiction with respect to company law matters. However, once all the provisions are
notified and a complete consolidation is achieved, corporate litigation in India will be far
simpler and speedier.

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Background of NCLT

NCLT was conceptualized by Eradi Committee. It was initially introduced in Companies

Act, 1956 in 2002 but the provisions of Companies (Second Amendment) Act, 2002 were
never notified as they got mired in litigation surrounding constitutionality of NCLT. 2013
Act was enacted and the concept of NCLT was retained. However, the powers and
functions of NCLT under 1956 Act and 2013 Act are different. The constitutionality of
NCLT related provisions were again challenged and this case was finally decided in May
2015. The Apex Court upheld the constitutionality of the concept of NCLT but some of
the provisions on constitution and selection process were found defective and
unconstitutional.

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 Powers vested in NCLT

Some of the important powers that are presently vested with NCLT are as follows:
1. Class Action:
Protection of the interest of various stakeholders, especially non-promoter shareholders
and depositors, has always been the concern of company law. There were several frauds
and improprieties that were noticed where the key losers were the shareholders and
depositors. The shareholders who invested in listed companies saw their investments and
savings drying up when the companies that they invested in cheated the investors.
The Companies Act, 2013 has provided a very good combination of remedies where the
offender will be punished and the people who are involved (whether it is the company or
directors or auditor or experts or consultants) will be liable even for a civil action
(namely class action), wherein they have to compensate the shareholders and depositors
for the losses caused to them on account of the fraudulent practices or improprieties.
A class action is a procedural device that permits one or more plaintiffs to file and
prosecute a lawsuit on behalf of a larger group, or “class”. It is in the nature of a
representative suit where the interest of a class is represented by a few of them. A huge
number of geographically dispersed shareholders/depositors are affected by the
wrongdoings. It is a useful tool where a few may sue for the benefit of the whole or
where the parties form a part of a voluntary association for public or private purposes,
and may be fairly supposed to represent the rights and interests of the whole.
Section 245 has been introduced in the new company law to provide relief to the
investors against a large set of wrongful actions committed by the company management
or other consultants and advisors who are associated with the company.
Class action can be filed against any type of companies, whether in the public sector or in
the private. It can be filed against any company which is incorporated under
the Companies Act, 2013 or any previous Companies Act. The Act provides only one
exemption i.e. banking companies.

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2. Deregistration of Companies: 
The procedural errors at the time of registration can now be questioned at any time. The
Tribunal is empowered to take several steps, including cancellation of registration and
dissolving the company. The Tribunal can even declare the liability of members
unlimited. Sec 7(7) provides this new way for de- registration of companies in certain
circumstances when there is registration of companies is obtained in an illegal or
wrongful manner. Deregistration is a remedy that is distinct from winding up and striking
off.

3. Oppression and Mismanagement:

The remedy of oppression and mismanagement is retained in 2013 Act. The nature of this
remedy has however changed to certain extent and it needs to be seen in light of the
changes made to the Companies Act, 2013. The 2013 Act has reset the bar for oppression
to a little lower level but has set the bar of mismanagement a little higher by applying the
test “winding up on just and equitable grounds” even to mismanagement matters. The Act
permits dilution of the eligibility criteria with the permission of Tribunal, where a
member below the eligibility criteria can apply in deserving cases.

4. Refusal to Transfer shares:

The power to hear grievance of refusal of companies to transfer securities and
rectification of register of members under Section 58 and 59 of the new Act were already
notified and were being taken up by CLB. Now, the same are transferred to NCLT. The
remedy for refusal to transfer or transmission was restricted only to shares and debentures
under 1956 Act. The provisions for refusal to transfer and transmit under Companies Act,
2013 Act extends to all securities. These sections gives express recognition to contracts
or arrangements for transfer of securities entered into between two or more persons with
respect to shares of a public company and thus clears any doubts about the enforceability
of these contracts.

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5. Deposits:
Chapter V dealing with deposits was notified in phases in 2014 and powers to deal with
the cases under it were assigned in CLB. Now the said powers will be vested in NCLT.
The law on deposits is quite distinct under the Companies Act, 2013 as compared to
the Companies Act, 1956. The provisions for deposits under 2013 Act were already
notified. Aggrieved depositors also have the remedy of class actions for seeking redressal
for the acts/omissions of the company which hurt their rights as depositors.

6. Reopening of Accounts & Revision of Financial Statements:

Several instances of falsification of books of accounts were noticed under the Companies
Act, 1956. To counter this menace, several measures have been provided in
the Companies Act, 2013. One such measure is the insertion of Section 130 and 131 read
with sec 447, 448 in the new Act. Section 130 read with sec 131 are newly inserted
provisions that prohibit the company from suomotu opening its accounts or revising its
financial statements. This can be done only in the manner provided in the Act. Section
130 and 131 provides the instances where financial statements can be revised/reopened.
Section 130 is mandatory, where the Tribunal or Court may direct the company to reopen
its accounts when certain circumstances are shown. Section 131 allows company to
revise its financial statement but do not permit reopening of accounts. The company can
itself approach the Tribunal under sec 131, through its director for revision of its financial
statement.

7. Tribunal Ordered Investigations:

Chapter XIV provides several powers to the Tribunal in connection with investigations.
The most important powers that are conferred to the Tribunal are:

a) Power to order investigation: Under the Companies Act, 2013, only 100 members

(as against 200 members required under the Companies Act, 1956) are required to

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 apply for an investigation into the affairs of a company. Further, the power to
apply for an investigation is given to any person who is able to convince the
Tribunal that circumstances exist for initiating investigation proceedings. An
investigation can be conducted even abroad. Provisions are made to take as well as
provide assistance to investigation agencies and courts of other countries with
respect to investigation proceedings.
b) Power to impose restriction on securities:   The restriction earlier could be
imposed only on shares. Now, the Tribunal can impose restrictions on any security
of the company.
c) Power to freeze assets of the company:   The Tribunal is given the power to freeze
assets of the company which can not only be used when the company is under
investigation, but can also be initiated at the insistence of a wide variety of persons
in certain situations.

8. Conversion of public company into private company

Sections 13, 14, 15 and 18 of the Companies Act, 2013 read with rules regulate the
conversion of public limited company into private limited company. It requires approval
from the NCLT. Approval of the Tribunal is required for such conversion. The Tribunal
may at its discretion impose certain conditions subject to which approvals may be granted
(sec 459).

9. Tribunal Convened AGM:

General meetings are required to assess the opinion of shareholders from time to time.
The Act mandatorily requires one meeting to be called, which is termed as the “annual
general meeting” or ‘AGM’. Any other general meeting is termed as “extra ordinary
general meeting” or ‘EOGM’. If the AGM or EOGM cannot be held, called or convened
in the manner provided under the Act or the Rules by the Board or the Member due to
certain extraordinary circumstances, then the Tribunal is empowered under Section 97

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and 98 of 2013 Act to convene general meetings under the Companies Act, 2013. The
provisions for convening an annual general meeting and extra ordinary general meeting
in the Companies Act, 2013 are almost similar to the provision provided in
the Companies Act, 1956. However, the draft rules have inserted an additional provision
that require intimation of such cases to be given to ROC.

10. Compounding of Offence:
Provisions of compounding under the 2013 Act were notified before the constitution of
NCLT and were assigned to CLB. This power will now be vested with NCLT, and all
compounding matters which are above the prescribed monetary limit will be approved by
NCLT. 

11. Change in Financial Year:

Section 2 (41) also has been already notified on 1 April 2014. The Act requires that every
company or body corporate, new or existing, must have a uniform financial year ending
on 31 March. It provides an exception where certain companies can apply to the Tribunal
to have a different financial year. A company or a body corporate can make an
application to the Tribunal. As the Tribunal was not notified at the time when this section
was notified, the power to alter the financial year on application was granted to the CLB.
The regulation provides the manner for making the application to CLB. The same has
notified on the site of CLB vide order dated 28 January 2015. All the application that are
not disposed of at the time when NCLT provisions are notified, will also be transferred to
the Tribunal. 

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How National Company Law Tribunal (NCLT) replaces Company
Law Board (CLB) Since June 2016

On June 01, 2016, the Ministry of Corporate Affairs (MCA) published a notification
regarding the constitution of the National Company Law Tribunal (NCLT) and National
Company Law Appellate Tribunal (NCLAT) with effect from the June 01, 2016. The
constitution of the aforesaid Tribunals is in exercise of the powers conferred by Sections
408 and 410 respectively of the new Companies Act, 2013.
The Companies (Second Amendment) Act, 2002 provides for the setting up of a National
Company Law Tribunal and Appellate Tribunal to replace the existing Company Law
Board (CLB) and Board for Industrial and Financial Reconstruction (BIFR). The setting
up of the NCLT as a specialized institution for corporate justice is based on the
recommendations of the Justice Eradi Committee, a committee set up to examine the
existing law relating to winding up proceedings of companies in order to re-model it in
line with the latest developments and innovations in the corporate law and governance
and to suggest reforms in the procedure at various stages followed in the insolvency
proceedings of companies to avoid unnecessary delays in tune with the international
practice in this field. The setting up of the NCLT and NCLAT are part of the efforts to
move to a regime of faster resolution of corporate disputes, thus improving the ease of
doing business in India. NCLT and NCLAT will also pave the way for the faster
implementation of the bankruptcy code. Their setting up is expected to reduce the burden
on courts. As reported by Livemint, an Indian daily, government data revealed that
48,418 civil cases were pending before the Supreme Court of India as of mid-February
2016, 3.116 million civil cases pending before the high court as of December 31, 2014
and 8.234 million civil cases pending before the district and subordinate courts.
The establishment of the National Company Law Tribunal (NCLT) consolidates the
corporate jurisdiction of the following authorities:
1. Company Law Board
2. Board for Industrial and Financial Reconstruction.

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3. The Appellate Authority for Industrial and Financial Reconstruction
4. Jurisdiction and powers relating to winding up restructuring and other such provisions,
vested in the High Courts.

With the establishment of the NCLT and NCLAT, the Company Law Board under the
Companies Act, 1956 will stand dissolved.While provisions relating to the investigation
of a company's accounts, freezing of assets, class action suits, conversion of a public
company to a private company will now be governed by the NCLT, and appeal therefrom
would be before NCLAT instead of High Court, those relating to compromise,
amalgamation and capital reduction will continue to be under the purview of the High
Courts. Gradually powers of High Court under the Companies Act 2013 / 1956 relating to
reduction of share capital, winding-up and compromise or arrangement (merger,
demerger, settlement) would get transferred to NCLT under specific directions issued by
the MCA.As per a notice published on the website of the Department of Personnel and
Training on March 30, 2016, former judge (Retd.) of the Supreme Court of India, Hon'ble
Mr. Justice S.J. Mukhopadhya, was appointed as the chairperson of the NCLAT, and the

Page. 15
Appointments Committee of the Cabinet approved appointment of Justice (Retd.) M.M.
Kumar, Chairman of the Company Law Board as President, National Company Law
Tribunal (NCLT). As per section 466 of the Companies Act 2013, existing members and
staff would be members and staff of the NCLT. The Rules in this regard are yet to be
notified.Vide its notification dated June 01, 2016, the Central Government also
constituted 11 (eleven) Benches of the NCLT in exercise of its powers under sub-section
(1) of section 419 of the new Companies Act, 2013. Of the said 11 benches, two shall be
situated in New Delhi, and one each at Ahmedabad, Allahabad, Bengaluru, Chandigarh,
Chennai, Guwahati, Hyderabad, Kolkata and Mumbai.

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The Constitution of National Company Law Tribunal

The government constituted the National Company Law Tribunal (NCLT) and its

appellate body, implementing most of the provisions of new Companies Act and helping
implementation of the Bankruptcy Code. With this, the Company Law Board (CLB),
constituted under the old Act, stands dissolved.

The NCLT shall consist of a President and such number of Judicial and Technical
Members as may be required. As per MCA circular 6 dated June 7, 2016 notified that the
principal bench of the NCLT is to be located at New Delhi and it would have ten other
benches at New Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Chandigarh, Allahabad,
Ahmedabad, Hyderabad and Guwahati.

The Hon'ble Justice M.M. Kumar, retired judge of the Punjab and Haryana High Court
and the current Chairman of the CLB has been appointed as the President of the NCLT
and Hon'ble Justice S.J. Mukhopadhaya (Retd.), Supreme Court of India has been
appointed as the Chairperson of NCLAT. The existing members and staff of the CLB
shall be the members and staff of the NCLT as well.

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 The NCLT will now deal with the provisions relating to the call for general meeting,
oppression and mismanagement, investigation into the company's affairs, class action
suits, conversion of a public company to a private company, inspection of books and
minutes, compounding of offences etc. Further, the provisions relating to compromise,
amalgamation, winding up and capital reduction will continue to be governed by the High
Courts. Therefore, the MCA is yet to notify provisions regarding:
 compromises, arrangements and amalgamations including reduction of share
capital;
 revival and rehabilitation of sick companies; and
 winding up of companies

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Hence, the MCA has planned to transfer the jurisdiction of High Courts in a phased
manner in order to provide a smooth transition. Meanwhile, the provisions relating to
compromise, mergers, and reduction of share capital and winding up proceedings shall
continue to be under the jurisdiction of the High Court and of sick companies shall
continue to be under BIFR until further notification.
The appeal from any order of the NCLT would be made with the NCLAT instead of High
Court. However, appeals from the NCLAT orders will be heard by the Hon'ble Supreme
Court of India.

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CONSTITUTION OF SELECTION COMMITTEE

Selection of Members of Tribunal and Appellate Tribunal

(1) The President of the Tribunal and the chairperson and Judicial Members ofthe
Appellate Tribunal, shall be appointed after consultation with the Chief Justice of India.

(2) The Members of the Tribunal and the Technical Members of the Appellate
Tribunalshall be appointed on the recommendation of a Selection Committee consisting
of—

(a) Chief Justice of India or his nominee—Chairperson;

(b) a senior Judge of the Supreme Court or a Chief Justice of High Court—
Member;
(c) Secretary in the Ministry of Corporate Affairs—Member;
(d) Secretary in the Ministry of Law and Justice—Member; and
(e) Secretary in the Department of Financial Services in the Ministry of Finance—
Member.
(3) The Secretary, Ministry of Corporate Affairs shall be the Convener of the Selection
Committee.
(4) The Selection Committee shall determine its procedure for recommending persons
under sub-section (2).
(5) No appointment of the Members of the Tribunal or the Appellate Tribunal shall beinvalid
merely by reason of any vacancy or any defect in the constitution of the SelectionCommittee.

QUALIFICATION OF MEMBERS OF TRIBUNAL AND APPELLATE

TRIBUNAL:

(1) The President shall be a person who is or has been a Judge of a High Court for five
years.
(2) A person shall not be qualified for appointment as a Judicial Member unless he:-
(a) is, or has been, a judge of a High Court :, or
(b) is, or has been, a District Judge for at least five years; or
(c) has, for at least ten years been an advocate of a court.
(3) A person shall not be qualified for appointment as a Technical Member unless he

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(a) has, for at least fifteen years been a member of the Indian Corporate Law Service or
Indian Legal Service out of which at least three years shall be in the pay scale of Joint
Secretary to the Government of India or equivalent or above in that service; or
(b) is or has been, in practice as a chartered accountant for at least fifteen years; or
(c) isor has been, in practice as a cost accountant for at least fifteen years; or
(d) isor has been, in practice as a company secretary for at least fifteen years; or
(e) is a person of proven ability, integrity and standing having special knowledge and
experience, of not less than fifteen years, in law, industrial finance, industrial
management or administration, industrial reconstruction, investment, accountancy, labour
matters, or such other disciplines related to management, conduct of affairs, revival,
rehabilitation and winding up of companies; or
(f) isor has been, for at least five years, a presiding officer of a Labour Court, Tribunal or
National Tribunal constituted under the Industrial Disputes Act, 1947.

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Conclusion:

NCLT/NCLAT formation is indeed a very welcome long overdue reform.  It will help
reduce the burden on the HCs and all matters under Cos. Act and allied laws will be
handled by a separate expert body.  Since the Tribunal has the power to make its own
procedures, there will be speedy remedy and matters will be disposed of expeditiously. 
Giving power to the Tribunal to hear class action suits will give birth to a new and
different kind of shareholder democracy in India, much like the Western countries.  This
will lead to Indian companies adopting better corporate governance practices and will
improve the value to the shareholders.
The transition period of shifting from CLB to NCLT will be one that is crucial and needs
to be carefully handled by the MCA.  In my personal view, CLB dissolution could have
been done once the NCLT actually started functioning for avoiding the extant ambiguity
and chaos.  Be that as it may, we, as professionals see this as a very welcome step in
Indian Corporate Law History and one that will have far reaching effects.
National Company Law Tribunal will bring with itself wide ranging opportunities.Need
is to understand & appreciate the same.

In order to meet the standards, it is of utmost significance to continuously work towards

enhancing our knowledge & skills and then deliver the quality results.

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 BIBLIOGRAPHY
 https://en.wikipedia.org/wiki/Company_Law_Board
 http://www.mca.gov.in/MinistryV2/clb.html
 http://lawstreetindia.com/experts/column?sid=164
 http://barandbench.com/10-features-distinguish-nclt-clb/
 http://www.business-standard.com/article/economy-policy/new-company-law-tribunal-
sc-gives-qualified-approval-115051500031_1.html
 http://www.business-standard.com/article/economy-policy/national-company-law-
tribunal-constituted-116060200016_1.html
 http://icmai.in/upload/PPT_Chapters_RCs/Nagpur-22-01-2016.pdf
 http://www.business-standard.com/article/companies/five-member-panel-to-oversee-63
Moons-investments-116061601082_1.html
 http://snehalkamdar.in/new-era-start-nclt-nclat-established/
 http://www.mondaq.com/india/x/438424/Corporate+Commercial+Law/SUPREME+CO
URT+APPROVES+SETTING+UP+OF+COMPANY+LAW+TRIBUNALS

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