No extension to retiring NCLT members appointed for less than 5 yrs tenure: SC

Case Details: National Company Law Tribunal Bar Association v. Union of India - [2022] 141 taxmann.com 200 (SC)

Judiciary and Counsel Details

• • Dr. Dhananjaya Y. Chandrachud & Sudhanshu Dhulia, JJ.

Facts of the Case

In the instant case, the proceedings were instituted by the National Company Law Tribunal Bar Association – petitioner against the Union government in the Ministry of Corporate Affairs whereby it was contended that the notification S.O 3412(E), dated September 20, 2019 issued by the MCA was contrary to the provisions of Section 413 of the Companies Act, 2013.

The petitioner contended that the notification S.O. 3412(E) issued by the MCA appointing 28 candidates as Members of the National Company Law Tribunal for a tenure of three years was contrary to the provisions of Section 413 of the Companies Act, 2013. According to the petitioner, the advertisements issued by the Union government inviting applications for appointment of Judicial and Technical Members of the NCLT prescribed tenure of five years. However, the impugned notification which was issued on 20 September 2019, prescribed tenure of three years or until the attainment of the age of 65 years, whichever is earlier.

On the other hand, the petitioner urged that, on 28 July 2016, 11 September 2021 and 10 October 2021, notifications were issued by the Union government for the appointment of members of NCLT, each for a term of five years or until the attainment of the age of 65 years, which is earlier, in line with the provisions of Section 413 of the Companies Act 2013.

It was urged that the impugned notification prescribing a tenure of three years was contrary to the provisions of Section 413(1) of the Companies Act 2013. The petitioner 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.

The Union government had stated that the appointment of the Members of the NCLT for a period of three years was approved by the Appointments Committee of the Cabinet and before the appointment, the Members were given an offer of appointment for three years.

Further, the Union government stated that pursuant to the offer, the Members joined the NCLT in pursuance of the impugned notification. Hence, it was urged that the Bar Association can have no locus to question the term of appointment when the Members have not raised a grievance.

The Selection Committee then opined that there was no specific provision which empowered it to consider the issue of revising the term of office of the Members of the NCLT. The Committee however observed that considering the sensitive nature of the functions and duties of the Members of the NCLT, and considering the verification reports bearing on the character, antecedents, performance and suitability of the Members, the Union government might take appropriate action in the matter.

The petitioner sought the issuance of a writ by the Court for the modification of the term of appointment of the Members governed by the impugned notification, whose terms were expiring in June/July 2022, from three years to five years.

Supreme Court Held

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 the office. A Member is eligible for reappointment for another term of five years. For a Member of the NCLT, the upper age limit for holding office is prescribed as 65 years.

Appointment of persons as members of the NCLT for a period of three years is not contemplated by the provisions of Section 413(1) which requires an appointment for a tenure of 5 years. An administrative notification for an appointment has to be consistent with the statute which governs appointments to the Tribunal.

However, entertaining the submissions of the petitioner of the Bar Association to extend the tenure of retiring NCLT members from 3 years to 5 years as prescribed by section 413(1) of the Companies Act, 2013 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.

Furthermore, in the present circumstances, the selection process for fresh appointments of Members of the NCLT has already begun and is partially at an advanced stage. Accordingly, Court’s orders (to extend tenure) at the present stage would interfere with the selection process.

In view of the above, there is no challenge to the Rules or the provisions of the statute itself. The petitioners have instead sought an extension of the tenure of the retiring Members, who are not petitioning parties to the instant proceedings.