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National Company Law Tribunal Bar Association vs. Union of India

Writ Petition (Civil) · 2022 INSC 778Decided 1 Aug 2022
Writ Petition (Civil) No. 180 of 2022
Dr. Dhananjaya Y Chandrachud · Sudhanshu Dhulia

Background

In 2019, the government appointed 23 Members of the National Company Law Tribunal (NCLT) for a term of three years, even though Section 413 of the Companies Act, 2013 prescribes a five-year term. The NCLT Bar Association filed this writ petition seeking a correction of the notification to grant the full five-year tenure, relying on earlier Supreme Court rulings that had criticized short tribunal tenures as undermining independence. The government objected that the Bar Association had no standing to raise this on behalf of members who had themselves accepted the three-year offer without protest.

Decision Breakdown

The Supreme Court agreed on the merits that the three-year tenure prescribed in the 2019 notification was indeed inconsistent with the statutory five-year term under Section 413. However, it declined to grant the relief sought, extending the tenure of all 23 members, because: the members themselves had never challenged the shorter tenure; a fresh selection process for new appointments was already underway, with some of the outgoing members having reapplied; and the government had, in the interim, already extended the tenure of eight members for five years based on a performance review by the NCLT President. The Court held that entertaining the plea now would improperly draw it into evaluating individual members' suitability in a case where they were not even parties, and would disrupt the ongoing selection process. It disposed of the petition without granting the extension sought, but directed that all future NCLT appointments must comply with the statutory five-year term under Section 413.

Lesson Learnt

A rule or notification being technically illegal does not automatically mean a court will unwind its practical consequences years later. Courts weigh delay, the fact that affected persons themselves did not object, and disruption to ongoing processes, while still fixing the legal position for the future.

Official source (sci.gov.in)View Judgment (PDF)

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