National Company Law Tribunal

• Context (IE): Byju’s parent company, Think & Learn Pvt Ltd, once valued at $22 billion, now faces financial distress, legal challenges, and investor discontent.
• This month, CEO of Byju’s, informed employees about delayed salaries, attributing it to investors.
• Based on the Investors’ plea the National Company Law Tribunal has blocked access to $200 million raised through a rights issue in January.
• Further, Byju’s is facing inquiries into the whereabouts of $533 million which was parked with a Florida-based wealth manager.
  • Allegations of fund diversion are refuted by Byju’s, claiming the money was transferred to a subsidiary.
• The valuation dropped below $1 billion, leading to calls for the removal of CEO Byju Raveendran and his family members from the company.

National Company Law Tribunal

• It is a quasi-judicial body in India that adjudicates matters related to corporate law.
• NCLT was set up to replace the erstwhile Company Law Board and the Board for Industrial and Financial Reconstruction (BIFR).
• The Eradi Committee (2000) first recommended the constitution of an NCLT.
• Constituted by the Central Government under Section 408 of the Companies Act, 2013 with effect from 1st June 2016.
• Objective to provide a specialized forum for the resolution of disputes and matters pertaining to company law and Insolvency and Bankruptcy Act, 2016 (IBC).
• Composition: It shall consist of a President and such number of Judicial and Technical Members as may be required.
  • The President appointed by the Central Government after consultation with CJI.
  • Criteria for President: A person who is or has been judge of a High Court for five years.
  • The Members appointed by the Central Government on the recommendation of a Selection Committee.
• Term of Members
  • President of Tribunal: Initial term of 5 years or till attainment of 67 years.
  • Other Members: 5 years or till attainment of 65 years.
  • Can be renewed for next 5 years.
  • No person shall be appointed as a Member unless he has completed 50 years.
• Structure: The NCLT has eleven benches, two at New Delhi (one being the principal bench) and one each at Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata and Mumbai.
• Appeal-Decisions of the NCLT may be appealed to the National Company Law Appellate Tribunal (NCLAT), the decisions of which may further be appealed to the Supreme Court of India.

Powers of NCLT

• It has been given wide powers under the Companies Act, 2013 to adjudicate,
  • Cases initiated before the Company Law Board under the previous act (Companies Act, 1956)
  • All proceedings pending before any District court or High Court under the Old Act.
  • Cases pending before the Board for Industrial and Financial Reconstruction (BIFR), including those pending under the Sick Industrial Companies (Special Provisions) Act, 1985.
  • Appeals or any other proceedings pending before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR)
  • Fresh proceedings pertaining to claims of oppression and mismanagement of a company, winding up of companies and all other powers prescribed under the Companies Act.
  • The Insolvency and Bankruptcy Code, 2016, also provides wide powers to the NCLT to adjudicate upon the insolvency resolution process and liquidation of corporate debtors.

Rights issue

• It is an offer made by a company to its shareholders to purchase additional shares of their stock by a certain date at a specific price.
• Unlike IPO, the rights issue is not offered to the general public but only to the existing shareholders in proportion of their existing holdings.
• These are typically offered at prices that are lower than the typical share price.
• Rights issues can lower a stock’s value and decrease trading volume, both of which have an impact on the share price.