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New Era of Corporate Adjudication NCLT & NCLAT (Under Companies Act, 2013). CS Ranjeet Pandey - FCS , LL.B. Central Council Member Ranjeet Pandey & Associates Practising Company Secretary Mobile: 09810558049, 011 – 46074119 e-mail: cs.ranjeet@gmail.com. Benches of NCLT.
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New Era of Corporate Adjudication NCLT & NCLAT (Under Companies Act, 2013) CS Ranjeet Pandey - FCS, LL.B. Central Council Member Ranjeet Pandey & Associates Practising Company Secretary Mobile: 09810558049, 011 – 46074119 e-mail: cs.ranjeet@gmail.com
Benches of NCLT • Benches of Tribunal (Section 419): • CG to notify benches of the Tribunal; • Principal Bench to be in New Delhi presided by President; • Power of Tribunal to be exercise by two members bench, some class of cases - single bench may exercise powers; • Rehabilitation, restructuring, reviving or winding up, of companies, president to constitute one or more Special Benches consisting of three or more Members, majority necessarily being of Judicial Members;
NCLT – Representation, Limitation Right of Legal Representation (Section 432): • Any party to the proceeding or appeal may appear in person • Party may authorise PCS or CA or CWA or Legal Practitioner or any other person to present his case before the NCLT or NCLAT, as the case may be. Limitation (Section 433): • The provisions of the Limitation Act, 1963 to apply to any proceeding before Tribunal or appeal before NCLAT
Removal of name under Section 7 • False or incorrect information or representation • Suppressing any material fact information in any of the documents • Section 7(7) - Tribunal may by order: • Alteration in MOA/AOA, or • Direct that liability of the members shall be unlimited; • Direct removal of the name of company from the ROC; or • Pass an order for the winding up of the company; or • Pass such other orders as it may deem fit:
Removal of name under Section 7 Reasonable opportunity of being heard; and The Tribunal shall take into consideration the transactions entered into by the company, including the obligations, if any, contracted or payment of any liability.
Removal of Name • Application under sub-section (7) of Section 7 shall be filed to the Tribunal in Form No. NCT 1 and shall be accompanied with such documents as are mentioned in Annexure –B, which is as under: • MOA & AOA, • Balance Sheet, • Affidavit verifying petition in Form No. NCT.6 • Bank Draft evidencing Fees, • Memo of appearance or Vakalatnama, • Board Resolution.
Removal of Name • Application shall set out the following particulars: • Name, date of incorporation, name and address of the subscribers, promoters and first directors; and • The details of false or incorrect information or representation or material facts or information suppressed. • The details of such documents in or declaration filed or made for incorporating such company, • The involvement of promoters, subscribers and first directors in committing fraud during the course of incorporation; • The Tribunal may pass orders in accordance with clauses (a), (b), (c), (d) and (e) of sub-section (7) of section 7.
Change of financial Year {Section- 2(41)} • Application by a company or body corporate, which is a holdingcompany or a subsidiary of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India • The Tribunal may, if it is satisfied, allow any period as its financial year, whether or not that period is a year:
Change of Financial Year • The Petition under sub-section (41) of Section 2 be filed to the Tribunal in Form No. NCT 1 and shall be accompanied with such documents as are mentioned in Annexure –B, which is as under: • Copy of the memorandum and Articles of Association. • Copy of balance sheet of companies. • Affidavit verifying the petition. • Bank draft evidencing payment of application fee. • Memorandum of appearance or the executed Vakalatnama, as the case may be • Copy of the Board Resolution.
Change of Financial Year • Admission of Petition • Form GNL 1 • Report of Registrar • Hearing and presentation of matter. • Order of Tribunal • Filing of Order in Form INC 28.
Conversion from Public to Private • Any alteration having the effect of conversion of a public co. into a private Co. shall not take effect except with approval of the Tribunal which shall make such order as it may deem fit. [Section-14(2)] • A Petition shall, not less than 3 months from the date of passing of special resolution, be filed to the Tribunal in Form No. NCT. 1and shall be accompanied with following documents (Rule 70): • MOA & AOA, • Copy of the documents showing that the company ceased to become a public company. • Affidavit verifying the petition. • Bank draft evidencing payment of application fee. • Memorandum of appearance with copy of the Board Resolution or the executed Vakalatnama, as the case may be.
Conversion from Public to Private • Every petition filed shall set out the following particulars: • Date of BM and date of GM at which the proposed alteration was approved; • State at which the registered office of the company was situated; • Number of members in the company, number of members attended the meeting and number of members of voted for and against; • Reason for conversion & effect of such conversion on shareholders, creditors, debentureholders and other related parties. • Listed or unlisted public company. • Nature of the company: limited by shares, limited by guarantee and unlimited company, section 8 Co.
Conversion from Public to Private • A list of creditors and debenture holders, drawn up to the latest practicable date preceding the date of filing of petition by not more than two months, setting forth the following details: • An affidavit, signed by the CS, if any and by two directors, one of whom shall be a managing director, where there is one - that the list of creditors is correct, and that the estimated value are proper estimates of the values of debts and claims and that there are no other debts of, or claims against, the company to their knowledge. • List of creditors shall be kept at the registered office and shall be available for inspection.
Conversion from Public to Private • The company shall at least 14 days before the date of hearing: • Advertise the petition in accordance with rule 7; • Serve individual notice(s) in Form NCT. No. 3B; and • Serve, a notice together with the copy of the petition to the CG, ROC and to the SEBI, to other the regulatory body, viz IRDA • Objection received - serve a copy thereof to the ROC on or before the date of hearing. • Tribunal may allow the conversion. • May disallowthe conversion, if: • Not in interest of the company or • is being made with a view to contravene or to avoid complying with the provisions of the Act.
MAINTAINABILITY • Section 241 lays down eligibility criteria for filing an application for relief against oppression and mismanagement. • According to Sub Section (1) following members shall have right to apply: • In case of Company having Share Capital: Not less than 100 member or not less than 1/10 of the total number of members whichever is less or any member(s) holding not less than 1/10th of the issue share capital. • In case of Company without Share Capital: Not less than 1/10thof the total number of members • (Note: The Tribunal may waive all or any of the requirement specified therein)
O&M • Step 1 : Application to be made to the Tribunal • An Application, shall be filed in the Form No. NCT. 1. • If there are more than One Applicant – the Letter of Consent signed by the rest of the members so entitled, shall be annexed to the Application, and the names and addresses of all the members shall be set out in a schedule to the Application. • A copy of every Application made under this rule shall be servedon the company, other respondents and all such persons as the Tribunal may direct. [Rule 3(3)]
Section 242 (Powers of Tribunal) If Tribunal is of the opinion that the Complaints are justified then it may pass any order to bring the complaints on an end, which includes following: The regulation of conduct of affairs of the company in future. Purchase of shares or interests of any members. Restrictions on the transfer or allotment of Shares, Removal of MD/Manager and/or Director of the Company. Recovery of undue gains made by the any MD, Manager or director including transfer to IEPF or repayment to identifiable victims. Manner of Takeover of Management of the Company Appointment of any other person to manage the Company. Imposition of Costs (If Tribunal Deemed it fit) Any other matter for which, in the opinion of the Tribunal, it is just and equitable that the provision should be made.
Action by affected person – Class Action Suit • Class Action & Background: • A class action or a representative action is a form of lawsuit in which a large group of stakeholders collectively bring a claim to court and/or in which a group of defendants is being sued. • Enforce accountability of management towards all stakeholders. • The proposed introduction of Class Action is Fall-out of Satyam fraud, wherein Indian investors have not got any compensation, whereas US ADR holders has been compensated appropriately by way of CAS.
Class Action Suit(CAS)……. • Who can file CAS ?? • Co. having Share Capital: • 100 members or 10 % of no. of members, whichever is less. • Member/Members – holding 10 % of issued capital. • Co. not having Share Capital - 1/5th of total number of Members. • Depositors: 100 depositors or 10 % of no. of depositors, whichever is less. • Can a representative file CAS ?? • An application may be filed or any other action may be taken under this section by any person, group of persons or any association of persons representing the persons affected by any specified act or omission [Section 245(10)].
Class Action Suit(CAS)….. • Audit firm / Experts / PCS be made liable for CAS ?? • Audit firm/each partner shall be liable for CAS: • Any improper or misleading statement in the audit report or • If acted in a fraudulent, unlawful or wrongful manner. • Apart from Auditors, other professionals shall also be liable for class action, if given above statement or acted in abovesaid manner as an expertor advisor or consultant.
Class Action Suit(CAS)…. • Available Remedies: • Restraining company from: • Committing act ultra-vires to MOA/AOA; • Committing breach of any provision of MOA/AOA; • Acting on any resolution passed in suppression of material facts; • Doing an act contrary to Act or any other law; • Taking action contrary to any resolution passed by the members; • Declaring a resolution altering MOA/AOA as void - if passed by suppression of material facts or obtained by mis-statement to the members or depositors; • to claim damages or compensation or demand any other suitable action from/against Company, Auditors, Experts / advisor / consultant; • to seek any other remedy as the Tribunal may deem fit.
Class Action Suit(CAS)….. • Exclusion: • Provision of Section 245 not applicable to Banking Companies, however no such exemption is provided for under Section 34-36. • Matters to be considered by Tribunal while admitting CAS: • Cause of action is one which the member or depositor could pursue in his own right rather than through an order of tribunal (Individual vs. Class Action) • Where the cause of action is an act or omission that is yet to occur, whether the act or omission could be, and in the circumstances would be likely to be (i) authorised by the company before it occurs; or (ii) ratified by the company after it occurs; • Cause of action is an act or omission that has already occurred, whether the act or omission could be, and in the circumstances would be likely to be, ratified by the company.
Class Action Suit(CAS)….. • Process to be followed on Admission: • On admission of application, the Tribunal shall have regard to: • Public notice to all the members or depositors of the class; • All similar applications should be consolidated into a single application; • Class members or depositors should be allowed to choose one lead applicant ; • If they unable to come to a consensus, the Tribunal to appoint a lead applicant; • Two class action applications for the same cause of action shall not be allowed; • The cost or expenses connected with the application for class action shall be defrayed by the company or any other person responsible for any oppressive act.
Class Action Suit(CAS)….. Rule 6 (Right to apply under section 245) An Application under Section 245(1) shall be filled in Form No. NCT.1. A copy of every Application shall be served on the company, other respondents and all such persons as the Tribunal may direct. Rule 8 (Conducting a class action suit) 1) Tribunal while considering the admissibility of an Application under Section 245 take into account the following: (a) whether the class has so many members that joining them individually would be impractical, making a class action desirable; (b) whether there are questions of law or fact common to the class; (c) whether the claims or defences of the representative parties are typical of the claims or defences of the class; (d) whether the representative partieswill fairly and adequately protect the interests of the class.
DRAFTING OF PETITION • Heading, Brief description of Petitioner, Company & Respondents, if any. • Concise narration of material facts only. Full particulars of fraud, undue influence and coercion to be stated. • Specific instances of acts of O&M, Grieviance, etc. • In case of winding up petitions, specific averments as to admission of liability/quantified debt. • Petition should be accompanied by an affidavit sworn before the person specified in Section 558 of the Companies Act, 1956 / Section 355 of the Companies Act, 2013; • Multiple Reliefs– A petitioner shall be entitled to seek one or more reliefs provided that they are consequential to one another.
Petition - Reliefs INTERIM RELIEFS: • Interim relief should not exceed the final relief. • The Interim relief should not amount to grant of the final relief. • Purpose is to maintain the last non-contested status quo. FINAL RELIEFS: • Order to conduct the Company in a manner not prejudicial to the interest of members and to public interest; • Order restitution for losses caused to the company. • Order to put to an end the matters complained. • Such other relief, as the Hon’ble Court may desire to grant, in the interest of justice.
REPLY & Rejoinder Reply: • Reply to the petition by the Respondent. • Reply to be submitted within time line prescribed under an Order. • It should be para wise reply of original averment supported by Affidavit. Rejoinder: • Rejoinder by the Petitioner on the Reply filed by Respondent. • Reply to be submitted within time line prescribed under an Order. • It should be para wise reply of original averment supported by Affidavit. • No new facts. New facts only through amendment application.
Its not about winning or loosing !! Success is a journey, not the destination !!
CS RanjeetPandey Central Council Member, ICSI Practising Company Secretary # 09810558049, 011 – 46074119 cs.ranjeet@gmail.com
