Companies Act Section 425

Companies Act, Section 425: Power of the Tribunal and Appellate Tribunal to Punish for Contempt

Section 425 of the Companies Act, 2013 confers on the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) the same authority that a High Court possesses in matters related to contempt of court.

This is a crucial safeguard to ensure respect for the judicial process and to maintain dignity and discipline within the functioning of these adjudicatory bodies.

Corporate justice requires that parties, lawyers, witnesses, and others involved in proceedings follow established rules and behave responsibly. 

Therefore, the Tribunals must have strong powers to respond to acts that challenge their authority or obstruct justice.

1. Jurisdiction Equivalent to High Courts

The section expressly states that NCLT and NCLAT hold the same jurisdiction, authority, and powers as a High Court.

These powers apply in cases of contempt committed against either Tribunal. This means that if any person:

Disobeys a Tribunal’s order. Interrupts proceedings in a disorderly manner.

Shows disrespect towards Members of the Tribunal. Attempts to interfere with the administration of justice.

Provides false statements or misleads the Tribunal deliberately. The Tribunal can initiate contempt proceedings and impose penalties as permitted under law.

2. Application of the Contempt of Courts Act, 1971

For executing these powers, the Tribunals may exercise authority granted under the Contempt of Courts Act, 1971, which lays down the:

Types of contempt (civil contempt and criminal contempt). Procedures to be followed during contempt proceedings. Forms of punishment such as fines or imprisonment.

However, some modifications are introduced to align the Act with the Tribunal system.

3. Modifications to the Contempt of Courts Act, 1971

There are two key modifications to ensure seamless application:

a) Every reference to the term “High Court” in the Contempt of Courts Act must be understood as including a reference to NCLT and NCLAT.

This places the Tribunals on similar footing with High Courts in contempt jurisdiction.

b) Under Section 15 of the Contempt of Courts Act, the reference to the Advocate-General must be interpreted as referring to a Law Officer designated by the Central Government for Tribunals.

This enables the Central Government to appoint appropriate legal representatives to assist in contempt matters before the Tribunals.

Purpose and Importance of Section 425

Respect for judicial authority within corporate dispute resolution. Orderly conduct of legal proceedings.

Protecting the integrity of Tribunal functions. Preventing interference with justice.

Ensuring that compliance with orders is strictly enforced without such powers, the effectiveness of the Tribunal could be compromised by misconduct, disrespect, or deliberate obstruction from individuals involved in proceedings.