Companies Act Section 428

Companies Act, Section 428: Protection of Actions Taken in Good Faith

Section 428 of the Companies Act, 2013 provides legal protection to the National Company Law Tribunal (NCLT), the National Company Law Appellate Tribunal (NCLAT), and the individuals associated with them when performing their duties under the law. 

This safeguard exists to ensure that judicial and administrative functioning is carried out without fear of unnecessary litigation or harassment, as long as actions are taken honestly, responsibly, and in good faith.

1. Scope of Protection

This immunity extends to the Tribunal as an institution and the President, Chairperson, and Members of NCLT and NCLAT.

All officers and employees supporting their functioning. Liquidators appointed under the Act.

Any person authorized by NCLT or NCLAT in the discharge of official functions.

It covers all acts performed or intended to be performed while carrying out duties under the Companies Act.

2. Nature of Protection Provided

The provision clearly states that no suit, prosecution, or legal proceeding shall be initiated against any of the above-mentioned individuals or authorities for any loss or damage caused or likely to be caused by an act done in good faith and in pursuance of the Act. This means that:

As long as the action was taken with honesty of purpose, without negligence or malicious intent, and for fulfilling statutory obligations.

The officials involved will be immune from legal consequences

3. Purpose and Importance of the Protection

Tribunal Members and officers are often required to make decisions affecting:

Corporate finances, Shareholder rights, Business continuity, Creditor recoveries, Insolvency and restructuring outcomes.

Displeased parties might otherwise attempt to disrupt or retaliate through frivolous or hostile legal actions. This provision therefore:

Encourages independence in decision-making. Allows authorities to perform their duties confidently and without fear.

Prevents vindictive or malicious litigation meant to intimidate or pressure officials. Strengthens the functioning and efficiency of corporate judicial mechanisms.

4. Balance Between Immunity and Accountability

The protection applies only to actions taken in good faith, according to the law within the authority granted under the Act. It cannot be used as a shield for:

Acts done with malicious intent. Abuse of power or corruption. Negligence or actions outside legal authority.

Thus, Section 428 protects honest decision-making, while still maintaining avenues to hold wrongdoers accountable.