NCLT/NCLAT Benches Need Not Have Majority Of Judicial Members; Technical Members Cannot Be Treated As Inferior Adjudicators: Supreme Court
The Apex Court held that the Companies Act does not mandate that Larger Benches of the NCLT or NCLAT must have a majority of Judicial Members, observing that technical members, once permitted by the legislature to sit in tribunals, cannot be treated as inferior adjudicators.
The Supreme Court has held that the statutory framework governing the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) does not require that tribunal benches must consist of a majority of Judicial Members.
The Court further observed that administrative officers and technocrats appointed as Technical Members perform adjudicatory functions alongside Judicial Members, and their capabilities cannot be treated as inferior merely because they do not possess judicial experience.
The Court was hearing a batch of appeals arising from disputes concerning the reduction of share capital approved by the NCLT and affirmed by the NCLAT.
A Bench of Justice Sanjay Kumar and Justice K. Vinod Chandran, while stating that the provisions of the Companies Act 2013, “as of now do not require a majority of Judicial Members in the Larger Benches of the NCLT or the NCLAT”, further observed: “Though judicial experience is valuable, administrative officers and technocrats; to whom judicious consideration is not alien in their long tenures of service dealing also with quasi-judicial matters, statutory appeals and the like, when permitted by the legislature to be included as Tribunal Members to aid, assist and promote a holistic adjudication of disputes and interpretation of laws, having administrative and technical ramifications, we cannot after permitting them to sit side by side treat them or their capabilities, with disdain or label them lower in status or in quality.”
Background
The dispute arose from proceedings related to the reduction of share capital of a closely held company under Section 66 of the Companies Act, 2013. Minority investors challenged the reduction scheme, alleging unfair valuation and procedural irregularities.
The NCLT confirmed the scheme of capital reduction after considering objections raised by the shareholders. Appeals filed before the NCLAT were dismissed.
Before the Supreme Court, one of the appellants raised a jurisdictional objection concerning the composition of the NCLAT Bench. It was argued that the Bench consisted of two Technical Members and one Judicial Member, which allegedly violated the principles laid down in Union of India v. Madras Bar Association (2010), which emphasised the importance of judicial members in tribunals replacing those of High Courts.
The appellants contended that tribunal benches exercising judicial functions must have a majority of Judicial Members and that the composition of the NCLAT Bench rendered its decision legally unsustainable.
Court’s Observation
The Supreme Court rejected the challenge to the composition of the NCLAT Bench.
The Court noted that the provisions currently governing the constitution of benches under the Companies Act do not require that the Larger Benches of the NCLT or NCLAT must have a majority of Judicial Members. The statute only mandates that at least one Judicial Member must be part of the Bench.
The Court observed that earlier decisions concerning tribunal composition, including the Madras Bar Association, addressed issues relating to appointment and independence of members, but did not impose a statutory requirement that judicial members must outnumber technical members in tribunal benches under the present framework.
Referring to the constitutional principle underlying Article 14, the Court observed that adjudication must be carried out by a forum capable of exercising judicial power impartially and independently. The Court drew support from State of West Bengal v. Anwar Ali Sarkar, which emphasised that equality before law includes the right to have disputes adjudicated by a forum functioning in accordance with recognised principles of justice.
The Court referred to the constitutional principle articulated in Anwar Ali Sarkar, observing: “The fundamental right to equality before law and equal protection of laws guaranteed by Article 14 of the Constitution clearly includes a right to have the persons’ rights adjudicated by a forum which exercises judicial power in an impartial and independent manner, consistent with the recognised principles of adjudication.”
The Court further observed that adjudicators, whether drawn from judicial or technical backgrounds, are expected to act as reasonable decision-makers exercising impartial judgment. It noted that technical members often possess extensive experience in administrative and regulatory matters and may have long exposure to quasi-judicial functions.
Accordingly, the Court held that once the legislature has authorised technical members to sit alongside judicial members in tribunals, their role cannot be treated as inferior or subordinate.
The Court also noted that in the present case, the NCLAT Bench was headed by a Judicial Member and the decision was unanimous. Therefore, no infirmity arose from the composition of the Bench.
Conclusion
The Supreme Court held that there was no jurisdictional defect in the constitution of the NCLAT Bench and declined to interfere with the decision on that ground.
Accordingly, the appeals were dismissed.
Cause Title: Pannalal Bhansali v. Bharti Telecom Limited & Ors. (Neutral Citation: 2026 INSC 213)
Appearances
Appellants: Senior Advocate K. Parmeshwar
Respondents: Senior Advocates Ramji Srinivasan and Shyam Divan