Company Law Board - procedure - needed reforms

        I have been writing articles on Company Law in India, issues touching the corporate world and especially issues pertaining to Company dispute resolution mechanism. The state is supposed to do everything that is required for the betterment of Corporate World as we have already embraced industrialization substituting even agriculture if we keep the policy issues apart.

       With the advantage of limited liability and the scope of raising funds from the public and also institutions, business is started incorporating a company normally as we see. In such a scenario, it is very important to concentrate on the issues that create unnecessary difficulties to the industries or the companies. As we are all humans and even the companies are managed by professionals called managers or the directors, a dispute tend to come in the course and in most cases the dispute threatens even the very existence of the business establishment.

        For example, as I have heard, Steve Jobs of Apple Computers has taken a management guy who, as Steve felt, could be a useful asset for the Company. But, unfortunately, the Board of directors sided with the new person who has been brought by Steve into the Company and Steve had to leave the Company. It seems unreasonable and unethical, but, it happens in life and real time.

        What I want to say is that the disputes tend to come in the course of doing a business or running a Company, but, it needs to be ensured that the unfair do not take advantage of technicalities or faults in the system and a good dispute resolution system is must for the development of any industry. I have seen and heard many cases where the brilliant people who promotes and functions the Company for some time, had to waste all their time fighting in litigation and been confused as to what is law and what happens before the dispute resolution mechanism.

        The dispute among the members or the shareholders of a Company normally goes either to Company Law Board, Company Court or the High Court, Central Government, Registrar of Companies or the Securities Appellate Tribunal in case of listed public companies. But, most of the disputes among the members or the shareholders lead to an application under section 391/398 of the Companies Act, 1956 before the Company Law Board. As such, if we look at the present set-up, the Company Law Board plays an important role in ensuring the security of the rights of the members or the Company at times.

        While the issue of procedure before traditional civil courts and needed reforms is a bigger thing, I just want to confine myself to the procedure followed by the Company Law Board when a disputes pertaining to a Company comes before it. The Company Law Board follows a summary procedure which means disputed facts can not be decided by Board. Then, it is an assumption that the disputed facts can only be decided in a Trial. As the Company Law Board will not normally conduct a Trial as is being done by the Traditional Courts, it is confusing as to what happens if a genuine dispute comes before it in the course of adjudication of a dispute. There are two ways to deal with the issue. The first thing is that the Company Law Board can say that it will take a decision on any issue before it with the material available. Secondly, the Company Law Board may say that it is handicapped to deal with the disputed fact in view of the technicalities and may advise the parties to approach the traditional civil court to get the disputed fact adjudicated upon. It is all confusing to be very frank and even the corporates are confused at the state of affairs as I believe. There should be clarity on procedure being followed and that is the object behind attaching so much importance to rule of law.

        We need more clarity on the procedure being followed by the Company Law Board and its powers to punish for Contempt and we need to see as to how the National Company Law Tribunal will address these things when the new companies act comes into existence in the near future as everybody believe.

Note: The issues dealtwith may appear to be simple, but, carries so much significance practically and I have just expressed my opinion on the subject.