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Madras Bar Association v. Union of India!

Published on Thu, May 21,2015 | 22:57, Updated at Thu, May 21 at 22:57Source : 

The constitutional validity of NCLT and NCLAT, and the manner of their constitution and functioning became a subject matter of litigation, with the result that these specialized tribunals could not be operationalized.  In 2010, a constitution bench of the Supreme Court, in Union of India vs R. Gandhi, President, Madras Bar Association [2010] 11 SCC 1, finally upheld the constitutional validity of these tribunals.  However, the Supreme Court also found certain provisions of law relating to selection criteria of technical members[1] of these tribunals, and the selection committee (which has the power select members of NCLT and NCLAT) were constitutionally invalid, and directed that unless these defects are cured by legislative amendment, constitution of NCLT and NCLAT could not be proceeded with.

Post this judgment, NCLT and NCLAT could still not be set-up and operationalized due to administrative reasons, and further litigation on the matter.

In September 2014, the erstwhile Companies Act, 1956 was replaced by Companies Act, 2013 (“New Act”).  Like its predecessor, the New Act also contained provisions relating to constitution of NCLT and NCLAT, their jurisdiction and their operation.  It was expected that the provisions of the New Act address the defects pointed out the Supreme Court judgment of 2010.

However, the constitutionality of the provisions of the New Act was challenged again in fresh litigation on the issue, with the result that the set-up of these tribunals could not be proceeded with.  This also impinged on the full operation of the New Act – many provisions of the New Act on which he NCLT had jurisdiction could not be made legally effective for want of an appropriate forum for adjudication.

The issue has finally been decided by a constitution bench of the Apex Court in its judgment in Madras Bar Association vs Union of India pronounced on May 14, 2015.       

This BMR Edge newsletter details the Supreme Court decision and its implications…

Attachments : BMR_Edge_M_A_Tax_Vol_12_Issue_02-11432214407.pdf

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