NCLAT Sets Aside NCLT Order for Lack of Reasons and Breach of Natural Justice

NCLAT Sets Aside NCLT Order for Lack of Reasons and Breach of Natural Justice

Introduction

The National Company Law Appellate Tribunal (NCLAT) has set aside an order of the National Company Law Tribunal (NCLT), Kolkata Bench, which had appointed an independent scrutinizer to examine the results of the 2024-25 elections of the Calcutta Cricket & Football Club. The appellate tribunal found that the NCLT’s order lacked judicial reasoning and had been passed in breach of the principles of natural justice and Rule 37 of the NCLT Rules, 2016.

Factual Background

The Calcutta Cricket & Football Club, a Section 8 company with 1,880 members, conducted its annual elections on 30 September 2024.

Respondents in the appeal, who were club members and participants in the election, filed an application before the NCLT on 3 December 2024 seeking preservation and scrutiny of the election records, alleging irregularities.

Procedural Background

• The NCLT heard the matter on 9 December 2024, granted one week to the club to file a reply, but reserved orders the same day.
• On 3 January 2025, the NCLT passed an order appointing an independent scrutinizer and directing preservation of election materials.
• The appellant challenged this order before the NCLAT.

Issues

1. Whether the NCLT's order appointing a scrutinizer was valid?

2. Whether the NCLT's order breached the principles of natural justice and Rule 37 of the NCLT Rules, 2016?

Contentions of the Parties

• Appellant's Contention:

The appellant's counsel argued that the order did not contain any reasons or analysis despite a heading “Analysis and Findings,” and merely recorded the applicant’s belief without the tribunal forming its own satisfaction.

They also submitted that granting time to reply but reserving orders on the same day violated Rule 37 and the principles of natural justice.

• Respondents' Contention:

The respondents argued that participation in the election did not prevent them from questioning its conduct. They highlighted that the absence of a senior advocate as scrutinizer, unlike in previous years, raised concerns. They contended that the request to preserve ballot materials was essential for transparency in the pending company petition.

Reasoning and Analysis

The bench comprising Justice Rakesh Kumar (Judicial Member) and Dr. Alok Srivastava (Technical Member) observed that:

• The NCLT order did not contain any independent findings or reasoning.
• Recording only the applicant’s “reasons to believe” was not a substitute for judicial analysis.
• Granting time to reply but reserving orders the same day was contrary to Rule 37 and denied the appellant a meaningful opportunity to be heard.

Implications

This decision underscores the importance of judicial reasoning and adherence to the principles of natural justice in tribunal proceedings. It reiterates that tribunals must provide parties with a real opportunity to be heard and issue reasoned orders to ensure fairness.

Outcome

The NCLAT set aside the NCLT’s order dated 3 January 2025 and directed that the appellant take custody of the election materials deposited in the NCLT. The interim order passed earlier in the appeal was discharged, and no costs were imposed.