Companies Act Section 417

Companies Act, Section 417: Removal of the President, Chairperson, and Members of NCLT and NCLAT

Section 417 of the Companies Act, 2013 provides the legal framework for removing the President, the Chairperson, or any other Member of the National Company Law Tribunal (NCLT) or National Company Law Appellate Tribunal (NCLAT). 

Since these individuals hold important judicial or quasi-judicial positions, the provision ensures that removal is permitted only under justified circumstances and through a fair and transparent process. 

The section balances two essential objectives: safeguarding judicial independence and maintaining accountability when misconduct, incapacity, or other serious concerns arise.

1. Grounds for Removal by the Central Government

The Central Government can remove the President, Chairperson, or any Member only after consulting the Chief Justice of India, and only if any of the following conditions are met:

a) The person has been declared insolvent

b) The person has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude

c) The person has become mentally or physically incapable of performing official duties

d) The person has financial or other interests that negatively affect their ability to perform their duties impartially

e) The person has misused or abused their position, making their continuation in office harmful to the public interest

These grounds ensure that only situations of serious disqualification warrant removal. The provision also includes an important safeguard:

When removal is proposed on grounds (b) to (e), the concerned individual must be given a reasonable opportunity to be heard

This preserves natural justice and prevents arbitrary or unfair removal.

2. Removal for Misbehaviour or Incapacity

In addition to the above grounds, the law imposes a stricter and more formal procedure for removal on the basis of:

Proved misbehaviour, Proved incapacity. In such cases, removal can only occur when:

A Judge of the Supreme Court, nominated by the Chief Justice of India, conducts an inquiry. The Judge examines charges referred by the Central Government.

The concerned person is fully informed of the charges and given a reasonable chance to defend themselves.

Only after the Judge’s report confirming the charges can the Central Government remove the Member from office. This system ensures independence of adjudicators and prevents political interference.

3. Power to Suspend During Inquiry

While the inquiry under sub-section (2) is ongoing, the Central Government, with the concurrence of the Chief Justice of India, may suspend the President, Chairperson, or Member.

This provision allows protection of the Tribunal’s reputation and functioning by preventing a potentially compromised Member from continuing to exercise judicial authority during the investigation. 

The suspension is temporary and lasts until final orders are passed after reviewing the Supreme Court Judge’s report.

4. Rules for Inquiry Procedure

Finally, the law mandates that the Central Government:

Must consult the Supreme Court. Must frame detailed rules to regulate the inquiry process under sub-section (2)

These rules provide structure and uniformity to inquiries involving misconduct or incapacity and ensure transparency in the disciplinary proceedings.

Importance and Purpose of Section 417

This provision plays a key role in maintaining trust and integrity in India’s corporate adjudication system:

Ensures judicial accountability while preventing misuse of power. Protects the independence of Tribunal Members from arbitrary removal.

Maintains public confidence, as Members can be removed only on valid and proven grounds.

Avoids disruption to the justice system through timely suspension where necessary. Guarantees fair treatment through due process and the right to be heard

Section 417 therefore strengthens the credibility, impartiality, and stability of NCLT and NCLAT institutions that are central to corporate governance and economic justice in India.