NCLAT Order Not Invalid Merely Because Bench Had Majority Technical Members : Supreme Court

The Supreme Court has held that an order of the National Company Law Appellate Tribunal (NCLAT) cannot be treated as illegal merely because the bench deciding the case had a majority of technical members. The Court clarified that the present statutory framework governing the tribunal system does not mandate that judicial members must outnumber technical members in NCLAT benches.A bench comprising Justice Sanjay Kumar and Justice K. Vinod Chandran made the observation while dismissing appeals filed by minority investors challenging a capital reduction scheme undertaken by Bharti Telecom Limited.Challenge Based On NCLAT Bench CompositionOne of the objections raised by the appellants was that the NCLAT bench which heard their appeals consisted of two technical members and one judicial member. Relying on the Constitution Bench decision in Union of India v. Madras Bar Association (2010), the appellants argued that tribunals replacing High Courts must have a majority of judicial members.Rejecting this contention, the Supreme Court held that the statutory provisions currently governing the NCLAT do not require a bench to have a majority of judicial members.The Court noted that Section 418A of the Companies Act, 2013 only requires that a bench of the NCLAT must include at least one judicial member and one technical member. There is no statutory mandate that judicial members must outnumber technical members.“In the present case, the Bench was headed by a Judicial Member and had two Technical Members, and the opinion was unanimous at the NCLAT. We find absolutely no reason to interfere with the order on the question raised of the composition of the Bench of the Appellate Tribunal,” the Court said."The NCLAT as provided in Section 418A always comprises of two members, one of whom is a judicial member or such larger composition where the prescription is only of the presence of a member from the Judicial side and not in the majority," the Court said.The Court further observed that the earlier Constitution Bench observations in the Madras Bar Association case were made in the context of the legislative framework that existed at that time under the Companies Act, 1956, which has since been replaced.Technical Members Cannot Be Viewed As Inferior AdjudicatorsThe Court also cautioned against treating technical members as inferior adjudicators merely because they do not come from a judicial background.Emphasising the role of domain expertise in tribunal adjudication, the bench noted that technocrats and administrative officers often possess substantial experience in dealing with quasi-judicial functions.“All adjudicators first and foremost are or should be reasonable persons having resolute minds and unbiased views,” the Court observed.While judicial experience is valuable, the Court said that technocrats permitted by the legislature to sit on tribunals cannot be treated with “disdain” or considered inferior in status or capability.According to the Court, technical members often bring specialised knowledge that assists in resolving disputes involving complex commercial, financial or administrative issues.Appeals On Capital Reduction DismissedThe challenge to the NCLAT's composition arose in appeals filed by minority shareholders of Bharti Telecom Limited who opposed the company's decision to reduce its share capital by cancelling shares held by certain minority investors.The reduction was approved through a special resolution of shareholders and subsequently confirmed by the National Company Law Tribunal (NCLT). The NCLAT later dismissed the objections raised by certain investors.The Supreme Court upheld the decisions of both tribunals and dismissed the appeals, finding no illegality either in the process of capital reduction or in the composition of the NCLAT bench that decided the matter.The Court also reiterated that when the NCLT and NCLAT record concurrent findings, the Supreme Court will not ordinarily reappreciate evidence in appeals under Section 423 of the Companies Act unless a clear question of law arises.Also from the judgment -S. 66 Companies Act | Valuation Report Not Mandatory For Share Capital Reduction : Supreme CourtHeadnoteCompanies Act, 2013 – Section 66 – Reduction of Share Capital – Validity of Selective Reduction and Forced Exit of Minority Shareholders - The Supreme Court upheld the reduction of share capital under Section 66, even if selective and resulting in an involuntary exit of minority shareholders – Held that reduction of share capital is a domestic concern of the company decided by the majority - As long as the procedure is followed and the transaction is not unfair, inequitable, or against public interest, the majority has the right to decide how to carry out the reduction, including extinguishing certain shares while retaining others. [Relied on: Re: Reckitt Benckiser (India) Ltd.; British and American Trustee and Finance Corporation v. Couper 2005 SCC Online Del 674; Paras 42-47]Companies...

NCLAT Order Not Invalid Merely Because Bench Had Majority Technical Members : Supreme Court

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NCLAT Order Not Invalid Merely Because Bench Had Majority Technical Members : Supreme Court

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