POWERS O F COMPANY LAW BOARD : A CRITICAL ANALYSIS

POWERS OF COMPANY LAW BOARD: A CRITICAL ANALYSIS

SUBMITTED TO:- SUBMITTED BY:-

DR. DIPAK DAS PIYUSH PATEL

(FACULTY – CORPORATE LAW) SEMESTER VI

SECTION - C

ROLL NO. 107

CORPORATE LAW PROJECT

DATE OF SUBMISSION:-06/04/2017

HIDAYATULLAH NATIONAL LAW UNIVERSITY

UPARWARA, NAYA RAIPUR, CHHATTISGARH

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 POWERS O F COMPANY LAW BOARD : A CRITICAL ANALYSIS

Declaration
I hereby declare that the project work entitled “Powers Of Company Law Board: A Critical

Analysis” submitted to HNLU, Raipur, is a record of an original work done by me under the

guidance of Dr. Dipak Das, Faculty Member Corporate Law, HNLU, Raipur.

Piyush Patel

Semester- VI

Section - C

Roll no. 107

Acknowledgements

I would like to sincerely thank the Faculty of Corporate Law, Dr. Dipak Das for giving me this
project on the topic, “Powers Of Company Law Board: A Critical Analysis”. This has widened
my knowledge on the relevant topic. Her guidance and support has been instrumental in the
completion of this project. Thank you sir indeed.
I’d also like to thank all the honorable judges, authors, writers, social workers and lawyers, for
their outstanding and remarkable works, views, ideas, judgments and articles that I have used for
the completion of my project.
My heartfelt gratitude also goes out to the staff and administration of HNLU for the infrastructure
in the form of our library and IT lab that was a source of great help in the completion of this project.
I also thank my friends for their precious inputs which have been very helpful in the completion
of this project.

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 POWERS O F COMPANY LAW BOARD : A CRITICAL ANALYSIS

TABLE OF CONTENTS

ACKNOWLEDGEMENTS......................................................................................................…...2

TABLE OF CONTENTS….............................................................................................................3

OBJECTIVES……………..………………………………………………………………………4

RESEARCH METHODOLOGY……………………………………….………………………...4

INTRODUCTION...........................................................................................................................5

HISTORY AND DEVELOPMENT.............................................................................................6-9

POWERS CONFERRED ON THE CLB.................................................................................10-15

IS IT POSSIBLE TO LAY DOWN HARD AND FAST RULES ON THE POWERS

CONFERRED UPON CLB UNDER SECTION 397/398 OF THE COMANIES ACT,
1956?........................................................................................................................................16-18

NATIONAL COMPANY LAW TRIBUNAL.......................................................................19-21

CONCLUSION..............................................................................................................................21

REFERENCES..............................................................................................................................22

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 POWERS O F COMPANY LAW BOARD : A CRITICAL ANALYSIS

OBJECTIVES

The main objectives are:

• To study the history of the Company Law Board

• To study the powers and objectives of the Company Law Board.
• To examine the role of Company Law Board specifically with the cases of oppression
and mismanagement.
• To study the changes made my Companies Act of 2013.

RESEARCH METHODOLOGY

This is a doctrinal research project. This research paper is based on secondary and electronic
sources. Other references as guided by Faculty of Corporate Law have been primarily helpful in
giving this project a concrete shape. Websites and articles have also been referred.
Footnotes have been provided wherever needed, to acknowledge the source.

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 POWERS O F COMPANY LAW BOARD : A CRITICAL ANALYSIS

CHAPTER 1:- INTRODUCTION

Since August 1955, the Central Government has established a new Department of Company Law
Administration (DCLA) under the Ministry of Finance1. In the year 1964, there was established a
Board of Company Law Administration (BCLA) by an amendment in Indian Companies Act 1956
in the light of the recommendations made by the Bhaba Committee in 1952. The “Bhaba
Committee Report” made the following recommendations with respect to a central authority:

• The law should also provide for the establishment of an appropriate authority not merely
for enforcing the provision of the Companies Act or for carrying out investigations which
may be necessary under it, but also for generally overseeing the administration of the Act
and for exercising in the public interest that reserve of authority which must necessarily
vest in some organ of Government; and
• The provisions for investigations into the affairs of a company should be so designed as to
enable an appropriate authority to intervene in its affairs not merely when an offence has
been committed, but also when it is established that the affairs of a company are being
managed in a manner prejudicial to the shareholders of the company, or oppressive to any
substantial portion of them, or when such investigation is otherwise necessary in the public
interest.

Therefore, Section 10E of the Companies Act, 1956 deals with Constitution of Board of Company
Law Administration, section 10F deals with appeals against the orders of the Company Law Board
and section 10FA deals with the dissolution of Company Law Board.

1
Pandia, Ranjitlal, H., The Companies Act 1956 with Complete and Exhaustive Commentary, Expository and Critical,
Bombay: N. M. Tripathy, 1956, p. 433.

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 POWERS O F COMPANY LAW BOARD : A CRITICAL ANALYSIS

CHAPTER 2:- HISTORY AND DEVELOPMENT

Prior to the enactment of Indian Companies Act of 1956, under the repealed Companies Act of
1913, the powers of investigations were delegated to the state governments, who had no adequate
machinery for using the same for required purposes. These provisions, therefore, remained dead
letter. Therefore, under the Indian Companies Act 1956, the following powers were taken over by
the Central Government:

• Power to appoint inspectors for investigation (ss. 237-241);

• Power to start prosecutions (s. 242);
• Power to compulsorily wind-up the company in certain cases (s. 243);
• Power to recover damages or property (s. 244);
• Power to appoint inspectors to investigate ownership of companies (s. 247);
• Power to inquire into ownership of shares and debentures and interest in managing agency
etc. (ss. 248-249);
• Power to put restrictions on transfer etc. of shares or debentures of a company in certain
[number of] cases (s. 250).

The above mentioned powers were taken by the Central Government to inquire into the
management of a company’s affairs are a measure to the distempers with which company
management in India has been afflicted since the 2nd world war. The Central Government was
able to check, control, circumvent all forms of possible mal-administration and corruption in
company management and bring the respective offenders to book.

The Central Government constituted an independent Company Law Board (CLB) vide
Notification S.I. No. 364 dated the 31st May, 1991. The Board is a quasi-judicial body, consisting
of nine members that exercise some of the judicial and quasi-judicial powers which were earlier
being exercised by the High Courts or the Central Government.

Following powers of the court were transferred to CLB under the amendment of 1988.

These include:

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 POWERS O F COMPANY LAW BOARD : A CRITICAL ANALYSIS

1. Power to confirm alteration in memoranda (s. 17);

2. To sanction issue of share at a discount (s. 73);

3. To call a General Meeting (s. 186);

4. To order rectification of register of charges, or register of members (s. 111); and

5. To provide relief against oppression and mismanagement (ss. 397-409).

6. While Board also shares the powers of Central Government to grant approvals under section
637-A.

The Board, is not subject to the control of the Central Government and has the powers to regulate
its own procedure and act in its own discretion2.

The powers of CLB in case of “Prevention of Oppression and Mismanagement” are also wide
enough. In Indian Companies Act, 1913, these powers were not available. Even in English
company law, these powers were introduced in the English Companies Act of 1948 on the
recommendations of Cohen Committee3. Following this example, Indian Companies Act of 1913
was amended to that effect in 1951. Originally, these powers were with Courts (ss. 397-407) and
Central Government (ss. 408-409), but in 1988, by an amendment4 in Indian Companies Act of
1956, these powers were transferred to CLB to make this body more effective and autonomous. It
is worth mentioning here that a general trend of transferring the regulatory powers to the CLB has
been found. The powers under these sections are also regulatory in nature, hence transferred to the
CLB.

This is another case where the powers of Court and Central Government have been transferred to
CLB. Before, these powers were available with high courts and Central Government; but after an
amendment in 1988, the powers of court and central government are now vested in CLB. Hence,
the role of CLB also acquired the status of a quasi-judicial body. However, there is a conflict of

2
< http://www.allindia.com/gov/ministry/finance/dca/law.htm >.Last accessed on 3rd April 2014.
3
Pandia, The Companies Act, 1956, Op. Cit., p. 240.
4
The Indian Companies (Amendment) Act, 1988, XXXI of 1988.

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 POWERS O F COMPANY LAW BOARD : A CRITICAL ANALYSIS

opinion regarding its judicial character. This contention was raised as the provisions of sub-
sections (4-C) and (4-D) of section 10-E of the Companies Act, 1956 provides that “every Bench
shall be deemed to be a Civil Court for the purpose of s.195 and Chapter XXVI of the Code of
Criminal Procedure 1973 and every proceedings before the Bench shall be deemed to be a judicial
proceeding…” Mr. R Santhanam is of the view that CLB is not competent to start prosecution in
case any party makes a false statement or declaration. Rather, it can only direct that a complaint
against the wrongdoer be filed in a court of competent jurisdiction.

While Mr. M. M. Sheth, in a letter to Mr. Santhanam, opposed this view and developed his own
analogy to prove that CLB is a court to start prosecution and punish the parties making any false
statements or declarations. Dr. Avtar Singh 5 is of the view that CLB is a court-proper for the
purposes of execution of its orders passed under the provisions of this Act.

In his article, “The Companies Act, 1956––Restraints on Growth of Corporate Sector” (1982) 2
Comp LJ 221 (Journal), Mr. B. Banerjee pointed out that there are:

• 12 matters require approval of the Regional Directorate;

• 44 matters require approval of the Central Government;
• 11 matters require approval of the CLB under the powers delegated to it by the
Government; and
• 7 matters require consideration of the CLB under the Act.

He further suggests that “excessive governmental intervention and regulations imposed on

corporate sector created series of restraints in the process of growth”, therefore, it is required that
“the matters for prior approval of the Government should be significantly consolidated and kept
to the minimum.” Though the consolidation of powers in one body has reduced the burden on the
corporate sector with respect to management of Company Law by one central authority,
nevertheless, the role of that authority tends to decrease in efficiency had it not been working in
harmony with the corporate sector. The approach of the bureaucracy towards the corporate sector
always remained of a mere controlling and interfering body, than of a “vigilant onlooker”. But due

5
Singh, Dr. Avtar, Company Law, Lahore: Central Law Book Agency, n.d., p. 420.

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 POWERS O F COMPANY LAW BOARD : A CRITICAL ANALYSIS

to the independent status given to CLB, it is now in a better position to work in harmony with the
corporate sector for the development and administration of company law.

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 POWERS O F COMPANY LAW BOARD : A CRITICAL ANALYSIS

CHAPTER 3:- POWERS CONFERRED ON THE COMPANY LAW BOARD

I) Company Law Board shall exercise and discharge such powers and functions as may be
conferred on it by or under the Companies Act or any other law and should not contravene the
provisions of section 10E (1A) of Companies Act 1956.

II) It shall also exercise and discharge such powers and functions as may be conferred on it by the
Central Government from time-to-time.

III) The Companies Act has conferred on the CLB various powers and functions some of which
have been transferred from the Court while some other from the Central Government.

APPLICATION

Powers conferred on CLB by the Companies Act, 1956.

Section Nature of Power

10 (E) To regulate the procedure of the Company Law Board.
17 (2) To confirm alteration of the memorandum of association with respect to
the shifting of the registered office of the company from one State to
another
18 (4) To extend time for the filling of a certified copy of the order of the
Company Law Board (and other documents) required to be filed.
19 (2) Proviso To revive the order of the Company Law Board passed under section 17
which was not filed within the time prescribed under section18.
43 Proviso To grant relief from the consequences arising on the default by the
company in complying with the conditions set out in clause (a) to (c) of
section 3 (1) (iii) constituting a company as a private limited company.
49 (10) To direct immediate inspection of the register kept under section 49(8) if
inspection of the same by any member or debenture holder is refused by
the company.
58 A (9) To direct repayment of unpaid deposits
79 (2) To sanction the issue of shares at a discount

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 POWERS O F COMPANY LAW BOARD : A CRITICAL ANALYSIS

80 A (1) Proviso To accord consent to the issue of further redeemable preferences shares
where the previous redeemable preference shares are not redeemed.
111 (5) To direct the registration of transfer or transmission of shares or
debentures or to direct rectification of the register of members of the
company, in the case of a private company or a deemed public company.
111 A (2) Proviso To direct rectification of the register of members of a public company.
(3)
113 (1), Proviso To extend time up to nine months for issuing debenture certificates if not
issued within the time prescribed in sub- section (1).
113 (3) To direct a company to deliver the certificates of shares or debentures if
not issued within the time prescribed in subsection (1).
118 (3) To direct that a copy of the debenture trust deed required shall forthwith
be sent to the person requiring it.
141 (1) To direct that the time for filing of the particulars or for the registration or
modification of a charge or for the giving of intimation of payment or
satisfaction of a charge shall be extended or that the omission or mis-
statement in regard to the particulars thereof shall be rectified.
141 (2) To make an order as to the costs of an application under subsection (1) of
Section141.
144 (4) To compel an immediate inspection of the copies of Instruments of charges
or register of charges.
163 (6) To compel an immediate inspection of the registers or indexes of members
or debenture holders or annual return and other documents or to direct that
extracts thereof shall be allowed to be taken or copies thereof shall be
furnished.
167 (1) To call or direct the calling of an annual general meeting.
186 (1) To order a general meeting to be called, held and conducted.
188 (5) To direct that any statement need not be circulated if it is satisfied that the
rights conferred by the section are being abused to secure needless
publicity for defamatory statement.

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 POWERS O F COMPANY LAW BOARD : A CRITICAL ANALYSIS

196 (4) To order an immediate inspection of the minute books or direct that the
copy required shall forthwith be sent to the person requiring it.
219 (4) To direct that a copy of the last balance sheet and the documents annexed
or attached thereto demanded in pursuance of sub-section (4) be furnished
forthwith.
225 (3), Proviso To direct that the copies of the representations made by the auditor sought
to be removed need not be sent out and read out at the meeting if it is
satisfied that the rights conferred by the section are being abused to secure
needless publicity for defamatory matter.
235 (2) To declare that the affairs of the company ought to be investigated.
236 To direct, in support of the application for a declaration as aforesaid, such
evidence to be produced as it may require.
237 (b) To form an opinion that there are circumstances suggesting existence of
matters specified in sub-clauses (i), (ii) and (iii) which calls for the
investigation of the affairs of a company.
241 (2) (dd) To be furnished with a copy of the report of inspector on completion of
the investigation.
247 (1A) To declare that the affairs of the company ought to be investigated as
regards the membership and other matters.
248 (1) To require any person to give any information as to the present and past
interest of the persons in any shares or debentures of the company.
250 (1) To direct that the shares shall be subject to the restrictions imposed by sub-
section (2) of section 250 in order to find out the relevant facts about the
shares.
250 (3) To direct that the voting rights in respect of any shares shall not be
exercisable for such period not exceeding three years as may be specified,
and that no resolution passed or action taken to effect a change in the
composition of the Board of directors shall have effect unless confirmed
by the Company Law Board.

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 POWERS O F COMPANY LAW BOARD : A CRITICAL ANALYSIS

250 (4) To direct that any transfer of shares during the specified period shall be
void.
250 (5) To vary or rescind an order made by it under sub-section (1), (3) or (4) of
section 250.
269 (9) To declare that the appointment of a managing or whole-time director or
manager has been made in contravention of the requirements of Schedule
XIII
284 (4), Proviso To direct that copies of the representation made by the director proposed
to be removed need not be sent out, and read out at the meeting if it is
satisfied that the rights conferred by the section are being abused to secure
needless publicity for defamatory matter.
304 (2) To compel an immediate inspection of the register of directors, etc
307 (9) To compel an immediate inspection of the register of director's
shareholdings.
388B/388D To record a decision as to whether or not a person is a fit and proper person
to hold the office of director or any other office connected with the conduct
and management of any company.
388 (c) To pass interim orders during the pendency of a case under section 388B
restraining a person to hold the office or replacing him by another person.
397 to 405 To make such orders as it may think fit, and to exercise the powers
conferred by sections 397 to 405, with a view to bringing to an end or
preventing the matters complained of under sections 397 or 398 i.e.
oppression and mismanagement of the affairs of the company.
407 (1) To grant leave to appoint a managing or other director or manager whose
agreement has been set aside or terminated by the Company Law Board
under section 402.
408 (1) To declare that it is necessary to make the appointment of one or more
directors by the Central Government to prevent the affairs of the company
being conducted either in a manner which is oppressive to any members
of the company or in a manner which is prejudicial to the interests of the
company or to public interest.

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 POWERS O F COMPANY LAW BOARD : A CRITICAL ANALYSIS

408 (1), Proviso To direct a company to amend its articles in the manner provided for in
section 265 and make fresh appointment of directors.
408 (2) To direct, where an order as aforesaid has been passed, that such number
of persons as it may specify shall hold office as additional directors till the
directors are appointed in pursuance of the amended articles.
408 (5) To confirm a change in the Board of directors made after a person is
appointed or directed to hold office as an additional director under section
408.
409 To prevent a change in the Board of directors which is likely to affect the
company prejudicially.
610 To grant leave to issue process for compelling the production of any
document kept by the Registrar.
614 (1) To direct a company and any of its officers to make good the default in
complying with any provisions of the Act requiring to file any document,
etc.
621A To compound the offences of the specified kinds.
Schedule XI To exercise the powers specified in Schedule XI in relation to an
application under 397 or 398.

II) Power conferred on CLB under other laws

In addition to the powers conferred by the Companies Act, the CLB is also empowered to exercise
the power under section 2A of the MRTP Act, 1969 to decide the question as to whether

a. two or more individuals, trustees, associations of individuals, firms or bodies corporate or any

combination thereof, constitute or fall within a group, or

b. two or more undertakings are inter-connected undertakings within the meaning of that Act, or

c. two or more bodies corporate are under the same management.

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 POWERS O F COMPANY LAW BOARD : A CRITICAL ANALYSIS

Besides, section 22A of the Securities Contracts (Regulation) Act, 1956 empowers the CLB to
deal with the references filed by the listed companies under clause (d) of sub-section (4) thereof.

IS IT POSSIBLE TO LAY A HARD AND FAST RULE ON THE POWERS OF COMPANY LAW
BOARD UNDER SECTION 397/398 OF COMPANIES ACT, 1956?

It is known to the corporate professionals that there are so many complications in getting the
disputes resolved among shareholders in the Company. The disputes among the shareholders or
the groups tend to come in closely held companies as the largely held Public Limited Companies
should follow SEBI (DIP) regulations while allotting shares and as SEBI and the Stock Exchange
monitors various issues in respect of Listed Public Companies. When the trust is lost between or
among the groups in a Company, then, each group tries to take control over the Company or the
affairs of the Company by resorting to certain acts. The law governing the protection of the rights
of the shareholders is very complicated despite the protection given to the shareholders against
oppression and mismanagement under section 397/398 of Companies Act, 1956. When there is
oppression or mismanagement in a Company, the aggrieved group can approach the Civil Court
at times, Company Law Board in most of the cases and can even approach the High Court seeking
winding-up of the Company. There are complications in getting the corporate disputes resolved
through Civil Court and as such there is a specific bar on Civil Courts’ Jurisdiction in respect of
Company cases under the proposed Companies Bill. Again, when the Company is a going concern,
the High Court may not favour winding-up a Company and as such the remedy provided under
section 397/398 of the Companies Act, 1956 is important for the aggrieved shareholders or the
aggrieved group against oppression and mismanagement. There are concerns that the remedy
provided by the Company Law Board is not effective and there are also concerns that the remedy
before the Board under section 397/398 of the Companies Act, 1956 is getting misused.

If we keep the other broader issues apart, the powers of the Company Law Board under section
397/398 of the Companies Act, 1956 were the subject matter of discussion among the corporate
and the corporate professionals dealing with issue very frequently. There are so many precedents
on section 397/398 of the Act and also on the powers of the Company Law Board. If we keep the
express limitation on the powers of the Company Law Board under section 402 apart, even
otherwise, the powers of the Company Law Board were the subject matter of discussion in many
appeals and even before the Hon’ble Supreme Court of India. It is true that the precedents laid-

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 POWERS O F COMPANY LAW BOARD : A CRITICAL ANALYSIS

down by the Constitutional Courts to be interpreted in right spirit and the settled practice are to be
adhered to. Despite so many guidelines from the Constitutional Courts on the proceedings before
the Company Law Board under section 397/398 of the Companies Act, 1956, there exist
complications and the Board may have to deal with variety of situations in each case before it.
Many are in dilemma as to the scope of section 397/398 of the Companies Act, 1956 and also the
powers of the Company Law Board. There are judgments where the Courts held that the Company
Law Board cannot exercise the powers which are not expressly conferred on it and there are
judgments supporting the argument of elaborate powers of the Company Law Board under section
397/398 of the Companies Act, 1956.

In my personal opinion, the observation of Hon’ble Supreme Court of India in M.S.D.C.

Radharamanan Vs. M.S.D. Chandrasekara Raja & Another6 is the correct legal position and
the approach on the issue of the powers of the Company Law Board under section 397/398 of the
Companies Act, 1956 and the reference in the judgment referred above is extracted hereunder:

“19. The provisions of the Act vis-a-vis the jurisdiction of the Company Law Board must be
considered having regard to the complex situation(s) which may arise in the cases before it.
No hard and fast rule can be laid down. There cannot be any doubt whatsoever that the acts
of omission and commission on the part of a member of a company should be qua the
management of the company, but it is difficult to accept the proposition that the just and
equitable test, which should be held to be applicable in a case for winding up of a company,
is totally outside the purview of SECTION 397 of the Act. The function of a Company Law
Board in such matters is first to see as to how the interest of the company vis-a-vis its
shareholders can be safeguarded. The Company Law Board must also make an endeavour
to find out as to whether an order of winding up will serve the interest of the company or
subvert the same. Further, if an application is filed under Section 433 of the Act or SECTION
397 and/or 398 thereof, an order of winding up may be passed, but as noticed hereinbefore,
the Company Law Board in a winding up application may refuse to do so, if any other
remedy is available. The Company Law Board may not shut its doors only on sheer
technicality even if it is found as of fact that unless the jurisdiction under Section 402 of the

6
2008 (6) SCC 750

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Act is exercised, there will be a complete mismanagement in regard to the affairs of the
company.

20. Sections 397 and 398 of the Act empower the Company Law Board to remove oppression
and mismanagement. If the consequences of refusal to exercise jurisdiction would lead to a
total chaos or mismanagement of the company, would still the Company Law Board be
powerless to pass appropriate orders is the question. If a literal interpretation to the
provisions of SECTION 397 or 398 is taken recourse to, may be that would be the
consequence. But jurisdiction of the Company Law Board having been couched in wide
terms and as diverse reliefs can be granted by it to keep the company functioning; is it not
desirable to pass an order which for all intent and purport would be beneficial to the
company itself and the majority of the members? A court of law can hardly satisfy all the
litigants before it. This, however, by itself would not mean that the Company Law Board
would refuse to exercise its jurisdiction, although the statute confers such a power on it.”

As such, there cannot be any hard and fast rule on the powers of Company Law Board under
section 397/398 and section 402 of the Companies Act, 1956 while certain limitations and
settled principles are necessary to be followed.

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NATIONAL COMPANY LAW TRIBUNAL

Genesis of Establishment of Specialised Tribunals

The genesis of setting up of specialized tribunals can be traced in the Supreme Court judgement
in Sampath Kumar case 7 . In this case while adopting the theory of alternative institutional
mechanism the Supreme Court refers to the fact that since independence, the population explosion
and the increase in litigation had greatly increased the burden of pendency in the High Courts. The
Supreme Court also referred to studies conducted towards relieving the High Courts of their
increased load; the recommendations of the Shah Committee for setting up independent Tribunals
as also the suggestion of the Administrative Reforms Commission for setting up of Civil Service
Tribunals. The problem of clearing the backlogs of High Courts, which has reached colossal
proportions has been the focus of study for close to a half century. Over time, several Expert
Committees and Commissions have analysed the intricacies involved and have made suggestions.
The Law Commission of India in its 124th Report of 1988 pointed out that the different types of
litigation coming before the High Court in exercise of its wide jurisdiction has to some extent been
responsible for a very heavy institution of matters in the High Courts and recommended for
establishment of specialist Tribunals.

Establishment of NCLT

The Companies (Second Amendment) Act, 2002 provides for the setting up of a National
Company Law Tribunal and Appellate Tribunal to replace the existing Company Law Board and
Board for Industrial and Financial Reconstruction. It also provides for dealing with various
matters, which fall presently under the jurisdiction of High Court pursuant to various provisions
contained in the Companies Act, 1956. The setting up of NCLT as a specialized institution for
corporate justice is based on the recommendations of the Justice Eradi Committee on Law Relating
to Insolvency8 and Winding up of Companies. The Committee examined not only the Companies
Act, 1956 but also the other relevant laws having a bearing on the subject such as Sick Industrial
Companies (Special Provisions) Act, 1985 (SICA), Recovery of Debts due to Banks and Financial
Institutions Act, 1993 and the recommendations of the United Nations and International Monetary

7
S P Sampath Kumar v. Union of India, 1985 (4) SCC 458.
8
Justice Eradi Committee on Law Relating to Insolvency and Winding up of Companies.

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Fund Report - “Orderly and Effective Insolvency Procedures- Key Issues”. The Committee in its
report noted that there are at present three different agencies namely, the High Courts, which have
powers to order winding up of companies under the provisions of the Companies Act, 1956;
secondly, the Company Law Board set up under section 10E of the Companies Act, 1956 to
exercise powers conferred on it by the Act or the powers of the Central Government delegated to
it and finally, Board for Industrial and Financial 69 Reconstruction (BIFR) which deals with the
references relating to rehabilitation and revival of companies. The High Courts are not able to
devote exclusive attention to winding up cases which is essential to conclude the winding up of
companies quickly. The experiment with BIFR for speedy revival of companies has also not been
encouraging. The committee after a detailed analysis of the working of BIFR, with respect to
revival of sick companies and the working of High Courts with respect to winding up of companies
recommended for the formation of a composite legal forum to address all aspects of Companies
Act 1956 rather than have separate Acts (SICA 1985 etc.) and multiple forums (BIFR, High Court)
for various sections of the Companies Act 1956.

Powers of NCLT

The NCLT has been empowered to exercise the following powers:

1. Most of the powers of the Company Law Board under the Companies Act, 1956.
2. All the powers of BIFR for revival and rehabilitation of sick industrial companies;
3. Power of High Court in the matters of mergers, demergers, amalgamations, winding up,
etc.;
4. Power to order repayment of deposits accepted by Non-Banking Financial Companies as
provided in section 45QA of the Reserve Bank of India Act, 1934;
5. Power to wind up companies;
6. Power to Review its own orders.

The NCLT shall have powers and jurisdiction of the Board for Industrial and Financial
Reconstruction (BIFR), the Appellate Authority for Industrial and Financial Reconstruction
(AAIFR), Company Law Board, High Courts relating to compromises, arrangements, mergers,
amalgamations and reconstruction of companies, winding up etc. Thus, multiplicity of litigation

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before various courts or quasi-judicial bodies or forums have been sought to be avoided. The
powers of the NCLT shall be exercised by the Benches constituted by its President.

On and from the commencement of the relevant sections of the Companies (Second Amendment)
Act, 2002, the Board of Company Law Administration (CLB) constituted under Section 10E of
Companies Act, 1956 shall stand dissolved. It may be noted that notification to dissolve the CLB
under Section 10FA has not yet been issued by the Central Government and till such notification
is issued, the Company Law Board shall continue to discharge its duties and exercise its powers
under the Companies Act, 1956.

CONCLUSION

Therefore the Companies Act, 1956 confers a wide range of powers in the hands of the Company
Law Board. There cannot be any hard and fast rule imposed on the Company Law Board in its
discretion to exercise powers it is conferred upon by the law. The CLB is always subject to certain
limitations which it has to keep in mind while dealings with cases at hand and is bound to follow
the settled principles. Finally, Section 10E of the Companies Act, 1956 deals with Constitution of
Board of Company Law Administration, section 10F deals with appeals against the orders of the
Company Law Board and section 10FA deals with the dissolution of Company Law Board.

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 POWERS O F COMPANY LAW BOARD : A CRITICAL ANALYSIS

REFERENCES

BOOKS

• GOWER AND DAVIES, PRINCIPLES OF MODERN COMPANY LAW 8th Edition (2008)

• C R DATTA, THE COMPANY LAW 6th Edition (2008).

• TAXMANN’S COMPANY LAW, 15th Edition (2012).

• AVTAR SINGH, COMPANY LAW, 15th Edition (2007).

WEBLIOGRAPHY

• www.pib.nic.in
• www.mca.gov.in
• www.watchoutinvestors.com
• www.teriin.org

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