Friday, May 15, 2015

Court X Tribunal - Issue Kept Alive ? ET AL INCL CA'S ...


Supreme Court in Madras Bar Association v Union of India where it was held that Chartered Accountants and Company Secretaries cannot be permitted to appear on behalf of a party before the National Tax Tribunal.
e unauthorised practice of law.
Support has also been drawn from the judgement of the Bombay High Court in Lawyers Collective vs. Bar Council where it was held that even “drafting documents, reviewing and providing comments on documents, conducting negotiations and advising clients on international standards and customary practice relating to the client’s transaction etc. was nothing but practising the profession of law in non litigious matters”.

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Readers may recall that the primary reason for the partial effectiveness of the Companies Act, 2013 (the “2013 Act”) has been the pending litigation surrounding the constitution of the National Company Law Tribunal (“NCLT”) and the National Company Law Appellate Tribunal (“NCLAT”). Hence, the provisions of the 2013 Act that relate to the NCLT[1] have been kept in abeyance pending the outcome of the litigation, while only the remaining provisions have already been brought into force. This legislative quagmire ended yesterday with a Constitution Bench ruling of the Supreme Court in Madras Bar Association v. Union of India, which upheld the constitutionality of the 2013 Act’s provisions relating to NCLT subject to certain qualifications. In this post, I discuss the key issues and ruling of the Supreme Court and highlight what this might mean for the future of corporate litigation in India.
Background and Ruling

The genesis of this litigation goes back to a challenge mounted to the constitutional validity of the provisions of the Companies Act, 1956 (the “1956 Act”), which were introduced by way of the Companies (Second Amendment) Act, 2002. These provisions catered for the constitution and functioning of the NCLT. Both the Madras High Court as well as the Supreme Court upheld the constitutional validity of the provisions subject to certain amendments to the legislation. This decision of the Supreme Court in R. Gandhi v. Union of India has been previously discussed here.

In the wake of the Supreme Court’s observations in that case, necessary changes were introduced to the scheme of the NCLT, which were reflected in the 2013 Act. However, another round of litigation ensued inter alia on the ground that the 2013 Act does not fully reflect the observations of the Supreme Court in R. Gandhi. Hence, the current ruling of the Supreme Court is essentially an effort to examine the provisions of the 2013 Act to consider whether it faithfully adheres to its previous ruling in R. Gandhi. While the court finds that the 2013 Act broadly does so, it also identifies some discrepancies. Hence its final conclusion of upholding the validity of the NCLT provisions of the 2013 Act, with qualifications to the extent of the discrepancies identified.

The Supreme Court’s decision is pithy and confines itself very closely to specific issues at hand without an elaborate discussion of constitutional principles. It is essentially verification exercise to ensure that the provisions of the 2013 Act adhere scrupulously to R. Gandhi. In this light, the Court pronounced its ruling on three principal issues:

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