Supreme Court decides if NCLAT can Refer Split Verdicts to Third Member

Introduction

In a move that may transform procedural standards at the National Company Law Appellate Tribunal (NCLAT), the Supreme Court of India has resolved to review whether cases yielding split verdicts in front of an NCLAT Bench should be sent to a third member for resolution or be re-evaluated by a bigger coram.

The issue, with major consequences for appellate processes and judicial conduct in quasi-judicial entities, emerged in R. Narayananswamy v. Registrar of Companies, Tamil Nadu. A bench comprising Justices JB Pardiwala and KV Viswanathan has requested the help of Solicitor General of India Tushar Mehta to elucidate the proper procedural path under the Companies Act, 2013, and the NCLAT Rules, 2016.

Court to decide the correct procedure for resolving NCLAT split verdict cases.

Background: The Case that Sparked the Question:

The problem arises from an appeal submitted by R Narayananswamy contesting a ruling by the Registrar of Companies (ROC), Tamil Nadu, that removed his company's name from the Register of Companies under Section 248(5) of the Companies Act, 2013.

Following the removal of the company's name in 2018, the appellant filed a petition with the National Company Law Tribunal (NCLT), Chennai Bench, requesting restoration. The appeal was dismissed by the NCLT in 2020, prompting the appellant to contest the decision at the NCLAT.

A two-member Bench examined the case before the NCLAT but issued a divided ruling. One member deemed the ROC’s order unlawful, while the other supported it. The issue was subsequently sent to a third party, who agreed with the stance supporting the ROC’s decision, thereby confirming the company's deletion from the Register.

The Controversy: Can a Third Member Break the Tie?

The appellant contested this procedure in the Supreme Court, arguing that without a defined statutory or regulatory framework, such instances ought not to be sent to a third member but rather should be reconsidered de novo by a larger panel of at least three members.

Senior Advocate Viraraghavan Rama Krishnan, representing the appellant with a team of legal counsel, contended that sending a divided verdict to one extra member undermines the principle of collective judicial decision-making essential to tribunal adjudication.

The counsel argued that, unlike the Income Tax Appellate Tribunal (ITAT) or the Central Administrative Tribunal (CAT), which have statutory rules that clearly allow for a reference to a third member when opinions differ, the NCLAT does not have this provision either in the Companies Act or its procedural rules.

Thus, the appellant contended that the procedure of “tie-breaking” by an external party lacks legal endorsement and could undermine procedural fairness.

Supreme Court’s Prima Facie View:

The Bench of Justices Pardiwala and Viswanathan recognized that the matter highlighted a significant procedural gap in the NCLAT’s operations, particularly as the tribunal addresses appeals in corporate, insolvency, and competition law areas.

“The issue presented concerns the essential process regulating adjudication at the NCLAT and warrants an official resolution,” the Court noted, requesting insights from the Solicitor General of India to aid in pinpointing the appropriate procedural structure.

The Court instructed its Registry to send a copy of the order to the Solicitor General and requested the appellant’s lawyer to inform him about the issue. The case is scheduled to be heard again on November 19, 2025, following the submissions from the Solicitor General.

Why the Issue Matters: Institutional and Legal Implications:

This procedural uncertainty has wider ramifications for consistency, credibility, and due process in NCLAT's decision-making. Split verdicts frequently occur in the tribunal, especially in intricate cases involving the Insolvency and Bankruptcy Code (IBC) and Companies Act.

If the Supreme Court decides that these cases need to be reviewed by a larger Bench, it could significantly change the NCLAT’s case management framework, necessitating procedural changes or new regulations under the Companies Act, 2013.

On the other hand, should the Court support the third-member reference system, it would codify an established yet unrecorded practice, thus providing legal assurance to numerous cases resolved in a similar manner.

In either case, the decision is expected to affect the tribunal's efficiency, pending case levels, and procedural consistency, particularly as NCLAT acts as the ultimate fact-finding appellate body prior to cases advancing to the Supreme Court.

Way forward: A Step Toward Procedural Clarity:

From a legal policy standpoint, the intervention of the Supreme Court is both essential and prompt. The NCLAT, functioning as a multi-jurisdictional appellate entity, wields extensive power over issues related to company law, insolvency, and competition; however, its procedural structure lacks consistent clarity in specific domains, especially regarding split verdict adjudication.

By addressing this matter, the Apex Court is ready to bridge an essential procedural void and guarantee that consistency in adjudication is upheld across all tribunals operating under its supervisory authority.

According to Lawttorney, this investigation demonstrates the Court's overall dedication to enhancing judicial institutions rather than just addressing individual cases. Clear direction on how the NCLAT should manage split judgements will not only improve procedural clarity but also strengthen litigant trust in tribunal operations.

As the issue comes back to the Supreme Court on November 19, participants in corporate and insolvency litigation will closely anticipate the Solicitor General’s viewpoint, one that may influence the development of collegial adjudication and procedural discipline in India’s tribunal system.

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