Companies Act Section 424

Companies Act, Section 424: Procedure Before the Tribunal and Appellate Tribunal

Section 424 of the Companies Act, 2013 sets out the procedural framework under which the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) conduct their proceedings. 

This section emphasizes flexibility, fairness, and efficiency in resolving company law disputes. 

Instead of being restricted by rigid technicalities of the Code of Civil Procedure, 1908, the Tribunals are guided primarily by the principles of natural justice, making the adjudication process simpler, quicker, and more suitable for corporate matters.

Additionally, with the inclusion of references to the Insolvency and Bankruptcy Code, 2016 (IBC), this provision also governs procedures in insolvency-related cases heard by the Tribunals.

1. Tribunals Not Bound by Civil Procedure Code

The Tribunal and Appellate Tribunal are not bound by the procedures prescribed under the Code of Civil Procedure, 1908.

Instead, they must follow the principles of natural justice, which ensure:

Fair hearing to all parties, Impartiality in decision-making, Absence of bias.

Furthermore, subject to the provisions of the Companies Act and IBC and relevant rules, the Tribunals have complete authority to:

Regulate their own procedure: Adopt flexible and efficient methods based on the nature of disputes.

This enables faster decision-making compared to traditional civil courts.

2. Powers Equivalent to Those of a Civil Court

Even though they are not bound by the CPC, the Tribunals possess all essential powers granted to civil courts while trying a suit, including:

Summoning and enforcing attendance of persons, and examining them under oath.

Requiring discovery and production of documents. Receiving evidence on affidavit.

Requisitioning public documents or records from any authority, subject to the Indian Evidence Act.

Issuing commissions to examine witnesses or evidence. Dismissing a case for default or deciding matters ex parte.

Setting aside ex parte orders or dismissals for default. Any other matter prescribed under law.

These powers ensure the Tribunals can conduct effective inquiries, enforce compliance, and manage evidence with judicial authority.

3. Execution of Tribunal Orders

Orders issued by NCLT or NCLAT are legally enforceable just like decrees of civil courts. The Tribunals can:

Execute their own orders, Send orders for execution to an appropriate civil court. Execution depends on jurisdiction:

For orders against a company where its registered office is located.

For orders against any other person where the person resides, works, or conducts business.

This ensures enforcement is practical and jurisdictionally proper.

4. Proceedings Treated as Judicial Proceedings

All proceedings before NCLT and NCLAT:

Are considered judicial proceedings. Fall under Sections 193 and 228 of the Indian Penal Code, meaning:

False evidence or perjury before the Tribunal is a punishable offence. Any insult or disruption before the Tribunal constitutes a criminal offence. Additionally:

The Tribunals are deemed civil courts for purposes of Section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973.

They can initiate action against offences relating to judicial misconduct, false evidence, etc.

This classification protects the dignity of the Tribunal and imposes serious consequences for misconduct before it.

Purpose and Importance of Section 424

Faster and more flexible adjudication of corporate disputes. Fairness and transparency through natural justice principles.

Strong judicial authority to enforce compliance and maintain discipline. Enhanced credibility through recognition as judicial bodies under criminal law. Seamless integration with insolvency proceedings under IBC