Power and Role of National Company Law Tribunal

The power and role of the National Company Law Tribunal are-

Class Action

Section 245 of the Companies Act, 2013

An application may be submitted with the tribunal by the company's members,

depositors, or on their behalf, asserting that affairs have been managed in a way
adverse to the company's interests and requesting all or any of the following
grounds:

The corporation may be restrained:

• From engaging in any activity that is outside the scope of the MOA and
AOA,
• From violating any term of the MOA and AOA, and its directors from
acting on such resolutions,
• Doing anything contradictory to this act or any other legislation that is
currently in effect,
• Declaring any resolution that modifies the MOA and AOA becomes void
if such resolution is approved.
To seek damages or compensation or to take any other appropriate action.

• A corporation or its directors for any illegal, fraudulent, or wrongful act

or omission perpetrated by them.
• The company's auditor or audit firm for incorrect or misleading
information.
• Might ask the tribunal for any other remedy.

1.If depositors seek damages or compensation or take any other action against the
audit company, the firm and each and every partner engaged in making the
incorrect or misleading statement will be held liable.
2.The number of members required to file an application with the tribunal is:

• Not fewer than one hundred members, or members who control more
than one-tenth of the entire voting power in the business (if the firm has a
share capital); or
• Not less than one-fifth of the persons on the company's membership list
(in case the company does not have share capital).
1. The depositors must be at least one hundred in number or a certain
proportion of all depositors.
2. While an application for the ruling is filed, the tribunal must ensure that
the members and depositors have behaved in good faith.
3. Where similar applications are made from the jurisdictions, the tribunal
shall consolidate and consider it as one application. The class members
or depositors shall be allowed to choose the lead applicant, and two
class-action applications filed for the exact cause of the application shall
be prohibited.
4. The tribunal's rulings are binding on the members, depositors, auditors
(including audit firms), advisers, experts, consultants, and any other
individual affiliated with the corporation.
5. If the corporate body fails to comply with the tribunal's ruling, it will be
fined INR 5 lakhs, which may be increased to INR 25 lakhs, and each
officer in default will be fined INR 25 thousand, which can be increased
to INR 1 lakh, and will be imprisoned for three years.
6. Suppose the tribunal determines that the application submitted is
frivolous or vexatious. In that case, it shall reject the application and
record the reasons in writing and shall compel the other party to pay the
cost not exceeding INR 1 lakh.

Deregistration

Section 7(7) of the Companies Act states that if the tribunal learns that the
company provided false or incorrect information at the time of incorporation or
that the company suppressed any material facts, information, or declarations filed
by the company, the tribunal may issue any of the following orders:
 • In addition, it may issue any commands it sees proper.
• Pass orders for the company's wound-up.
• Direct members' responsibility shall be unrestricted.

Sufficiency and Mismanagement

Section 241 of the Companies Act 2013 stipulates that any member of the business
who has the right to complain to a tribunal under Section 244 of the Act 2013 must
register a complaint with the tribunal stating the following:

• The firm's affairs are conducted in a way that is detrimental to the public
interest, oppressive to him or any member of the company, or harmful to
the company.
• A significant change brought about by the firm that is harmful to the
interests of the business's creditors, debenture holders, and shareholders,
and it has resulted in a major shift in the company's management or
control, either in
• A change in the board of directors,
• Managers must be replaced.
• Member modification, or
• For any other reason.
For these reasons, the company's members believe that its affairs have been
conducted in a way that is detrimental to its interests.

• When the Central Government believes that the company's affairs have
been managed in any of the following ways, and the tribunal determines
that it has been harmful to the public interest or in an oppressive manner:
1. A corporate member is either guilty of fraud, misfeasance, chronic
negligence, or breach of trust or is in default in carrying out legal
responsibilities and functions; or
2. The company's management is not being carried out in accordance with
good principles or sensible business procedures, or
3. When a business is done that causes severe harm to trade, business, or
industry
 4. When a business is managed only for the goal of defrauding creditors or
members, or when a firm is run solely for fraudulent or criminal
objectives that are against the public interest,
It shall submit an application to the tribunal to seek remedy.

Investigative Authority

According to Section 213 of the Companies Act of 201:

When an application to the tribunal is made by:

1. Company with a share capital: at least one hundred members or members

holding at least one-tenth of the company's total voting power; or
2. A company with no share capital: Not less than one-fifth of the people on
the company's membership list.
When a person other than a company member applies to the tribunal citing one of
the following circumstances:

1. The company's affairs have been conducted solely with the intent of
defrauding its creditors, members, or any other person.
2. Business is being conducted for either fraudulent or illegal reasons.
3. Business is being conducted oppressively toward its members.
4. Businesses are being formed solely for illegal or fraudulent purposes.
5. Persons involved in the company's formation or the management of the
company's affairs were either guilty of fraud, misfeasance, or misconduct
towards the company or any of its members.
6. When members of the company fail to provide all of the information to
the company relating to the company's affairs that they are expected to
provide, including information relating to the calculation of commission
payable to the managing director, director, or any other manager of the
company, and the tribunal believes that the company's affairs should be
investigated after giving the parties a reasonable opportunity to do so, the
tribunal may order an investigation.
If it is proven after an investigation that:
 • The company's affairs have been conducted solely with the intent of
defrauding its creditors, members, or any other person, or
• Business is being conducted for fraudulent or illegal reasons, or
• Business is being conducted in an oppressive manner toward its
members, or
• A company is formed solely for the purpose of engaging in illegal or
fraudulent activities.
• Persons involved in the formation of the company or the management of
the company's affairs were either guilty of fraud, misfeasance, or
misconduct towards the company or any of its members.
Then, for fraud, every officer of the company who is in default, as well as anyone
involved in the formation of the company or managing its affairs, shall be
punished.

Accounts can be Reopened

Stated in Section 130 of the Companies Act of 2013;

• Except on the central government's order, income tax authorities, SEBI, a

statutory body, a court of competent jurisdiction, or a tribunal, the
company shall not open its accounts or recast its financial statements. It
shall only be permitted to do so when:
1. Previously, fraudulent accounts were prepared.
2. The company's affairs were mismanaged, casting doubt on the accuracy
of its financial statements.
The tribunal must notify the relevant authorities before issuing such orders.

Transfer of Shares

The National Company Law Tribunal is also empowered to hear complaints about
companies being denied permission to transfer shares and securities under sections
58-59 of the Act, which were previously under the purview of the Company Law
Board. Going back to the Companies Act of 1956, the solution for rejecting
transmission or transfer was limited to a company's shares and debentures. Still,
the prospect has now been raised under the Companies Act of 2013 and now
covers all securities issued by any company.

Conversion of a Public Corporation into a Private Corporation

Sections 13 to 18 of the Companies Act, r/w Rule 41 of the Companies

(Incorporation) Rule 2014, state that when a firm converts from a public firm to a
private limited, the NCLT tribunal must approve the conversion. Section 459 of the
Companies Act of 2013 permits the tribunal to impose terms and conditions.

Annual General Meeting

According to Sections 97 and 98 of the Companies Act of 2013, if the members of

the firm fail to convene the meeting within a certain time, the member of the
company may apply to the tribunal to convene such a meeting, and the tribunal as
such has the power to convene those meetings.

Winding up of Company

Section 242 of the Companies Act, 2013 provides that the tribunal may wind a
company if its affairs have been conducted in any of the following ways, as
specified in section 242 of the Companies Act, 2013, and the tribunal concludes
that the company has been prejudicial to the public interest or in an oppressive
manner.

Additional Capabilities

Section 221 of the Companies Act of 2013 gives the National Company Law
Tribunal the authority to freeze the company's assets. Section 2(41) of the
Companies Act of 2013 gives the registered company the authority to change its
financial years.
Conclusion

National Company Law Tribunal operates along the lines of a regular Court of
Law in the country & is needed to fairly and without bias determine the facts of
each case & decide with subjects in accordance with natural justice principles, and
offer conclusions from decisions in the form of orders in the continuation of such
decisions. The NCLT orders could help resolve a situation, right a wrong done by a
corporation, or levy penalties and costs, and they could change the rights,
obligations, duties, or privileges of the parties involved. The Tribunal is not
required to follow strict rules regarding the evaluation of any evidence or
procedural law.