The National Company Law Appellate Tribunal (NCLAT) quashed an order of the National Company Law Appellate Tribunal (NCLT) directing that the Ministry of Corporate Affairs (MCA) be made a party to every case under the Insolvency and Bankruptcy Code (IBC) on Monday.
According to the appellate tribunal, the NCLT’s order, was beyond the power of the tribunal as it was tantamount to the imposition of a new rule in a compelling fashion
The impugned order making it applicable throughout the country to all the benches of NCLT is untenable and it suffers from material irregularity and patent illegality in the eye of law, said the judgment of the three-judge bench headed by Justice Venugopal M.
“The NCLAT ruled that the MCA need not be a party to all Section 7,9 and 10 applications, although they may be impleaded in certain cases based on exercise of judicial principles and following principles of natural justice. Although the MCA has been central in the implementation of the IBC, their being a party to every single IBC fillings is not only excessive but perhaps counterproductive,” said Richa Roy, partner at Cyril Amarchand Mangaldas.
In November 2019, the NCLT had directed the MCA, through its secretary, be party to all cases under IBC on the grounds that authentic records would be made available by officers of the MCA.
The Centre challenged the order arguing that such rule making was the exclusive domain of the government. It further said that authentic records could be furnished by the Registrar of Companies and certified copies could be made available for a fee.
The NCLAT order added that such “wholesale, blanket and omnibus directions” cannot be issued in a single stroke” and impleadment of the MCA can only be determined on a case-to-case basis.
