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4. It is stated that the recommendations of the Eradi Committee were accepted by the Government and Company (Second Amendment) Act, 2002 was passed providing for establishment of NCLT and NCLAT to take-over the functions which are being performed by CLB, BIFR, AAIFR and the High Courts. It is submitted that the establishment of NCLT and NCLAT will have the following beneficial effects: (i) reduce the pendency of cases and reduce the period of winding-up process from 20 to 25 years to about two years; (ii) avoid multiplicity of litigation before various fora (High Courts and quasi-judicial Authorities like CLB, BIFR and AAIFR) as all can be heard and decided by NCLT; (iii) the appeals will be streamlined with an appeal provided against the order of the NCLT to an appellate Tribunal (NCLAT) exclusively dedicated to matters arising from NCLT, with a further appeal to the Supreme Court only on points of law, thereby reducing the delay in appeals; and (iv) with the pending cases before the Company Law Board and all winding-up cases pending before the High Courts being transferred to NCLT, the burden on High Courts will be reduced and BIFR and AAIFR could be abolished.
5. It was contended that the power to provide for establishment of NCLT and NCLAT was derived from Article 245 read with several entries in List I of the Seventh Schedule and did not originate from Article 323B. It was submitted that various provisions in Parts IB and IC of the Act relating to the constitution of NCLT and NCLAT were intended to provide for selection of proper persons to be their President/Chairperson/members and for their proper functioning. It was submitted that similar provisions relating to establishment of other alternative institutional mechanisms such as Administrative Tribunals, Debt Recovery Tribunals and Consumer fora, had the seal of approval of this Court in S. P. Sampath Kumar vs. Union of India
7.3) The High Court also held that the period of lien in regard to the members of NCLT should be restricted to only one year instead of the entire period of service as a Member of NCLT.
The Union Government has submitted that in view of the proposed longer tenure of five years as against the three years, the government proposes to permit the members to retain their lien with their parent cadre/Ministry/Department for a period of three years, as one year may be too short for the members to decide whether to give up the lien or not.
Section 10FD(3)(f) : Appointment of Technical Member to NCLT 7.5) The High Court has held that appointment of a member under the category specified in section 10FD(3)(f), can have a role only in matters concerning revival and rehabilitation of sick industrial companies and not in relation to other matters. The High Court has therefore virtually indicated that NCLT should have two divisions, that is an Adjudication Division and a Rehabilitation Division and persons selected under the category specified in clause (f) should only be appointed as members of the Rehabilitation Division.