February 1, 2017

Only time will tell how this affects the country's present situation of over 30 mn pending cases

With the Budget announcement of the government's plans to rationalise the tribunals existing in the country, a number of appellate bodies are likely to face the axe in the coming days. Currently, India has a number of tribunals that look into appeals made from orders of specific sectoral regulators.

These include the Telecom Disputed Settlement and Appellate Tribunal , Securities Appellate Tribunal, Competition Appellate Tribunal (COMPAT), National Company Law Appellate Tribunal and Debt Recovery Appellate Tribunals – which look into appeals against orders passed by the National Company Law Tribunals (NCLTs) and Debt Recovery Tribunal (DRTs), respectively – and a host of other such bodies.

According to sources in the government, COMPAT, which addresses appeals against fair trade regulator Competition Commission of India, could be one of these tribunals that may be on the chopping block. At the moment, the COMPAT is functioning with just two judges, after Justice Rajiv Kher's retirement in December 2016. The government still doesn’t seem to have found Kher’s replacement in the tribunal, though this is not the first time that the COMPAT is functioning with only two judges.

The finance minister’s announcement is being seen as smoke before the fire, in what may eventually result in the winding up of the COMPAT. “Any possibility of dissolving the COMPAT or its merger with the NCLT will defeat the focus of competition law in India. The merging of the tribunal (COMPAT) with the NCLT would cause severe confusion as the former is an economic regulator and the latter a financial one and would certainly come as a big surprise,” said Sitesh Mukherjee, partner, Trilegal.

It is already felt that the NCLTs and DRTs are burdened excessively with the notification of various provisions of the Companies Act 2013 in December 2016, which have transferred a barrage of pending and fresh cases relating to compromises, arrangements, mergers, amalgamations and winding ups to the tribunal. This added caseload comes in the backdrop of the tribunals’ previous responsibilities, including the settlement of cases of oppression and mismanagement, as well as adjudication of class action suits.

To further the woes of the over-burdened structure, which is already in severe need of further infrastructure and additional benches, the newly introduced Insolvency and Bankruptcy Code 2016 (IBC) has also bestowed the NCLTs with the duty of handling corporate insolvencies. Under the IBC, even restructuring of sick industrial companies, formerly handled by the Board for Financial and Industrial Reconstruction (BIFR) and Appellate Authority for Industrial and Financial Reconstruction (AAIFR) under the erstwhile Sick Industrial Companies Act (SICA) 1985, are now to be dealt with by these tribunals alone.

Experts feel that there is little scope for the government to further stratify the tribunals, particularly relating to the financial sector, as the SICA, BIFR and AAIFR have now become non-existent. According to Sapan Gupta, partner, Shardul Amarchand Mangaldas, instead of thinking of reducing the number of tribunals, the focus needs to be towards making these existing institutions more robust.

However, if the Budget announcement is anything to go by, India may soon see a reversal of years of attempts at creating alternative and more technically equipped institutions of dispute resolution in our increasingly complex financial and business landscape. Only time will tell which tribunals go and which ones stay, and how this affects the country’s present situation of over 30 million pending cases.

[The Business Standard]