NCLT, NCLAT hijacked by corporate affairs ministry: Supreme Court

The Supreme Court declared on Thursday that the administration of the National Company Law Tribunal and the National Company Law Appellate Tribunal had been completely hijacked by the Union ministry of corporate affairs. A bench led by Chief Justice Surya Kant warned that the ministry’s attempt to exert control over these quasi-judicial bodies was undermining their autonomy and daily functioning. The court stated that the ministry sought a complete grip over the institutions, a situation the judges described as most unfortunate. The bench included Justices Joymalya Bagchi and V Mohana. They were hearing a suo motu case regarding infrastructure deficiencies, staff shortages, and administrative difficulties affecting both tribunals. The court emphasized that the presidents of the NCLT and NCLAT must be permitted to administer their respective institutions independently. The bench instructed that the entire power of appointment for personnel should rest solely with the presidents. They rejected arguments for protecting existing contractual employees based on tenure alone. Instead, the court indicated that recruitment must occur through proper channels, specifically mentioning the Union Public Service Commission or the Staff Selection Commission. The judges noted that contractual employment often represents a backdoor entry into the system. Senior advocate Sanjiv Sen, appearing for the NCLT Bar Association, highlighted the deteriorating physical condition of the tribunal’s principal bench in Delhi. He reported that roofs were collapsing and that the seventh and eighth floors of the main building had been shut down due to safety concerns. Consequently, all courts within the facility were operating at half strength. Sen described the situation as being in shambles. The court accepted these reports of infrastructure failure as part of the broader administrative crisis. The staffing crisis at the NCLT is severe. Out of 320 sanctioned regular administrative posts, only 67 have been filled, leaving 253 vacancies. Additionally, 16 positions for judicial and technical members remain unfilled. Senior advocate Meenakshi Arora informed the bench that the ministry had outsourced the recruitment of administrative personnel to a foreign company operating in India. This contract, awarded on October 6, involves deploying staff such as deputy registrars, assistant registrars, and stenographers. Arora argued that this arrangement could displace existing contractual employees starting November 1 or 2. She contended that these employees had served for eight years and should not be terminated abruptly. Chief Justice Kant responded firmly to these claims. He stated that the court would not intervene to keep contractual staff in position simply because they had served for several years. Nor would the court allow private contractors to dictate staffing arrangements for a judicial institution. The judge cited specific incidents of misconduct by contractual staff, including cases where original files were removed and criminal complaints were registered. He mentioned that in Bombay, contractual employees had taken original documents, leading to First Information Reports being filed. The bench concluded that current and past contractual employees should be released, allowing the tribunal presidents to manage future hiring autonomously. Attorney General R Venkataramani, representing the central government, informed the court that recommendations for new appointments were currently in the pipeline. He proposed a joint meeting involving government representatives, the NCLT president, and other relevant parties to address the issues. The court directed the presidents of both the NCLT and NCLAT to submit detailed proposals regarding infrastructure and staffing within four weeks. These proposals should include requirements for land, buildings, and the secure keeping of records. The tribunal handles critical matters including corporate civil disputes, company law violations, and insolvency proceedings. During the financial year 2024-25, the NCLT approved resolution plans valued at 55,000 crore rupees. Despite this volume of high-stakes work, the institution faces significant operational hurdles. The court’s intervention aims to restore institutional independence and ensure that the heads of these tribunals can effectively suggest ways to smooth and strengthen their day-to-day operations. The focus remains on eliminating external interference in administrative decisions and addressing the immediate need for functional infrastructure and adequate staffing levels.