Supreme Court: NCLAT Order Valid Even If Bench Has Majority Technical Members

In Pannalal Bhansali Versus Bharti Telecom Limited & Ors., the Supreme Court clarified that an order of the National Company Law Appellate Tribunal (NCLAT) cannot be considered invalid merely because the bench deciding the matter had a majority of technical members. The Court held that the present statutory framework does not require judicial members to outnumber technical members in an NCLAT bench.

The ruling was delivered by a Bench comprising Justice Sanjay Kumar and Justice K. Vinod Chandran. The Court dismissed appeals filed by minority investors who had challenged a share capital reduction scheme implemented by Bharti Telecom Limited.

The dispute arose when certain minority shareholders opposed the company’s decision to reduce its share capital by cancelling shares held by specific minority investors. The scheme had earlier been approved by shareholders through a special resolution and later confirmed by the National Company Law Tribunal (NCLT).

Following this approval, some investors approached the NCLAT challenging the capital reduction. However, the appellate tribunal dismissed their objections. The investors then approached the Supreme Court, questioning both the decision and the composition of the NCLAT bench that heard their appeal.

The appellants argued that the NCLAT bench consisted of two technical members and one judicial member. They relied on the Constitution Bench judgement in Union of India v. Madras Bar Association (2010) to contend that tribunals replacing High Courts must have a majority of judicial members.

The Supreme Court rejected this argument. It explained that the legal framework governing the NCLAT does not mandate a judicial majority on the bench. The Court referred to Section 418A of the Companies Act, 2013, which only requires that a bench must include at least one judicial member and one technical member.

The bench observed that in the present case, the NCLAT was chaired by a judicial member and also included two technical members. Since the decision of the tribunal was unanimous, the Court found no reason to question the validity of the bench’s composition.

Clarifying further, the Court stated that earlier observations in the Madras Bar Association case were made under the legislative scheme that existed during the Companies Act, 1956. The present structure under the Companies Act, 2013 is different and does not impose the same requirement.

The Court also cautioned against treating technical members as inferior adjudicators simply because they are not from a judicial background. It emphasised that many technical members are experienced administrators or domain experts who regularly perform quasi-judicial functions.

According to the Court, such expertise can play a significant role in resolving disputes involving complex financial, commercial, and administrative issues. Therefore, their presence on tribunal benches cannot be viewed with “disdain” or suspicion.

Ultimately, the Supreme Court upheld the decisions of both the NCLT and NCLAT. The appeals filed by the minority investors were dismissed, and the capital reduction scheme approved by Bharti Telecom Limited remained valid.

The Court also reiterated an important appellate principle. When the NCLT and NCLAT have recorded concurrent findings, the Supreme Court generally will not re-examine evidence in appeals under Section 423 of the Companies Act unless a clear question of law arises.