THE LEGAL BRIDGE

Judiciary & Law Notes Series

THE COMPANIES ACT, 2013

CHAPTER XXVII

National Company Law Tribunal and Appellate Tribunal

Sections 407–434

For Judicial Service Aspirants & Law Students

RJS • DJS • PCS-J • HJS • UPJS • BJS • MPCJ

NCLT • NCLAT • Jurisdiction • Appeals • IBC Adjudicating Authority

— Enriched with landmark judgments and illustrative case law —

Chapter XXVII — National Company Law Tribunal and Appellate Tribunal

The National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) are the twin institutions that, together, constitute the apex adjudicatory machinery for corporate and insolvency disputes in India. Chapter XXVII of the Companies Act, 2013 (Sections 407 to 434) establishes these tribunals, defines their composition and jurisdiction, confers wide powers on them, and provides for appeals and connected matters. This chapter is the result of a long constitutional and legislative journey that began with the Companies (Second Amendment) Act, 2002, and culminated only in 2016 when the NCLT and NCLAT were finally constituted and became operational.

For the judicial-service aspirant, Chapter XXVII is high-yield. Every question on winding-up, oppression and mismanagement, compromises and arrangements, class actions, rectification of register, or IBC proceedings requires familiarity with the NCLT/NCLAT jurisdictional framework. Landmark constitutional challenges — Madras Bar Association I, R. Gandhi, Madras Bar Association IV — have shaped the structure and composition of these tribunals and are recurring material for judicial interviews.

Historical Context — The Path to NCLT/NCLAT

Prior to the NCLT, corporate adjudication was distributed among several institutions:

• The Company Law Board (CLB) — a quasi-judicial body constituted under Section 10E of the Companies Act, 1956, handling oppression & mismanagement, rectification of register, and certain approvals;
• The Board for Industrial and Financial Reconstruction (BIFR) and the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) — constituted under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), handling revival and rehabilitation of sick companies;
• High Courts — exercising inherent and statutory jurisdiction for winding-up, compromises and arrangements under Sections 391-394 of the 1956 Act, and schemes of amalgamation;
• District Courts — limited jurisdiction for certain classes of companies;
• Central Government (through the Regional Director) — handling several administrative approvals.

This fragmentation was inefficient, slow, and led to inconsistent jurisprudence. The Eradi Committee Report (1999) recommended unification of corporate adjudication into a single tribunal. The Companies (Second Amendment) Act, 2002, enacted this recommendation by inserting Part IB into the 1956 Act, creating the NCLT and NCLAT. However, constitutional challenges to the composition of these tribunals — first in Union of India v. R. Gandhi (2010) and subsequently in Madras Bar Association v. Union of India cases (2014, 2020, 2021) — delayed operationalisation. The tribunals were finally constituted by notification dated 1 June 2016, making NCLT/NCLAT operational.

Section 407 — Definitions

In this Chapter, unless the context otherwise requires —

• 'Chairperson' means the Chairperson of the Appellate Tribunal;
• 'Judicial Member' means a member of the Tribunal or the Appellate Tribunal appointed as such and includes the President or the Chairperson, as the case may be;
• 'Member' means a member, whether Judicial or Technical of the Tribunal or the Appellate Tribunal and includes the President or the Chairperson, as the case may be;
• 'President' means the President of the Tribunal;
• 'Technical Member' means a member of the Tribunal or the Appellate Tribunal appointed as such.

Section 408 — Constitution of National Company Law Tribunal

The Central Government shall, by notification, constitute, with effect from such date as may be specified therein, a Tribunal to be known as the National Company Law Tribunal consisting of a President and such number of Judicial and Technical members, as the Central Government may deem necessary, to be appointed by it by notification, to exercise and discharge such powers and functions as are, or may be, conferred on it by or under this Act or any other law for the time being in force.

Structure of the NCLT

• Principal Bench at New Delhi;
• Regional Benches across India — presently located at Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Cuttack, Guwahati, Hyderabad, Indore, Jaipur, Kochi, Kolkata, Mumbai, and New Delhi;
• Each bench typically consists of a Judicial Member and a Technical Member sitting together (a 'Division Bench');
• The President presides over the Principal Bench and has administrative control over all regional benches.

Section 409 — Qualification of President and Members of Tribunal

The President of the Tribunal shall be a person who is or has been a Judge of a High Court for five years. Judicial Members and Technical Members must meet prescribed qualifications relating to judicial experience, service as a Secretary to the Government of India in specified ministries, or equivalent. Post the Madras Bar Association judgments, these qualifications have been progressively strengthened to ensure judicial dominance and functional expertise.

Qualifications Summary (Current Regime)

Section 410 — Constitution of Appellate Tribunal

The Central Government shall, by notification, constitute, with effect from such date as may be specified therein, an Appellate Tribunal to be known as the National Company Law Appellate Tribunal consisting of a Chairperson and such number of Judicial and Technical Members, not exceeding eleven, to be appointed by it by notification, for hearing appeals against —

• The order of the Tribunal or of the National Financial Reporting Authority under this Act;
• Any direction, decision or order referred to in section 53N of the Competition Act, 2002 in accordance with the provisions of that Act.

Scope of NCLAT Jurisdiction (Current)

• Appeals from NCLT orders under the Companies Act, 2013;
• Appeals from the Adjudicating Authority (NCLT) under the Insolvency and Bankruptcy Code, 2016;
• Appeals from orders of the National Financial Reporting Authority (NFRA) under Section 132 of the 2013 Act;
• Appeals from orders of the Competition Commission of India (CCI) under Section 53A of the Competition Act, 2002 (consolidated from the erstwhile Competition Appellate Tribunal w.e.f. 26 May 2017).

Section 411 — Qualifications of Chairperson and Members of Appellate Tribunal

The Chairperson of the Appellate Tribunal shall be a person who is or has been a Judge of the Supreme Court or the Chief Justice of a High Court. A Judicial Member shall be a person who is or has been a Judge of a High Court or is a Judicial Member of the Tribunal for 5 years. A Technical Member shall be a person of proven ability, integrity, and standing, having special knowledge and experience, of not less than 25 years, in law, industrial finance, industrial management or administration, industrial reconstruction, investment, accountancy, labour matters or such other disciplines related to management, conduct of affairs, revival, rehabilitation and winding-up of companies.

Section 412 — Selection of Members of Tribunal and Appellate Tribunal

The President of the Tribunal and the Chairperson and Judicial Members of the Appellate Tribunal shall be appointed after consultation with the Chief Justice of India. Members of the Tribunal and the Technical Members of the Appellate Tribunal shall be appointed on the recommendation of a Selection Committee consisting of — (a) Chief Justice of India or his nominee — Chairperson; (b) a senior Judge of the Supreme Court or Chief Justice of High Court — Member; (c) Secretary in the Ministry of Corporate Affairs — Member; (d) Secretary in the Ministry of Law and Justice — Member; and (e) Secretary in the Department of Financial Services in the Ministry of Finance — Member.

Section 413 — Term of Office of Members

The President and every other Member of the Tribunal shall hold office for a term of five years from the date on which he enters upon his office, or until he attains — in the case of the President, the age of 67 years; and in the case of any other Member, the age of 65 years, whichever is earlier. The Chairperson and every Judicial and Technical Member of the Appellate Tribunal shall hold office for a term of five years or until they attain — in the case of the Chairperson, the age of 70 years; and in the case of other Members, the age of 67 years, whichever is earlier. Members are eligible for re-appointment for a second term, subject to the age ceiling.

Section 414 — Salary, Allowances and Other Terms

The salary, allowances and other terms and conditions of service of the President, Chairperson and other Members of the Tribunal and Appellate Tribunal shall be such as may be prescribed and shall not be varied to their disadvantage during the term of their office. These provisions ensure institutional independence by preventing financial pressure as a tool of executive control.

Sections 415-418 — Procedural Provisions

• Section 415 — Acting President or Chairperson (interim arrangement in absence of principal);
• Section 416 — Resignation of Members;
• Section 417 — Removal of Members — only after inquiry, and on specified grounds such as insolvency, conviction, incapacity, abuse of office, or misbehaviour;
• Section 418 — Staff of Tribunal and Appellate Tribunal — including officers and servants to discharge the work of the tribunals.

Section 419 — Benches of Tribunal

There shall be constituted such number of Benches of the Tribunal, as may, by notification, be specified by the Central Government. The Principal Bench of the Tribunal shall be at New Delhi which shall be presided over by the President of the Tribunal. The powers of the Tribunal shall be exercisable by Benches consisting of two members, one of whom shall be a Judicial Member and the other shall be a Technical Member. However, the President may, for the disposal of any particular case, constitute a Bench consisting of — (a) only a single judicial or technical Member for adjudication of such class of matters as specified in the Act or rules; or (b) a Bench of three Members for any important question arising.

Section 420 — Orders of Tribunal

The Tribunal may, after giving the parties to any proceeding before it, a reasonable opportunity of being heard, pass such orders thereon as it thinks fit. The Tribunal may, at any time within two years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it, and shall make such amendment, if the mistake is brought to its notice by the parties. Provided that no such amendment shall be made in respect of any order against which an appeal has been preferred under this Act.

Section 421 — Appeal from Orders of Tribunal

Any person aggrieved by an order of the Tribunal may prefer an appeal to the Appellate Tribunal. No appeal shall lie to the Appellate Tribunal from an order made by the Tribunal with the consent of parties. Every appeal under sub-section (1) shall be filed within a period of forty-five days from the date on which a copy of the order of the Tribunal is made available to the person aggrieved and shall be in such form, and accompanied by such fees, as may be prescribed. Provided that the Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five days from the date aforesaid, but within a further period not exceeding forty-five days, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within that period.

The Appellate Tribunal shall, after giving the parties to the appeal, a reasonable opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against. The Appellate Tribunal shall send a copy of every order made by it to the Tribunal and the parties to the appeal.

Section 422 — Expeditious Disposal by Tribunal and Appellate Tribunal

Every application or petition presented before the Tribunal and every appeal filed before the Appellate Tribunal shall be dealt with and disposed of by it as expeditiously as possible and every endeavour shall be made by the Tribunal or the Appellate Tribunal for the disposal of such application or petition or appeal, as the case may be, within three months from the date of its presentation before the Tribunal or the filing of the appeal before the Appellate Tribunal.

In case the application or petition or the appeal is not disposed of within the period specified in sub-section (1), the Tribunal or the Appellate Tribunal, as the case may be, shall record the reasons for not disposing of the application or petition or the appeal within the period so specified. The President or the Chairperson, as the case may be, may, after taking into account the reasons so recorded, extend the period specified in sub-section (1) by such period not exceeding ninety days as he may consider necessary.

Section 423 — Appeal to Supreme Court

Any person aggrieved by any order of the Appellate Tribunal may file an appeal to the Supreme Court within sixty days from the date of receipt of the order of the Appellate Tribunal to him on any question of law arising out of such order. Provided that the Supreme Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.

The scope of appeal is restricted to 'questions of law'. Pure findings of fact are not appealable. This filtering ensures that the Supreme Court's corporate docket remains manageable while still providing constitutional oversight of the specialised tribunal system.

Section 424 — Procedure Before Tribunal and Appellate Tribunal

The Tribunal and the Appellate Tribunal shall not, while disposing of any proceeding before it or, as the case may be, an appeal before it, be bound by the procedure laid down in the Code of Civil Procedure, 1908, but shall be guided by the principles of natural justice, and subject to the other provisions of this Act and of any rules made thereunder, the Tribunal and the Appellate Tribunal shall have power to regulate their own procedure.

The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging their functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit in respect of the following matters, namely: —

1. Summoning and enforcing the attendance of any person and examining him on oath;Requiring the discovery and production of documents;Receiving evidence on affidavits;Subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872, requisitioning any public record or document or a copy of such record or document from any office;Issuing commissions for the examination of witnesses or documents;Dismissing a representation for default or deciding it ex parte;Setting aside any order of dismissal of any representation for default or any order passed by it ex parte;Any other matter which may be prescribed.

Section 425 — Power to Punish for Contempt

The Tribunal and the Appellate Tribunal shall have the same jurisdiction, powers and authority in respect of contempt of themselves as the High Court has and may exercise, for this purpose, the powers under the provisions of the Contempt of Courts Act, 1971, which shall have the effect subject to modifications that — (a) the reference therein to a High Court shall be construed as including a reference to the Tribunal and the Appellate Tribunal; and (b) the reference to Advocate-General in section 15 of the said Act shall be construed as a reference to such Law Officers as the Central Government may specify in this behalf.

This power of contempt is a critical enforcement tool — without it, tribunals would depend on parallel High Court proceedings to secure compliance with their orders. With it, the NCLT/NCLAT can directly penalise contumacy and preserve the dignity of their proceedings.

Section 426 — Delegation of Powers

The Tribunal and Appellate Tribunal may, by general or special order, direct, subject to such conditions, if any, as may be specified in the order, that any act required by or under this Act to be done by the Tribunal or the Appellate Tribunal may be done on an urgent basis by any Member or officer or employee thereof so specified in the order.

Section 427 — President, Members, etc., to be Public Servants

The President, Members, officers and other employees of the Tribunal and the Chairperson, Members, officers and other employees of the Appellate Tribunal shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code (now Section 2(28) of the Bharatiya Nyaya Sanhita, 2023). This conveys two crucial consequences — (a) they are subject to the Prevention of Corruption Act, 1988; (b) offences against them in connection with their functions attract enhanced IPC/BNS penalties.

Section 428 — Protection of Action Taken in Good Faith

No suit, prosecution or other legal proceedings shall lie against the Tribunal, the Appellate Tribunal, its Chairperson, President, Member, officer or other employee, or any person authorised by the Tribunal or the Appellate Tribunal for the discharge of any function under this Act in respect of any loss or damage caused or likely to be caused by any act which is in good faith done or intended to be done in pursuance of this Act or of any rule or order made thereunder.

Section 429 — Power to Seek Assistance of Chief Metropolitan Magistrate

The Tribunal may, in any proceedings for winding-up of a company under this Act or in any proceedings under the Insolvency and Bankruptcy Code, 2016, in order to take into custody or under its control all property, books of account or other documents, request, in writing, the Chief Metropolitan Magistrate, Chief Judicial Magistrate or the District Collector within whose jurisdiction any such property, books of account or other documents of such company are situated or found, to take possession thereof, and the Chief Metropolitan Magistrate, Chief Judicial Magistrate or the District Collector, as the case may be, shall, on such request being made to him — (a) take possession of such property, books of account or other documents; and (b) cause the same to be entrusted to the Tribunal or other persons authorised by it. This is the NCLT's equivalent of Section 14(1A) of the SARFAESI Act — enabling direct executive assistance.

Section 430 — Civil Court Jurisdiction Barred

No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.

This is the jurisdictional ouster clause — a powerful provision conferring exclusive jurisdiction on the tribunal. Any suit filed in a civil court on a matter within NCLT jurisdiction is barred. However, the bar does not extend to writ jurisdiction under Articles 32 and 226 — which remain available as constitutional remedies.

Section 431 — Vacancy in Tribunal or Appellate Tribunal Not to Invalidate Acts or Proceedings

No act or proceeding of the Tribunal or the Appellate Tribunal shall be questioned or shall be invalid merely on the ground of the existence of any vacancy or defect in the constitution of the Tribunal or the Appellate Tribunal, as the case may be.

Section 432 — Right to Legal Representation

A party to any proceeding or appeal before the Tribunal or the Appellate Tribunal, as the case may be, may either appear in person or authorise one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any other person to present his case before the Tribunal or the Appellate Tribunal. This multi-disciplinary advocacy permission is a distinctive feature — reflecting the tribunal's intent to be accessible to parties with varied professional support. However, in contested matters involving complex legal issues, legal practitioners remain predominant.

Section 433 — Limitation

The provisions of the Limitation Act, 1963 shall, as far as may be, apply to proceedings or appeals before the Tribunal or the Appellate Tribunal, as the case may be. This brings NCLT/NCLAT proceedings within the familiar limitation framework — with periods generally corresponding to civil court periods for analogous proceedings, subject to express time limits in specific Companies Act provisions.

Section 434 — Transfer of Certain Pending Proceedings

On such date as may be notified by the Central Government in this behalf —

• All matters, proceedings or cases pending before the Board of Company Law Administration constituted under sub-section (1) of section 10E of the Companies Act, 1956 (the CLB), immediately before such date shall stand transferred to the Tribunal and the Tribunal shall dispose of such matters, proceedings or cases in accordance with the provisions of this Act;
• Any person aggrieved by any decision or order of the Company Law Board made before such date may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order;
• All proceedings under the Companies Act, 1956, including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer.

This transitional provision completed the migration of the old fragmented jurisdiction to the new unified tribunal. Some pending matters — particularly winding-up petitions at advanced stages — have been permitted to continue before the High Courts, as clarified in the Jaipur Metals case.

Evolution of NCLT/NCLAT Jurisprudence

Phase 1 — The Constitutional Challenges (2002–2016)

Phase 2 — Operationalisation and Scope (2016–Present)

NCLT and NCLAT — A Comparative Overview

NCLT Jurisdiction — Key Matters

Role in Insolvency and Bankruptcy Code, 2016

The NCLT's most prolific jurisdiction in recent years has been under the IBC. As the 'Adjudicating Authority' under Section 5(1) of the IBC, NCLT handles:

• Applications by Financial Creditors under Section 7;
• Applications by Operational Creditors under Section 9;
• Applications by Corporate Debtor itself under Section 10;
• Approval of Resolution Plans under Section 31;
• Orders for Liquidation under Section 33;
• Voluntary Liquidation under Section 59;
• Applications relating to Pre-Packaged Insolvency Resolution Process (PPIRP) — a fast-track mechanism for MSMEs introduced in 2021.

The IBC caseload has been the single largest contributor to the NCLT's docket — often exceeding Companies Act matters in volume. This has put substantial capacity pressure on the tribunals and has led to ongoing infrastructure expansion.