The Tribunal and the Appellate Tribunal

Section 409: qualifications for the Tribunal.

• The President shall be a person who is or has been a Judge of a High Court for five years.
• A Judicial Member must (a) be or have been a judge of a High Court, (b) be or have been a District Judge for at least five years, or (c) have been an advocate of a court for at least ten years. The Explanation counts, within that ten years, any period in judicial office, as a member of a tribunal, or in a post under the Union or a State requiring special knowledge of law, after he became an advocate.
• A Technical Member must have fifteen years in the Indian Corporate Law Service or Indian Legal Service holding the rank of Secretary or Additional Secretary to the Government of India; or fifteen years in practice as a chartered accountant, cost accountant or company secretary; or be a person of proven ability, integrity and standing with special knowledge and professional experience of not less than fifteen years in industrial finance, industrial management, industrial reconstruction, investment and accountancy; or have been for at least five years a presiding officer of a Labour Court, Tribunal or National Tribunal under the Industrial Disputes Act, 1947.

Section 410. The Central Government shall, by notification, constitute 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 as it deems fit, for hearing appeals against (a) the orders of the Tribunal or of the National Financial Reporting Authority under this Act, and (b) any direction, decision or order referred to in section 53A of the Competition Act, 2002.

Note clause (b). The Appellate Tribunal is also the appellate forum from the Competition Commission of India, which is why it is not a purely company law body.

Section 411: qualifications for the Appellate Tribunal. The chairperson shall be or have been a Judge of the Supreme Court or the Chief Justice of a High Court. A Judicial Member shall be or have been a Judge of a High Court, or a Judicial Member of the Tribunal for five years. A Technical Member shall be a person of proven ability, integrity and standing with special knowledge and professional experience of not less than twenty-five years in industrial finance, industrial management, industrial reconstruction, investment and accountancy.

Twenty-five years above, fifteen below, and that difference is worth remembering.

Section 412: selection. The President of the Tribunal and the chairperson and Judicial Members of the Appellate Tribunal are appointed after consultation with the Chief Justice of India. The Members of the Tribunal and the Technical Members of the Appellate Tribunal are appointed on the recommendation of a Selection Committee consisting of the Chief Justice of India or his nominee as Chairperson, a senior Judge of the Supreme Court or a Chief Justice of a High Court, the Secretary in the Ministry of Corporate Affairs and the Secretary in the Ministry of Law and Justice; the Chairperson has a casting vote; the Secretary, Ministry of Corporate Affairs is Convener; the Committee determines its own procedure; and no appointment is invalid merely by reason of a vacancy or defect in the Committee's constitution.

Tenure and conditions: sections 413 to 418

Section 413. The President and every other Member of the Tribunal hold office for five years, eligible for re-appointment for another five years, and until they attain the age of sixty-seven years in the case of the President and sixty-five in the case of any other Member. A person who has not completed fifty years of age is not eligible for appointment, and a Member may retain his lien with his parent cadre, Ministry or Department for not more than one year.

The chairperson and Members of the Appellate Tribunal hold office for five years, re-appointable for five, until the age of seventy for the Chairperson and sixty-seven for any other Member, with the same fifty year minimum and one year lien.

Section 414 deals with the salary, allowances and other terms and conditions of service, and section 418 with the officers and employees of the Tribunal and the Appellate Tribunal; section 417A provides for the conditions of service to be as prescribed. The remaining three deserve a line each.

Section 415: acting President or chairperson. On a vacancy in the office of the President or the Chairperson by death, resignation or otherwise, the senior-most Member shall act until a new appointee enters upon his office; and where the President or Chairperson is unable to discharge his functions owing to absence, illness or any other cause, the senior-most Member shall discharge them until he resumes his duties.

Section 416: resignation. The President, the Chairperson or any Member may resign by notice in writing under his hand addressed to the Central Government; but he continues to hold office until the earliest of the expiry of three months from the receipt of the notice, the entry upon office of a duly appointed successor, or the expiry of his term.

Section 417: removal. The Central Government may, after consultation with the Chief Justice of India, remove the President, Chairperson or a Member who (a) has been adjudged an insolvent; (b) has been convicted of an offence which in the Central Government's opinion involves moral turpitude; (c) has become physically or mentally incapable; (d) has acquired such financial or other interest as is likely to affect his functions prejudicially; or (e) has so abused his position as to render his continuance prejudicial to the public interest. Proviso: no removal on grounds (b) to (e) without a reasonable opportunity of being heard.

And sub-section (2) is the real protection of tenure. He shall not be removed except by an order of the Central Government on the ground of proved misbehaviour or incapacity, after an inquiry by a Judge of the Supreme Court nominated by the Chief Justice of India on a reference by the Central Government, in which he has been informed of the charges and given a reasonable opportunity of being heard. Pending that reference he may be suspended with the concurrence of the Chief Justice of India, and the procedure for the inquiry is regulated by rules made after consultation with the Supreme Court.

Benches and how they decide: section 419

Section 419(1) and (2). Such number of Benches as the Central Government specifies by notification; the Principal Bench is at New Delhi, presided over by the President.

Section 419(3): the composition of a Bench. The powers of the Tribunal shall be exercisable by Benches consisting of two Members, one Judicial and one Technical.

First proviso: single member benches. Members authorised in this behalf may function as a Bench of a single Judicial Member for such class of cases as the President may by general or special order specify.

Second proviso: if at any stage it appears to that Member that the matter ought to be heard by two Members, it may be transferred by the President, or referred to him for transfer, to such Bench as he thinks fit.

Section 419(4). The Central Government shall, by notification, establish such Benches as it considers necessary to exercise the jurisdiction of the Adjudicating Authority under Part II of the Insolvency and Bankruptcy Code, 2016.

Section 419(5): a divided Bench. A difference is decided according to the majority if there is one; if the Members are equally divided, they state the points of difference, and the President refers the case for hearing on those points by one or more other Members, the points then being decided according to the opinion of the majority of the Members who have heard the case, including those who first heard it.

Orders and rectification: section 420

Section 420(1). The Tribunal may, after giving the parties a reasonable opportunity of being heard, pass such orders as it thinks fit.

Section 420(2): rectification. It may, at any time within two years from the date of the order, amend any order with a view to rectifying any mistake apparent from the record, and shall do so if the mistake is brought to its notice by the parties. Proviso: no such amendment where an appeal has been preferred against the order.

Section 420(3). A copy of every order shall be sent to all the parties concerned.

Note the two limbs of sub-section (2). The power is discretionary when exercised on the Tribunal's own motion and mandatory when the parties point the mistake out.

Appeal to the Appellate Tribunal: section 421

Section 421(1) and (2). Any person aggrieved by an order of the Tribunal may appeal to the Appellate Tribunal; but no appeal lies from an order made with the consent of parties.

Section 421(3): time. Within forty-five days from the date on which a copy of the order is made available to the person aggrieved, in the prescribed form and with the prescribed fees. Proviso: the Appellate Tribunal may entertain an appeal after that period but within a further period not exceeding forty-five days, if satisfied that the appellant was prevented by sufficient cause.

So the outer limit is ninety days, and the second forty-five days is not available as of right.

Section 421(4) and (5). The Appellate Tribunal shall, after giving the parties a reasonable opportunity of being heard, pass such orders as it thinks fit, confirming, modifying or setting aside the order appealed against, and shall send a copy of every order to the Tribunal and to the parties.

Expedition: section 422

Every application or petition before the Tribunal and every appeal before the Appellate Tribunal shall be dealt with as expeditiously as possible, and every endeavour shall be made to dispose of it within three months of presentation or filing. Where it is not, the Tribunal or Appellate Tribunal shall record the reasons, and the President or Chairperson may, after taking those reasons into account, extend the period by not more than ninety days.

Appeal to the Supreme Court: section 423

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

Two limits, and both are examined. The appeal lies only on a question of law, and the outer time is one hundred and twenty days.

Procedure and powers: sections 424 and 425

Section 424(1). Neither Tribunal is bound by the procedure laid down in the Code of Civil Procedure, 1908; both are guided by the principles of natural justice, and, subject to this Act or the Insolvency and Bankruptcy Code, 2016 and the rules, have power to regulate their own procedure.

Section 424(2): the civil court's powers. For discharging their functions under this Act or the Code, they have the same powers as a civil court under the Code of Civil Procedure, 1908 in respect of:

• (a) summoning and enforcing attendance and examining a person on oath;
• (b) requiring the discovery and production of documents;
• (c) receiving evidence on affidavits;
• (d) requisitioning any public record or document, subject to sections 123 and 124 of the Indian Evidence Act, 1872;
• (e) issuing commissions for the examination of witnesses or documents;
• (f) dismissing a representation for default or deciding it ex parte;
• (g) setting aside such a dismissal or ex parte order; and
• (h) any other prescribed matter.

Section 424(3): enforcement. An order may be enforced in the same manner as a decree of a court in a suit pending in it, and may be sent for execution to the court within whose local limits the registered office of the company is situate, or, against any other person, where he voluntarily resides or carries on business or personally works for gain.

Section 424(4): the criminal law's view. All proceedings are deemed judicial proceedings within sections 193 and 228 and for the purposes of section 196 of the Indian Penal Code, 1860, and both bodies are deemed civil courts for section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973.

Section 425: contempt. Both have the same jurisdiction, powers and authority in respect of contempt of themselves as a High Court, exercising the powers of the Contempt of Courts Act, 1971, references to a High Court in that Act being read as including them, and the reference to the Advocate-General in its section 15 being read as a reference to such Law Officers as the Central Government may specify.

Assistance, ouster, representation and limitation: sections 429 to 433

Section 426: delegation. The Tribunal or the Appellate Tribunal may, by general or special order and subject to specified conditions, direct any of its officers or employees, or any other person authorised by it, to inquire into any matter connected with a proceeding or appeal before it and to report in the manner specified.

Section 427: public servants. The President, Members, officers and other employees of the Tribunal, and the Chairperson, Members, officers and employees of the Appellate Tribunal, are deemed to be public servants within the meaning of section 21 of the Indian Penal Code, 1860.

Section 428: good faith. No suit, prosecution or other legal proceeding shall lie against the Tribunal or the Appellate Tribunal, their President, Chairperson, Members, officers or employees, or a liquidator or other person authorised by them, in respect of any loss or damage caused or likely to be caused by any act done or intended to be done in good faith in pursuance of this Act.

Section 431: a vacancy does not invalidate. 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 its constitution.

Section 429. In any winding up proceeding under this Act or any proceeding under the Insolvency and Bankruptcy Code, 2016, the Tribunal may request in writing the Chief Metropolitan Magistrate, the Chief Judicial Magistrate or the District Collector within whose jurisdiction the property, books of account or other documents are situated to take possession of them and entrust them to the Tribunal or persons it authorises; that officer may use such force as in his opinion is necessary; and no act done by him under the section shall be called in question in any court or before any authority on any ground whatsoever.

Section 430: the ouster. 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, 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 on them.

Section 432: representation. A party may appear in person or authorise one or more chartered accountants, company secretaries, cost accountants, legal practitioners or any other person to present his case.

That is a wider right of audience than a civil court allows, and it is the section cited in section 300(4)(b) when a person examined in a winding up employs professionals to put questions.

Section 433: limitation. The provisions of the Limitation Act, 1963 shall, as far as may be, apply to proceedings or appeals before either body.

Section 434: transfer of pending proceedings. On the notified date, all matters pending before the Company Law Board under the Companies Act, 1956 stand transferred to the Tribunal, which disposes of them in accordance with this Act, with corresponding provision for proceedings before the Board for Industrial and Financial Reconstruction, the Appellate Authority for Industrial and Financial Reconstruction, and the High Courts.

A worked example

A group of shareholders of Nerul Chemicals Limited applies under section 241 complaining of oppression.

Where. To the National Company Law Tribunal, before the Bench having jurisdiction, ordinarily of two Members, one Judicial and one Technical: section 419(3). Had the Central Government prescribed the class of company for the purpose, an application by the Central Government under section 241(2) would have gone to the Principal Bench at New Delhi.

A single Member. If the President has, by general or special order, specified the class of case for a single Judicial Member, one Member may hear it; and if it turns out to need two, the President transfers it: provisos to section 419(3).

A split Bench. The two Members differ. There being no majority of two, they state the points of difference, and the President refers the case for hearing on those points by one or more other Members; the points are then decided by the majority of all who have heard the case, including the two who first heard it: section 419(5).

Procedure. The Tribunal is not bound by the Code of Civil Procedure, 1908 but by natural justice, and regulates its own procedure; it summons the former managing director and examines him on oath, orders discovery of the Board minutes, receives evidence on affidavit, and issues a commission to examine a witness abroad: section 424.

Representation. One petitioner appears in person; another authorises a company secretary; a third a legal practitioner. All are permissible: section 432.

An order and a slip. The Tribunal orders the majority to buy out the petitioners at a valuation, but the order misstates the number of shares. Within two years the Tribunal may amend it to rectify a mistake apparent from the record, and must do so once the parties point it out, unless an appeal has already been preferred: section 420(2).

Contempt. The majority shareholders ignore an interim order restraining a further allotment. The Tribunal has the same powers in respect of contempt of itself as a High Court, exercisable under the Contempt of Courts Act, 1971: section 425.

Enforcement. The buy-out price is not paid. The order may be enforced as a decree, and sent for execution to the court within whose local limits the company's registered office is situate, or, against an individual, where he resides, carries on business or personally works for gain: section 424(3).

A suit instead. One shareholder files a civil suit in the City Civil Court on the same facts. Section 430 bars it: no civil court has jurisdiction in respect of a matter the Tribunal is empowered to determine, and no injunction may be granted in respect of action taken under those powers.

Appeal. The majority appeal to the National Company Law Appellate Tribunal within forty-five days from the date the copy of the order was made available to them. They are eleven days late, but show sufficient cause, and the Appellate Tribunal may condone the delay within a further forty-five days: section 421(3). Had the order been made with the consent of the parties, no appeal would lie at all: section 421(2).

Expedition. Both the petition and the appeal are to be disposed of, so far as possible, within three months; if not, the reasons are recorded and the President or Chairperson may extend the period by up to ninety days: section 422.

To the Supreme Court. The Appellate Tribunal confirms the order. An appeal lies to the Supreme Court within sixty days of receipt of the order, but only on a question of law arising out of it, extendable by a further sixty days for sufficient cause: section 423. A complaint that the Appellate Tribunal weighed the evidence wrongly raises no question of law and will not be entertained.

And in a winding up. Where the Tribunal needs to take property or books of account into its control, it may request the Chief Metropolitan Magistrate, the Chief Judicial Magistrate or the District Collector to take possession and entrust them to it; force may be used; and no act done under the section may be questioned in any court: section 429.

Distinctions that carry marks

What this does NOT mean

It does not mean every matter is heard by two Members. The President may specify classes of cases for a single Judicial Member, subject to transfer where two are needed.

It does not mean an equally divided Bench fails. The points of difference are referred to other Members, and decided by the majority of all who heard the case.

It does not mean every order may be appealed. No appeal lies from an order made with the consent of parties.

It does not mean the Supreme Court rehears the case. The appeal lies only on a question of law arising out of the Appellate Tribunal's order.

It does not mean the Tribunal follows the Code of Civil Procedure. It is not bound by it, but is guided by the principles of natural justice and has a civil court's powers in the listed matters.

It does not mean a mistake can be corrected at any time. The rectification power runs for two years, and is unavailable once an appeal has been preferred.

Quick revision

• 408 and 409: the Central Government constitutes the National Company Law Tribunal of a President and Judicial and Technical Members; the President has been a High Court Judge for five years; a Judicial Member is a High Court judge, a District Judge of five years or an advocate of ten years; a Technical Member has fifteen years in the Indian Corporate Law Service or Indian Legal Service at Secretary or Additional Secretary rank, or in practice as a chartered accountant, cost accountant or company secretary, or fifteen years' special knowledge in industrial finance, management, reconstruction, investment and accountancy, or five years as a presiding officer under the Industrial Disputes Act, 1947.
• 410 and 411: the Appellate Tribunal hears appeals from the Tribunal and the National Financial Reporting Authority, and matters under section 53A of the Competition Act, 2002; the chairperson has been a Supreme Court Judge or Chief Justice of a High Court; a Judicial Member a High Court Judge or a Judicial Member of the Tribunal for five years; a Technical Member a person of twenty-five years' special knowledge and experience.
• 412 and 413: the President, chairperson and Judicial Members of the Appellate Tribunal are appointed after consultation with the Chief Justice of India; other Members on a Selection Committee of the Chief Justice or his nominee, a senior Supreme Court Judge or Chief Justice of a High Court, and the Secretaries of Corporate Affairs and of Law and Justice, the Chairperson having a casting vote; terms are five years, renewable once, with retirement at sixty-seven and sixty-five in the Tribunal and seventy and sixty-seven in the Appellate Tribunal, a minimum age of fifty, and a lien for not more than one year.
• 419: Benches as notified, the Principal Bench at New Delhi under the President; a Bench of one Judicial and one Technical Member, with single Judicial Member benches for specified classes and transfer where two are needed; separate benches for the Adjudicating Authority under Part II of the Insolvency and Bankruptcy Code, 2016; and an equally divided Bench referring the points of difference to other Members, the majority of all who heard it deciding.
• 420: orders after a reasonable opportunity of being heard; rectification of a mistake apparent from the record within two years, mandatory when the parties point it out, but not where an appeal has been preferred; and copies to all parties.
• 421 to 423: appeal by any person aggrieved, but not from a consent order, within forty-five days of the copy being made available, extendable by forty-five; the Appellate Tribunal may confirm, modify or set aside; disposal to be attempted within three months, extendable by ninety days on recorded reasons; and appeal to the Supreme Court within sixty days, extendable by sixty, only on a question of law.
• 424 and 425: not bound by the Code of Civil Procedure, 1908 but guided by natural justice, regulating their own procedure; a civil court's powers to summon and examine on oath, require discovery and production, receive affidavits, requisition public records, issue commissions, dismiss for default or decide ex parte and set such orders aside; orders enforceable as decrees, executable where the registered office is or where the person resides, carries on business or works for gain; proceedings deemed judicial under the Indian Penal Code, 1860 and both bodies deemed civil courts under the Code of Criminal Procedure, 1973; and the contempt powers of a High Court under the Contempt of Courts Act, 1971.
• 429 to 434: the Tribunal may request the Chief Metropolitan Magistrate, Chief Judicial Magistrate or District Collector to take possession of property and books, using force, his acts being unquestionable in any court; no civil court may entertain what the Tribunal is empowered to decide, and no injunction may issue against action under those powers; a party may be represented by chartered accountants, company secretaries, cost accountants, legal practitioners or any other person; the Limitation Act, 1963 applies as far as may be; and pending matters of the Company Law Board and other bodies stand transferred to the Tribunal.

Test yourself

1. Who may be appointed President of the Tribunal and chairperson of the Appellate Tribunal? The President must be a person who is or has been a Judge of a High Court for five years: section 409(1). The chairperson must be a person who is or has been a Judge of the Supreme Court or the Chief Justice of a High Court: section 411(1). Both are appointed after consultation with the Chief Justice of India: section 412(1).

2. How is a Bench of the Tribunal constituted, and what happens if its Members differ? Of two Members, one Judicial and one Technical, though Members authorised may sit as a single Judicial Member for classes of cases the President specifies. If the Members differ, the matter is decided by the majority where there is one; if they are equally divided, they state the points of difference and the President refers them for hearing by one or more other Members, the points being decided by the majority of all the Members who have heard the case, including those who first heard it: section 419.

3. Within what time does an appeal lie to the Appellate Tribunal? Within forty-five days from the date on which a copy of the Tribunal's order is made available to the person aggrieved, and the Appellate Tribunal may entertain an appeal within a further period not exceeding forty-five days if satisfied that the appellant was prevented by sufficient cause: section 421(3). No appeal lies from an order made with the consent of parties: section 421(2).

4. On what ground and within what time does an appeal lie to the Supreme Court? On any question of law arising out of the Appellate Tribunal's order, within sixty days from the date of receipt of the order, extendable by a further period not exceeding sixty days for sufficient cause: section 423.

5. Is the Tribunal bound by the Code of Civil Procedure? No. It is not bound by the procedure laid down in the Code of Civil Procedure, 1908 but is guided by the principles of natural justice and may regulate its own procedure, while having the same powers as a civil court in the eight matters listed in section 424(2).

6. Can a civil suit be filed on a matter within the Tribunal's jurisdiction? No. No civil court has 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, and no injunction may be granted by any court or authority in respect of any action taken or to be taken under those powers: section 430.