LATESTCurrent Affairs◆ Government Job Vacancies◆ NABARD Grade A Preparation Resources◆ PFRDA Grade A Study Material◆ UPSC EPFO APFC: Study Notes & Practice◆ DRDO SAO Books & Digital Resources — Visit Shop◆

CrackTarget

Companies Act, 2013 (Chapter XXVII, Sections 407–434 & Chapters XV–XVI): NCLT, NCLAT, Mergers & Oppression/Mismanagement

85,269 views

PFRDA Grade A • SEBI Grade A • RBI Grade B • UPSC EPFO APFC
⚡ Quick Answer & AI Exam Snapshot (TL;DR)

Section 5 of the PFRDA Grade A and SEBI Grade A Paper-2 syllabus explicitly covers Chapter XXVII (Sections 407 to 434: National Company Law Tribunal [NCLT] and Appellate Tribunal [NCLAT]), alongside Compromises, Arrangements & Amalgamations (Chapter XV, Sections 230–240) and Prevention of Oppression & Mismanagement (Chapter XVI, Sections 241–246). Constituted on 1st June 2016 on the recommendations of the Justice V. Balakrishna Eradi Committee (2000), NCLT and NCLAT serve as the unified quasi-judicial adjudicating bodies under both the Companies Act, 2013 and the Insolvency and Bankruptcy Code (IBC), 2016.

1. Chapter XXVII (Sections 407–434): NCLT vs NCLAT Master Comparison Table

While CrackTarget’s Polity shelf includes a short primer on NCLT, SEBI Grade A and PFRDA Paper-2 test the exact statutory sections (407 to 434), qualifications, tenure, and appeal limitation timelines:

Statutory Dimension National Company Law Tribunal (NCLT)
[Section 408]		 National Company Law Appellate Tribunal (NCLAT)
[Section 410]
1. Committee & Establishment Date Recommended by Justice V. Balakrishna Eradi Committee (2000); constituted on 1st June 2016 (replacing the Company Law Board [CLB] and BIFR). Constituted on 1st June 2016 (replacing AAIFR; also hears appeals from IBBI, Competition Commission of India [CCI], and NFRA!).
2. Head & Composition Headed by a President (who is or has been a Judge of a High Court for 5 years) + such number of Judicial Members and Technical Members as Central Govt deems fit (Principal Bench at New Delhi + regional benches). Headed by a Chairperson (who is or has been a Judge of the Supreme Court OR the Chief Justice of a High Court) + Judicial and Technical Members (NO numerical cap on members since the 2019 Amendment!).
3. Minimum Age, Term & Retirement Age (Sections 413–414) • Minimum Age for Appointment: 50 YEARS!
• Tenure: 5 YEARS (eligible for reappointment for another term of 5 years).
• Maximum Retirement Age:
— President of NCLT: 67 YEARS
— Judicial / Technical Member of NCLT: 65 YEARS		 • Minimum Age for Appointment: 50 YEARS!
• Tenure: 5 YEARS (eligible for reappointment for another 5 years).
• Maximum Retirement Age:
— Chairperson of NCLAT: 70 YEARS
— Judicial / Technical Member of NCLAT: 67 YEARS
4. Selection Committee (Section 412) 5-Member Selection Committee (with casting vote to Chair): (1) Chief Justice of India or his nominee SC Judge (Chairperson), (2) Senior Judge of Supreme Court or Chief Justice of High Court, (3) Secretary, Ministry of Corporate Affairs (MCA), and (4) Secretary, Ministry of Law and Justice (4 members; CJI has casting vote).
5. Appeal Hierarchy & Limitation Timelines (Sections 421 & 423) Appeal from NCLT to NCLAT (Section 421):
Within 45 DAYS from receipt of NCLT order (+ extendable by NCLAT by a further 45 DAYS for sufficient cause!). (No appeal lies against a consent order!).		 Appeal from NCLAT to Supreme Court (Section 423):
Only on a Question of Law within 60 DAYS from receipt of NCLAT order (+ extendable by Supreme Court by a further 60 DAYS!).
6. Expeditious Disposal Target (Section 422) Every application/petition before NCLT and every appeal before NCLAT shall be disposed of as expeditiously as possible, endeavouring to dispose of within 3 MONTHS (90 DAYS) from presentation (extendable by President/Chairperson by a further period not exceeding 90 DAYS!).

2. Chapter XV (Sections 230–240): Compromises, Arrangements, Amalgamations & Squeeze-Out Rules

Memorize the exact voting and shareholding thresholds under Chapter XV:

Section Subject Matter Exact Statutory Threshold & Exam Rule
Section 230(6): Approval of Compromise / Arrangement / Merger Dual Majority (“Majority in Number + 3/4th in Value”) A scheme of compromise/arrangement/merger becomes binding on all creditors/members ONLY if approved at the NCLT-convened meeting by:
A Majority in Number (>50% headcount) representing THREE-FOURTHS (3/4th or 75%) IN VALUE of the creditors or class of members voting in person, by proxy, or by postal ballot!
Section 230(4): Minimum Threshold to Object to a Scheme Who can file an Objection to a Compromise / Merger? Any objection to a compromise or arrangement shall be made ONLY by:
• Shareholders holding not less than 10% of the Shareholding; OR
• Creditors having Outstanding Debt amounting to not less than 5% of the Total Outstanding Debt as per the latest audited financial statement!
Section 233: Fast-Track Merger (Without NCLT!) Who qualifies & Approval Threshold (90% in Value) Applies to mergers between: (a) Two or more Small Companies, (b) a Holding Company and its Wholly-Owned Subsidiary (WOS), or (c) Two or more Start-up Companies (or Start-up with Small Co).
• Approved by Regional Director (Central Govt) without going to NCLT, provided it is approved by:
— Members holding at least 90% of Total Number of Shares; AND
— Creditors representing Nine-Tenths (9/10th or 90%) in Value!
Section 235 & 236: Power to Acquire Shares of Dissenting / Minority Shareholders 90% Takeover Squeeze-Out • Sec 235: If a takeover scheme/contract is approved by holders of not less than Nine-Tenths (90%) in value of the shares within 4 MONTHS of the offer, the transferee company may give notice within 2 MONTHS to acquire the remaining 10% dissenting shares.
• Sec 236 (Minority Squeeze-Out): When an acquirer becomes registered holder of 90% or more of the issued equity share capital, he notifies the company of his intention to buy out the remaining minority equity shares at a price determined by a Registered Valuer.

3. Chapter XVI (Sections 241–246): Prevention of Oppression & Mismanagement and Class Action Suits

The contrast between Section 244 (Eligibility for Oppression/Mismanagement under Sec 241) and Section 245 (Eligibility for Class Action Suits) is a top-tier SEBI Grade A and PFRDA question:

Category of Applicant Section 244: Minimum Threshold to Apply to NCLT for Oppression & Mismanagement (Section 241)
(NCLT has power to waive any/all conditions!)		 Section 245 & Rule 84: Minimum Threshold to File a Class Action Suit Before NCLT
(Cannot be filed against a Banking Company!)
1. Members of a Company Having a Share Capital • Not less than 100 Members; OR
• Not less than 1/10th (10%) of Total Number of Members, whichever is less; OR
• Any Member(s) holding not less than 1/10th (10%) of the Issued Share Capital of the company (all calls paid).		 • Not less than 100 Members; OR
• Not less than 5% of the Total Number of Members, whichever is less; OR
• Member(s) holding not less than:
— 5% of Issued Share Capital (in case of an Unlisted Company);
— 2% of Issued Share Capital (in case of a Listed Company)!
2. Members of a Company NOT Having a Share Capital Not less than ONE-FIFTH (1/5th or 20%) of the Total Number of Members. Not less than ONE-FIFTH (1/5th or 20%) of the Total Number of Members.
3. Depositors of a Company (Depositors cannot file under Sec 241; only Members or Central Govt can!). • Not less than 100 Depositors; OR
• Not less than 5% of the Total Number of Depositors, whichever is less; OR
• Depositor(s) to whom the company owes 5% of Total Deposits!

Frivolous Class Action Penalty (Section 245(8)): If an application under Section 245 is found to be frivolous or vexatious, NCLT shall reject it and order the applicant to pay costs to the opposite party not exceeding ₹1,00,000 (₹1 Lakh)!

🎯 High-Yield Exam One-Liners (Last-Minute Revision Box)

  1. NCLT and NCLAT were constituted on 1st June 2016 under Chapter XXVII (Sections 407–434) on the recommendations of the Justice V. Balakrishna Eradi Committee (2000).
  2. Minimum age to be appointed as President/Chairperson or Judicial/Technical Member of NCLT or NCLAT is 50 YEARS (Section 413).
  3. Tenure of President, Chairperson, and Members of NCLT and NCLAT is 5 YEARS (eligible for reappointment for another 5 years).
  4. Maximum retirement age in NCLT: President = 67 YEARS; Judicial/Technical Members = 65 YEARS.
  5. Maximum retirement age in NCLAT: Chairperson = 70 YEARS; Judicial/Technical Members = 67 YEARS.
  6. An appeal from an order of NCLT lies to NCLAT within 45 DAYS (+45 days extension for sufficient cause) under Section 421.
  7. An appeal from an order of NCLAT lies to the Supreme Court (only on a Question of Law) within 60 DAYS (+60 days extension) under Section 423.
  8. Under Section 422, NCLT and NCLAT must endeavour to dispose of applications/appeals within 3 MONTHS (90 days), extendable by up to 90 days.
  9. Under Section 430, Civil Courts have ZERO jurisdiction to entertain any suit or proceeding in respect of any matter that NCLT or NCLAT is empowered to determine.
  10. Under Section 230(6), a scheme of Compromise, Arrangement, or Merger requires approval by a ‘Majority in Number (>50%) representing 3/4th (75%) in Value’ of creditors/members present and voting.
  11. Under Section 230(4), an objection to a scheme of Compromise or Merger can be raised only by persons holding at least 10% of shareholding OR creditors having at least 5% of total outstanding debt.
  12. Under Section 233, a ‘Fast-Track Merger’ (between Small Companies, Holding & Wholly-Owned Subsidiary, or Start-ups) is approved by the Regional Director without NCLT, and requires 90% in value approval from both shareholders and creditors.
  13. Under Section 244, to file an Oppression & Mismanagement petition (Sec 241) in a company with share capital, minimum eligibility is: 100 Members OR 1/10th (10%) of total members (whichever is less), OR holders of 10% of Issued Share Capital.
  14. In a company WITHOUT share capital, the threshold under both Section 244 (Oppression) and Section 245 (Class Action) is 1/5th (20%) of the total number of members.
  15. Under Section 244(1) Proviso, the NCLT has the discretionary power to WAIVE all or any of the 100-member / 10% eligibility requirements for filing an Oppression & Mismanagement petition!
  16. Under Section 245 read with Rule 84, a Class Action Suit can be filed by 100 members or 5% of total members, OR holders of 5% of issued share capital in an Unlisted Company and 2% of issued share capital in a Listed Company.
  17. Under Section 245(9), a Class Action Suit under Section 245 can NEVER be filed against a Banking Company!

📝 UPSC & Regulatory Level Practice MCQs (With Detailed Solutions)

Q1. Under Sections 413, 421, and 423 of the Companies Act, 2013 (Chapter XXVII), what are the maximum retirement ages of the ‘President of NCLT’ and the ‘Chairperson of NCLAT’, and what are the normal limitation periods for filing an appeal from ‘NCLT to NCLAT’ and from ‘NCLAT to the Supreme Court’ respectively?
  • A. NCLT President: 65 yrs; NCLAT Chairperson: 67 yrs; NCLT->NCLAT: 30 days; NCLAT->SC: 45 days
  • B. NCLT President: 67 yrs; NCLAT Chairperson: 70 yrs; NCLT->NCLAT: 45 days (+45 days); NCLAT->SC: 60 days (+60 days)
  • C. NCLT President: 70 yrs; NCLAT Chairperson: 70 yrs; NCLT->NCLAT: 60 days; NCLAT->SC: 90 days
  • D. NCLT President: 62 yrs; NCLAT Chairperson: 65 yrs; NCLT->NCLAT: 45 days; NCLAT->SC: 45 days
Correct Answer: (B) — Under Section 413, the President of NCLT holds office up to age 67 (Members up to 65), and the Chairperson of NCLAT holds office up to age 70 (Members up to 67). Under Section 421, appeal to NCLAT lies within 45 days (+45 days extension), and under Section 423, appeal to the Supreme Court lies within 60 days (+60 days extension).

Q2. Under Section 230(4) of the Companies Act, 2013, who is statutorily eligible to make an ‘Objection’ to a proposed Scheme of Compromise, Arrangement, or Amalgamation before the NCLT?
  • A. Any single shareholder holding even 1 equity share or any trade creditor
  • B. Only persons holding not less than 10% of the shareholding OR having outstanding debt amounting to not less than 5% of the total outstanding debt as per the latest audited financial statement
  • C. Persons holding not less than 25% of shareholding OR 10% of total debt
  • D. Only the Statutory Auditor and Independent Directors
Correct Answer: (B) — Proviso to Section 230(4) restricts frivolous objections by stipulating that any objection to a compromise or arrangement shall be made only by persons holding not less than 10% of the shareholding or having outstanding debt amounting to not less than 5% of the total outstanding debt.

Q3. Under Section 244 of the Companies Act, 2013, what is the minimum numerical threshold of members required to file an application before the NCLT complaining of ‘Oppression and Mismanagement’ (under Section 241) in the case of a company NOT having a share capital?
  • A. Not less than One-Tenth (1/10th or 10%) of the total number of members
  • B. Not less than One-Fifth (1/5th or 20%) of the total number of members
  • C. Not less than One-Fourth (1/4th or 25%) of the total number of members
  • D. Not less than 50 members
Correct Answer: (B) — Under Section 244(1)(b), in the case of a company NOT having a share capital, not less than one-fifth (1/5th or 20%) of the total number of its members have the right to apply under Section 241 (whereas 100 members or 1/10th applies to a company having a share capital under Sec 244(1)(a)).

Q4. Under Section 245 of the Companies Act, 2013 read with Rule 84 of the NCLT Rules, against which type of company can a ‘Class Action Suit’ NEVER be filed, and what is the minimum issued share capital percentage required for members of a ‘Listed Company’ to file a Class Action Suit?
  • A. Cannot be filed against a Banking Company; Listed Company share capital threshold is 2% of issued share capital (5% for Unlisted Company)
  • B. Cannot be filed against an IT Company; Listed Company threshold is 10%
  • C. Cannot be filed against a Manufacturing Company; Listed Company threshold is 1%
  • D. Can be filed against all companies; Listed Company threshold is 20%
Correct Answer: (A) — Section 245(9) explicitly states that nothing in Section 245 (Class Action) shall apply to a Banking Company. Under Rule 84(3), the shareholding threshold to file a Class Action Suit is 2% of the issued share capital for a Listed Company and 5% of the issued share capital for an Unlisted Company.

Q5. Under Section 233 of the Companies Act, 2013 governing ‘Fast-Track Merger’ (between two or more Small Companies, or between a Holding Company and its Wholly-Owned Subsidiary, or between Start-ups), what percentage in value of shareholders and creditors must approve the scheme?
  • A. 51% of shareholders and 51% of creditors
  • B. 75% (3/4th) of shareholders and 75% of creditors
  • C. At least 90% of total number of shares AND at least 9/10ths (90%) in value of the creditors
  • D. 100% unanimous consent of all shareholders and creditors
Correct Answer: (C) — Because a Fast-Track Merger under Section 233 bypasses the regular NCLT process (and is registered directly by the Central Government / Regional Director), it requires a higher super-majority of at least 90% of total shares (Sec 233(1)(b)) and 9/10ths (90%) in value of creditors (Sec 233(1)(d)).

❓ Frequently Asked Questions (Exam FAQs)

Q: Can the NCLT waive the minimum 100-member or 10% shareholding requirement for an Oppression & Mismanagement petition under Section 244?

Yes! Under the Proviso to Section 244(1), the National Company Law Tribunal (NCLT) may, on an application made to it in this behalf, waive all or any of the eligibility requirements specified in Clause (a) or Clause (b) so as to enable the members to apply under Section 241 (as famously exercised in the Cyrus Mistry v. Tata Sons case).

Q: Which appellate bodies’ orders are heard by NCLAT besides NCLT?

Under Section 410 of the Companies Act, 2013, in addition to hearing appeals from orders of the NCLT (under both the Companies Act, 2013 and the IBC, 2016), NCLAT is also the statutory Appellate Tribunal to hear appeals against orders of the Insolvency and Bankruptcy Board of India (IBBI under Sec 202/211 of IBC), the Competition Commission of India (CCI under the Competition Act, 2002), and the National Financial Reporting Authority (NFRA under Sec 132(5)).

🚀 Continue Your Preparation on CrackTarget

Discover more from CrackTarget

Subscribe to get the latest posts sent to your email.

Discover more from CrackTarget

Subscribe now to keep reading and get access to the full archive.

Continue reading