SC Refuses To Allow NCLT Bar Association's Plea Seeking Extension Of Tenure Of NCLT Members Appointed In 2019

The Supreme Court's Bench of Justice Dhananjaya Y Chandrachud and Justice Sudhanshu Dhulia has refused to allow the plea of National Company Law Tribunal's Bar Association seeking extension of the tenures of 23 persons from three years to five years who were appointed in 2019.

The petition moved by the NCLT Bar Association had claimed that the notification issued by the Union Government in 2019 appointing 28 candidates as Members of the NCLT for a tenure of three years was contrary to the provisions of Section 413 of the Companies Act 2013. Section 413(1) of the Companies Act 2013 stipulates that the term of a Member of the Tribunal shall be five years from the date on which he enters upon office.

Therefore the bar association sought a modification of the tenure of appointment of the Members of the NCLT from three years to five years by correcting the notification of appointment.

Advocate Supriya Juneja appeared for NCLT Bar Association whereas Union of India was represented by Additional Solicitor General Balbir Singh.

The Court observed that when the incongruity in the term of office of three years was drawn to the attention to the Selection Committee chaired by the Chief Justice of India, a report was called from the President of the NCLT on the "work performance and suitability" of the Members.

After the initial meeting, the Selection Committee at its meeting held later adverted to the sensitive nature of the functions and duties of the Members, the verification carried out with regard to character and antecedents and the report on performance and suitability. The Union Government was, therefore, directed to take appropriate action.

The Court also noted that the issue in regard to the term of appointment being less than the term prescribed statutorily was only being raised towards the tail end of the tenure and by the Bar Association and not by the Members themselves.

In view of that, the Court said "Entertaining the submissions of the petitioner would incidentally lead the Court into an evaluation of the suitability, character and performance of individual Members in a petition to which they are not parties. Such an exercise would, in the circumstances, be wholly inappropriate."

The Court also pointed out that the members had consciously accepted the post for a duration of three years and furthermore, the selection process for fresh appointments of Members of the NCLT had already begun. Therefore, the Court opined that its orders at the present stage would interfere with the selection process.

The Court noted that-

"While the Notification dated 20 September 2019 prescribing a three year term was not in consonance with Section 413 of the Companies' Act 2013, we note that:

(i) the Members appointed under the notification failed to raise a challenge;

(ii) a fresh process of selection has begun and some of the members have applied afresh; and

(iii) the Union Government has taken corrective action to extend the tenure of certain members after considering the report of the President of the NCLT on their performance and suitability."

Therefore, the Court refused to accede to the prayer of the petitioner, however, the Court directed that the Union Government shall be bound by the statutory provisions embodied in Section 413 of the Companies Act 2013 while making appointments to the NCLT in the future.

Cause Title- National Company Law Tribunal Bar Association v. Union of India

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