This article is written by Tinku Singh Deora, studying at Jagannath University, B.A. L.L.B. 5th Year during his internship at LeDroit India.
This study focuses on analyzing the role of the National Company Law Tribunal (NCLT) in corporate reorganization under the Companies Act, 2013. It examines the Tribunal’s jurisdiction over mergers and amalgamations, compromises and arrangements, insolvency and restructuring, oppression and mismanagement, class action suits, and winding-up matters. The scope also includes an overview of NCLT’s powers—such as investigation orders, compounding of offences, and approval of financial statement revisions. Key judicial decisions are reviewed to illustrate how the NCLT interprets and applies these provisions. Overall, the study assesses how the NCLT strengthens corporate governance, improves stakeholder protection, and contributes to efficient dispute resolution in India’s corporate sector.
KEYWORDS
Corporate Reorganisation, NCLT Jurisdiction, Companies Act 2013, Mergers and Amalgamations, Insolvency and Restructuring, Corporate Governance Mechanisms
- ABSTRACT
Corporate Reorganizations, NCLT Jurisdiction, and the regulatory framework under the Companies Act 2013 have significantly transformed corporate dispute resolution in India. With growing complexities in Mergers and Amalgamations and rising instances of Insolvency and Restructuring, the National Company Law Tribunal (NCLT) functions as a specialised body ensuring structured, transparent, and time-bound adjudication. Established in 2016, the NCLT consolidates powers earlier dispersed across multiple forums, offering a unified mechanism for handling restructuring schemes, oppression and mismanagement matters, financial statement revisions, and revival or liquidation of distressed companies. Its jurisdiction also extends to class action suits, share-transfer disputes, and corporate investigations, enabling holistic oversight of corporate conduct. Through streamlined procedures and expert benches, the Tribunal strengthens Corporate Governance Mechanisms and enhances investor confidence. By ensuring fairness, accountability, and legal compliance in complex reorganisations, the NCLT has emerged as a cornerstone institution shaping India’s modern corporate regulatory environment.
- INTRODUCTION
The National Company Law Tribunal (NCLT), established in June 2016 under the Companies Act, 2013, is a specialised quasi-judicial body with nationwide jurisdiction to adjudicate matters relating to corporate laws in India. Created under the authority of Article 245 of the Constitution, it replaced the erstwhile Company Law Board (CLB) and took over all pending proceedings.
Historically, corporate regulation in India was minimal and largely governed by colonial-era statutes like the Companies Act, 1913. After economic liberalisation in 1991, rapid growth of domestic and multinational corporations exposed gaps in outdated laws, leading to delays, procedural complexities, and ineffective insolvency mechanisms. High-profile corporate failures such as IL&FS, Café Coffee Day, and Jet Airways further underscored the need for a modern, efficient, and centralised adjudicatory system. The NCLT was thus introduced to streamline corporate governance, ensure speedy dispute resolution, and strengthen investor confidence.
- OBJECTIVE
The objective of studying the role of the National Company Law Tribunal (NCLT) in corporate reorganisation is to analyse how the Tribunal functions as a specialised judicial body for restructuring corporate entities under the Companies Act, 2013. It aims to understand the NCLT’s powers in sanctioning schemes of compromise, arrangement, and amalgamation, ensuring protection of shareholders and creditors, and maintaining transparency and fairness in restructuring processes. The objective also includes examining how NCLT decisions promote efficient dispute resolution, reduce judicial delays, and contribute to stable corporate governance and economic growth.
- AREAS OF COMPANY LAW WHERE NCLT PLAYS A SIGNIFICANT ROLE
The National Company Law Tribunal (NCLT) exercises crucial jurisdiction across several core areas of corporate regulation under the Companies Act, 2013. Its powers extend to matters involving compromises and arrangements, mergers and amalgamations, corporate restructuring, winding up of companies, issues of oppression and mismanagement, revival and rehabilitation of sick companies, and compounding of offences. These domains collectively position the NCLT as the central authority for company law adjudication in India. A key area of its role is elaborated below:
4.1 Compromise, Arrangement and Amalgamation
Sections 230–232 of the Companies Act, 2013 empower the NCLT to supervise and approve corporate restructuring, including mergers and reorganisations of share capital. Any scheme involving consolidation, division, or restructuring of shares requires the Tribunal’s sanction to ensure fairness, transparency, and protection of stakeholder interests.
4.2 Oppression and Mismanagement
Sections 241–246 provide remedies for minority shareholders when company affairs are conducted in a manner prejudicial to their interests. These provisions overcome the majority rule from Foss v. Harbottle by allowing members to approach the NCLT against past or ongoing acts of oppression or mismanagement. The Act lowers the filing threshold and expands the scope of relief to protect stakeholders.
4.3 Class Action Suits
Section 245 enables groups of investors or depositors to file class action suits against a company, its directors, auditors, or advisors for fraud, negligence, or misleading conduct. It provides a collective remedy against corporate wrongdoing and applies to both public and private companies (excluding banks), ensuring accountability for large-scale harm.
4.4 Winding Up
Under Section 270, companies may be wound up voluntarily or by order of the NCLT. The Tribunal supervises compulsory winding up (Section 357), appoints liquidators, and oversees asset distribution. This ensures an orderly, transparent, and legally compliant dissolution process when companies become insolvent or financially unsustainable.
4.5 Deregistration
Section 7(7) empowers the NCLT to deregister companies formed through fraud, misrepresentation, or concealment of material facts. It may impose penalties and fix liability on wrongdoers, acting as a safeguard against shell companies and fraudulent incorporations.
4.6 Transfer of Shares Disputes
Sections 58 and 59 allow aggrieved parties to approach the NCLT when a company wrongfully refuses or delays transfer or transmission of securities. The Tribunal may order rectification and compensation, ensuring shareholder rights are not violated.
4.7 Revising Financial Statements
Sections 447 and 448 penalise falsification of accounts. Companies cannot reopen or revise financial statements without NCLT approval under Section 131. This ensures accuracy, transparency, and judicial oversight in financial reporting.
4.8 Deposits
NCLT handles deposit-related disputes following the 2014 notification. Depositors may seek remedies for defaults or fraud and can file class action suits under Section 245 for collective redress against companies mishandling depositors’ funds.
4.9 Powers to Investigate
The NCLT can order an investigation into a company’s affairs when at least 100 members or members with the required shareholding apply. It may freeze assets, restrict operations, or halt product distribution during the inquiry. The Tribunal can appoint external investigators with authority to conduct investigations both in India and abroad, enabling thorough scrutiny in complex or cross-border matters.
4.10 Compounding of Offences
NCLT now handles the compounding of offences exceeding certain monetary limits under the Companies Act. Compounding enables settlement of offences (not involving mandatory imprisonment) through payment of penalties instead of full prosecution. While smaller matters may be handled by the Regional Director, major cases require NCLT approval, ensuring efficient resolution of corporate non-compliances.
4.11 Uniform Financial Year
Section 2(41) mandates every company to follow a uniform financial year from 1 April to 31 March. Companies wanting a different financial year for valid reasons—such as foreign operations—must seek approval from the NCLT. This provision promotes consistency and uniformity in financial reporting across Indian companies.
- POWERS AND FUNCTIONS OF THE NCLT
The scope and responsibilities of the National Company Law Tribunal (NCLT) were largely shaped by the recommendations of the Eradi Committee, which envisioned a unified forum for corporate adjudication in India. As a specialised judicial body, the NCLT performs functions comparable to a court of law and is empowered to decide matters arising under the Companies Act, 2013 as well as earlier company legislations. The tribunal operates as an independent authority, and several powers previously exercised by various institutions—such as the High Courts, the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) and the Board of Industrial and Financial Reconstruction (BIFR)—have been consolidated under it. Consequently, almost all disputes involving companies incorporated in India fall within the jurisdiction of the NCLT, except for issues relating to banking companies and certain financial institutions that are governed by separate statutes. The NCLT functions through its Principal Bench located in New Delhi along with multiple regional benches across major cities such as Mumbai, Chennai, and Prayagraj (Allahabad).
- COMPOSITION OF THE BENCH
Each bench of the NCLT is constituted by a combination of judicial and technical expertise. The tribunal is headed by a President, supported by judicial members and technical members. To be appointed as President, an individual must have served as a judge of a High Court for a minimum of five years. Judicial members may include former judges of High Courts, district judges with significant judicial experience, or advocates with at least ten years of practice. Technical members generally consist of professionals such as chartered accountants, cost accountants, company secretaries, or individuals with substantial experience in corporate management and finance. Proceedings before the NCLT follow the principles of natural justice and are guided by the Code of Civil Procedure unless otherwise specified in the Companies Act or relevant rules. The tribunal also functions as the adjudicating authority for corporate and LLP insolvency matters under the Insolvency and Bankruptcy Code, 2016.
- QUASI-JUDICIAL CHARACTER OF THE TRIBUNAL
The NCLT is a quasi-judicial institution, meaning it has the power to conduct hearings, evaluate evidence, and deliver decisions similar to a court, but it does not enjoy the same constitutional status as the judiciary. In 2019, questions were raised before the Supreme Court regarding whether the creation of the NCLT diluted the independence of the judiciary by transferring functions traditionally exercised by High Courts to a body that could potentially be altered or dissolved by the executive. The Supreme Court, however, reaffirmed the constitutionality of the NCLT, emphasizing that its decisions are subject to appeal before the National Company Law Appellate Tribunal (NCLAT) and ultimately before the Supreme Court. This appellate structure, according to the Court, ensures adequate judicial oversight and prevents any erosion of judicial power.
- IMPACT OF CREATION OF NCLT & NCLAT
The establishment of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) under the Companies Act, 2013 represents a major institutional reform in India’s corporate regulatory structure. By consolidating the jurisdiction previously dispersed across the Company Law Board (CLB), Board of Industrial and Financial Reconstruction (BIFR), Appellate Authority for Industrial and Financial Reconstruction (AAIFR), and High Courts, the NCLT has created a unified adjudicatory platform. This integration aims to deliver faster, more efficient, and technically sound resolutions in company law, insolvency, and related disputes. The following sections examine the impact of this reform in detail, elaborating on statutory provisions, judicial scope, and functional advantages.
8.1 Single Forum
Consolidation of Disparate Authorities (Provision: Sections 408–434, Companies Act, 2013)
The Companies Act, 2013 empowered the Central Government to constitute the NCLT by transferring the powers and functions previously vested in CLB, BIFR, AAIFR, and High Courts. This eliminated the need for litigants to approach different authorities for issues such as oppression/mismanagement, winding up, and revival of sick companies. The consolidation has resulted in a streamlined judicial workflow, preventing contradictory decisions from multiple bodies. Before NCLT, a company facing operational mismanagement filed a petition before the CLB, but for revival proceedings it had to approach BIFR. Now, both issues can be addressed by NCLT through a single proceeding.
- Removal of Overlapping Jurisdiction
Earlier, High Courts exercised company jurisdiction under the Companies Act, 1956 while CLB handled certain administrative disputes. This duality often created overlaps, delays, and jurisdictional conflicts. NCLT’s exclusive jurisdiction resolves these issues by vesting all company-related adjudication in one specialized forum. In winding-up matters, litigants earlier faced confusion whether to file before the High Court or CLB; NCLT now handles both the cause of action and incidental relief.
- Transfer of Pending Cases to NCLT (Provision: Section 434)
All active proceedings pending before CLB under the 1956 Act stood transferred to NCLT upon its constitution. This ensured continuity and prevented multiplicity of litigation. The Tribunal is also authorized to apply the procedural provisions of the Companies Act, 2013 to transferred matters. A pending oppression petition filed in 2014 automatically shifted to NCLT in 2016 without requiring re-filing.
- Holistic Approach to Dispute Resolution
NCLT adjudicates company disputes, insolvency matters under IBC, mergers and acquisitions, capital reduction, and class action suits, making it a central adjudicatory institution. A unified platform ensures that interconnected issues are adjudicated without fragmented decisions. A merger petition involving a sick company earlier required parallel proceedings before BIFR and High Courts. NCLT now handles both restructuring and rehabilitation.
- Enhancement of Judicial Expertise
NCLT comprises both judicial and technical members (Section 409), enabling specialized interpretation of corporate, financial, and accounting issues. This dual expertise ensures high-quality decision-making unavailable in conventional courts. In complex transfer-pricing or accounting fraud disputes, technical members assist the judicial bench in understanding the financial intricacies.
8.2 Class Action Claims
- Statutory Basis: Section 245 of the Companies Act, 2013
Section 245 allows members and depositors to file class action applications before NCLT when company affairs are conducted in a manner prejudicial to their interests. This provision empowers minority shareholders who earlier lacked substantive legal remedies. If 150 shareholders find that company funds are being siphoned by directors, they may file a class action to restrain such conduct.
- Remedy Against Directors, Auditors, Experts
Section 245(1)(g) specifically empowers shareholders to initiate action not only against directors but also against auditors, audit firms, consultants, and advisors responsible for fraudulent or wrongful acts. This widens accountability beyond internal management. An audit firm that knowingly certifies inflated profits can be sued collectively by aggrieved shareholders.
- Reduction of Arbitrary Management Decisions
Class action suits help check oppressive management actions by mandating corporate governance compliance. NCLT may restrain directors from entering into ultra vires contracts, altering articles, or implementing unconstitutional resolutions. Directors passing resolutions approving related-party transactions without disclosures can be legally stopped through class action.
- Threshold Requirements (Section 245(3))
The law prescribes quantitative requirements such as minimum number of members, percentage of shareholding, or depositors eligible to file a class action. These ensure that frivolous or malicious petitions are avoided. If a company has 10,000 shareholders, at least 100 or a qualifying percentage must support the application.
- Strengthening Investor Confidence
The availability of class action remedies boosts investor trust in transparency and corporate governance. It aligns Indian company law with international standards like U.S. securities class actions. Investors may invest confidently in public companies knowing that collective legal protection is available.
8.3 Accessibility
- Establishment of Multiple NCLT Benches (Provision: Section 408)
The Central Government established 11 NCLT benches across India to ensure regional accessibility. This expansion removes the need for litigants to travel long distances, thereby reducing litigation costs and logistical burdens. A company in Jaipur need not approach Delhi; it can file matters before the NCLT Jaipur Bench.
- Replacement of CLB’s Limited Bench Structure
CLB operated with only five benches, causing heavy backlog and uneven access. NCLT’s broader geographical coverage allows more prompt hearings and filing convenience. Earlier a Chennai-based corporation waited months for CLB dates; now NCLT’s regional presence accelerates case listings.
- Jurisdiction Over Matters Earlier Handled by High Courts
NCLT now handles several matters formerly under High Courts, such as reduction of capital, rectification of register, and certain winding-up petitions (notified categories). This reduces the burden on High Courts while providing litigants a specialized forum. Rectification of register (Section 59) petitions that once clogged High Court boards now receive quicker adjudication.
● Appellate Mechanism via NCLAT (Provision: Section 410)
Appeals from NCLT orders lie before NCLAT, ensuring a uniform appellate structure. Further appeals lie only before the Supreme Court, not High Courts, preventing contradictory judgments across states. A decision of the NCLT Chennai Bench can be appealed only before NCLAT and not before Madras High Court.
- Uniformity in Company Law Adjudication
NCLT’s centralized procedure ensures consistent application of company law throughout India. This prevents regional variations in legal interpretations. Oppression/mismanagement cases now follow uniform benchmarks irrespective of the bench location.
8.4 Speedier Remedy
- Self-Regulated Procedure (Section 424)
NCLT and NCLAT are empowered to regulate their own procedures similar to civil courts but with flexibility. They may determine evidence, timelines, and hearings without strictly applying the Civil Procedure Code (CPC). NCLT may accept electronic records or affidavits without formal proof delays required under CPC.
- Time-bound Disposal of Matters
The Tribunals are mandated to endeavor to dispose of cases within three months, with a possible extension of 90 days upon written justification. This statutory discipline promotes efficiency rarely seen in conventional courts. In a merger scheme petition, NCLT can complete the process in three months instead of years.
- Swift Insolvency Resolutions Under IBC
NCLT is also the adjudicating authority under the Insolvency and Bankruptcy Code, 2016, where cases must be resolved within 180–330 days. This integration further accelerates economic rehabilitation. A company’s insolvency case must be resolved within statutory timelines, preventing indefinite delays.
- Elimination of Fragmented Litigation
Since NCLT handles a wide spectrum of corporate disputes, parties need not approach multiple forums. Consolidated proceedings naturally reduce time consumption. A merger involving a sick company previously required BIFR clearance; NCLT now handles all aspects in one proceeding.
- Reduced Backlogs Compared to High Courts
High Courts faced massive pendency; moving company matters to NCLT has significantly reduced delays. Specialized benches can dedicate full judicial time to company matters. Capital reduction petitions that once took years in High Courts now receive quicker approval.
8.5 Phased Introduction
- Initial Jurisdiction Under Notification (2016)
At the time of constitution, NCLT initially took over matters related to oppression and mismanagement (Sections 241–244) and class action (Section 245). This phased approach ensured smooth transitional functioning. A shareholder dispute filed under Section 241 in 2016 was immediately taken up by NCLT.
- Transfer of CLB Matters (Section 434)
All proceedings under the Companies Act, 1956 pending before CLB automatically transferred to NCLT. This ensured procedural continuity without requiring parties to re-file or modify pleadings. A rectification petition under Section 111A (1956 Act) moved automatically to NCLT.
- Exclusion of Certain Matters During Initial Phase
At the initial stage, matters relating to compromises/arrangements (Section 230–232), revival of sick companies, and winding-up (except notified categories) were not transferred. These were later integrated in phases. A 2016 winding-up petition remained with the High Court unless it fell under “transfer categories” later notified.
- Appellate Structure: NCLAT and Supreme Court
Appeals from NCLT lie with NCLAT (Section 410) and further appeals lie only before the Supreme Court on questions of law. This ensures a uniform appellate structure and reduces conflicting regional interpretations. A NCLT merger order challenged in Kolkata is decided by NCLAT Delhi, ensuring national-level consistency.
- Transitional Management of BIFR Cases
Sick industrial company matters originally under BIFR/AAIFR were not immediately transferred but were later subsumed under the Insolvency and Bankruptcy Code. This avoided systemic disruption. A company declared sick under 1956 Act before 2016 later filed for insolvency under IBC, bringing it within NCLT’s domain.
- LANDMARK CASE LAWS AND ILLUSTRATION
Reliance Industries Ltd. V. Reliance Jio Infocomm Ltd. Merger (2017) – NCLT Mumbai
NCLT sanctioned the merger holding that once creditors and shareholders approve the scheme and statutory compliances are complete, the tribunal must only verify fairness and absence of prejudice. The reasoning stressed the tribunal’s limited jurisdiction and reliance on commercial prudence of stakeholders.
Tata Chemicals Ltd. v. Rajendra V. Gogri (2016) – Bombay High Court
The Court held that objections alleging undervaluation or unfair share ratios must be supported by strong material. As valuation is a technical exercise approved by experts, the tribunal will not interfere unless the valuation is arbitrary, mala fide, or patently unjust.
INEOS Styrolution India Ltd. Merger (2019) – NCLT Ahmedabad
NCLT approved the scheme despite objections, stating that restructuring should not be refused merely because a minority disagrees. The tribunal reasoned that the focus is on procedural compliance, fairness, and stakeholder protection, not on minority dissatisfaction unless genuine prejudice is shown.
Gabs Investments Pvt. Ltd. v. Ajanta Pharma Ltd. (2020) – NCLAT
NCLAT upheld that a scheme must be examined for transparency, valuation integrity, and creditor protection. The tribunal held that if independent reports confirm fairness and stakeholders raise no substantive objections, the scheme must be approved.
CONCLUSION
The establishment of the National Company Law Tribunal (NCLT) and NCLAT represents a major advancement in India’s system of Corporate Reorganizations, creating a unified and specialized platform for resolving company law disputes. Through its expanded NCLT Jurisdiction, the Tribunal has successfully consolidated powers relating to Insolvency and Restructuring, Mergers and Amalgamations, and shareholder protection, thereby ensuring faster, transparent, and more coherent adjudication. This centralization has strengthened Corporate Governance Mechanisms by reducing procedural fragmentation and increasing institutional accountability. Integrating judicial and technical expertise, the NCLT provides informed and balanced decisions that enhance investor confidence and streamline corporate dispute resolution. As the Tribunal continues to handle complex matters of restructuring and corporate revival, it remains a cornerstone in shaping a modern and efficient corporate regulatory framework. Ultimately, the NCLT has transformed the landscape of corporate adjudication, ensuring that governance, compliance, and organizational restructuring are carried out with greater precision and timeliness.
