Jurisdiction of the National Company Law Tribunal

Ask any company law student what the National Company Law Tribunal actually does, and you’ll usually get a one-line answer: “it handles company disputes.” That’s true, but it undersells just how wide this tribunal’s reach is. From approving a merger between two listed companies to ordering a stubborn company to return a depositor’s money, the NCLT sits at the centre of almost every major corporate event in India. Understanding where its authority begins and ends is one of the most practical things you can learn in a Company Law course, because it tells you exactly which forum to approach when something goes wrong inside a company.

What is the National Company Law Tribunal? 🔗

The National Company Law Tribunal is a quasi-judicial body constituted by the central government on 1 June 2016 under Section 408 of the Companies Act, 2013. It was created on the recommendation of the Eradi Committee to end a messy, fragmented system where company matters were split between the Company Law Board, the High Courts, and bodies like the Board for Industrial and Financial Reconstruction (BIFR). Instead of a litigant running between three or four different authorities for one dispute, the NCLT was designed as a single specialised forum with benches across major Indian cities, headed by a principal bench in New Delhi.

Appeals against NCLT orders go to the National Company Law Appellate Tribunal (NCLAT), and from there, on a question of law, to the Supreme Court. This two-tier structure keeps company law adjudication specialised at every stage, rather than routing it through ordinary civil courts.

Why one tribunal handles so much 🔗

A key design feature of the Companies Act, 2013 is that it deliberately keeps civil courts out of matters the NCLT is empowered to decide. This is why disputes over share transfers, oppression by majority shareholders, or a company’s winding up don’t end up in a district court; they go straight to the Tribunal. This centralisation is meant to prevent the exact problem the old system suffered from: parallel proceedings, conflicting orders, and years of delay because two different forums were hearing pieces of the same dispute.

Jurisdiction over shareholder rights and share capital 🔗

A large share of the NCLT’s daily workload involves ordinary shareholder-level issues; disputes that, before 2016, could drag on for years before scattered forums.

Transfer and transmission of shares, and rectification of the register 🔗

When a company refuses to register a transfer of shares, or a shareholder’s name is removed from the register of members without proper cause, the aggrieved party can approach the NCLT under Sections 58 and 59. The Tribunal’s power here has actually grown compared to its predecessor, the Company Law Board, whose authority in such matters was once restricted by an earlier Supreme Court ruling. Today, the NCLT exercises considerably wider and more direct control over rectifying the register of members, including in cases involving disputed transmission of shares after a shareholder’s death.

Preference shares 🔗

Preference shares must eventually be redeemed; companies aren’t allowed to issue irredeemable ones. But what happens when a company genuinely cannot afford to redeem them on schedule? Section 55(3) lets such a company approach the NCLT, with the consent of holders representing three-fourths in value of the unredeemed shares, for permission to issue fresh redeemable preference shares in their place. This isn’t a rare, theoretical power either. Earlier this year, the NCLT’s Kochi bench permitted a private company to issue fresh redeemable preference shares for a further five years after it was unable to redeem its existing ones, treating the old shares as deemed redeemed once the new ones were issued.

Reduction of share capital 🔗

Under Section 66, any company wanting to reduce its share capital, whether by cancelling unpaid capital, paying off excess capital, or writing off accumulated losses, needs the NCLT’s approval. The Tribunal’s role here is essentially protective: it checks that the proposed reduction treats creditors and shareholders fairly before allowing it to go through, since a capital reduction can directly affect what creditors are eventually entitled to recover.

Jurisdiction over public deposits 🔗

Companies that accept deposits from members or the public under Sections 73 to 76 take on a strict repayment obligation. If a company defaults, a depositor doesn’t need to file a civil suit; they can apply directly to the NCLT under Section 73(4), and the Tribunal can order the company to repay the amount along with any loss or damage suffered because of the delay. This is one of the more consumer-facing sides of the NCLT’s jurisdiction, since it exists specifically to protect ordinary depositors, not just institutional creditors, from companies that renege on repayment promises.

Mergers, amalgamations, and corporate restructuring 🔗

Every scheme of merger, demerger, amalgamation, or compromise between a company and its shareholders or creditors under Sections 230 to 232 needs the NCLT’s sanction. The Tribunal examines the scheme, hears objections from stakeholders, regulators like SEBI or the Registrar of Companies, and satisfies itself that the arrangement is fair before approving it. For anyone tracking large corporate deals in the news, the phrase “pending NCLT approval” is almost always a reference to this exact jurisdiction.

Oppression and mismanagement 🔗

This is arguably where the NCLT does its heaviest lifting, especially in family-run and closely held companies. Under Section 241, any eligible member can approach the Tribunal alleging that a company’s affairs are being run in a manner that’s oppressive to members or prejudicial to the company’s or the public interest. To prevent frivolous petitions, Section 244 sets a threshold: broadly, at least 100 members or one-tenth of total members (or one-tenth of issued share capital), though the Tribunal can waive this in genuine cases.

Once a petition is admitted, the NCLT’s remedial powers under Section 242 are considerable. It can restrain share transfers, remove and appoint directors, set aside prejudicial transactions, or even direct a buyout of the minority shareholders’ stake. This chapter became widely known to the public through the long-running Tata Sons-Cyrus Mistry dispute, where questions about oppression, mismanagement, and the threshold to even file such a petition were litigated all the way to the Supreme Court.

Winding up of companies 🔗

Winding up used to be one of the NCLT’s biggest workloads, but the Insolvency and Bankruptcy Code, 2016 changed that considerably. Most insolvency-driven closures now go through the IBC’s resolution process rather than the older winding-up route. What remains with the NCLT under Section 271 of the Companies Act is a narrower, residual set of grounds: where a company passes a special resolution to be wound up, where it has acted against India’s sovereignty or security, where its affairs have been conducted fraudulently, where it has defaulted in filing financial statements or annual returns for five consecutive years, or where the Tribunal simply finds it “just and equitable” to wind the company up. That last ground is deliberately broad and has been used in cases involving a complete breakdown of trust between shareholders, most notably in deadlock disputes between joint-venture partners.

Revival and rehabilitation of sick companies 🔗

Textbooks still list Chapter XIX (Sections 253-269) of the Companies Act, 2013 as covering the revival and rehabilitation of financially distressed, or “sick,” companies. It’s worth knowing the current status of this provision: these sections were never really operationalised in their original form and were formally omitted once the Insolvency and Bankruptcy Code, 2016 took over this function. In practice, a company facing financial distress today is revived, restructured, or liquidated through the Corporate Insolvency Resolution Process under the IBC, with the NCLT acting as the Adjudicating Authority throughout. So while the “sick company” language has largely disappeared from the statute book, the underlying job of deciding whether a struggling company gets a second chance or gets wound up still rests squarely with the NCLT, just under a different law.

Putting it all together 🔗

Step back, and a pattern becomes clear. Every one of these powers, whether it’s approving a merger, rectifying a register, or ordering a winding up, involves a decision that affects multiple stakeholders at once: shareholders, creditors, employees, and sometimes the public interest. That’s precisely why a specialised tribunal, rather than an ordinary civil court, was given this jurisdiction. It allows judges with company law and financial expertise, sitting alongside technical members who understand accounting and corporate structuring, to make these calls faster and with more domain knowledge than a general court typically could.

What do you think? Given how much of the NCLT’s original mandate over sick companies and winding up has shifted to the Insolvency and Bankruptcy Code, do you think the Companies Act should be updated to formally remove the outdated references, or does keeping them serves any purpose? And in disputes like the Tata-Mistry case, where does “prejudicial to public interest” end and ordinary shareholder disagreement begin?

References

1. https://nclt.gov.in/
2. https://www.bwlegalworld.com/article/rectification-of-register-of-members-expanding-national-company-law-tribunal%E2%80%99s-jurisdiction-385919
3. https://www.livelawbiz.com/company-law/nclt/national-company-law-tribunal-kochi-allows-mfar-enterprises-to-issue-further-redeemable-preference-533722
4. https://www.thelawadvice.com/articles/jurisdiction-of-nclt-and-nclat
5. https://bhattandjoshiassociates.com/powers-of-the-nclt-in-cases-of-oppression-and-mismanagement/
6. https://www.lexology.com/library/detail.aspx?g=88950cdd-4eaf-4a32-b09c-332c67255739
7. https://blog.ipleaders.in/jurisdiction-nclt-companies-act-2013/