New Delhi, Nov 27: The Cabinet has cleared the setting up of the Company Law Tribunal replacing the Company Law Board and the Board for Industrial and Financial Reconstruction both of which had been criticised in the past as being toothless bodies.
The new body is expected to have greater powers to expedite revival of sick and near-sick companies or their winding up if needed while protecting the interests of workers.
The tribunal will be set within a year once the Bill is pushed through Parliament.
Sources said the Company Law Tribunal is likely to have about 60 members and would function through several benches across the country.
The Bill also provides for setting up an appellate tribunal which will act as a court of appeal beyond which companies can only approach the Supreme Court.
The power of the high courts and district courts in winding up companies have consequently been transferred to these tribunals. Earlier, decisions of the BIFR and CLB could be challenged in the high courts. Once this Bill is passed, one would have to approach the Supreme Court to appeal against decisions taken by the appellate body.
Analysts fear that this will make it costly for labour unions to contest various moves taken by company promoters to declare their companies sick.
However, the Bill includes two provisions to stop such wilful reporting of sickness. The first provision makes it obligatory for lending institutions to report to the tribunal whenever they discover that a company is headed towards sickness. “A company does not have to turn sick before reporting to the tribunal. If it shows the symptoms it might be brought before the body,” a finance ministry official said. Disposal of cases will be time bound and appeals too will have to be made within a certain time frame.
Besides this, the Bill provides for witholding financial assistance from banks and financial institutions to individuals associated with any entity found guilty of actions that forced a company to turn sick. This which will force promoters who routinely dress up accounts to declare their company sick to think twice before doing so.
The Bill also allows the tribunal to realise a cess of between 0.005 per cent and 0.10 per cent on the turnover or gross receipts of companies for funding rehabilitation and revival fund for companies.