Tribunal Must Apply Mind to Main Prayer Before Allowing Alternative, Rules NCLAT

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has clarified that while considering applications in company law matters, a tribunal cannot reject the main prayer without assigning cogent reasons and then proceed to allow only the alternative prayer. Setting aside an order of the National Company Law Tribunal (NCLT), Mumbai Bench, the appellate body held that such an approach amounted to an error apparent on the face of the record.

The decision came on September 11, 2025 by a bench comprising Justice Yogesh Khanna, Member (Judicial) and Mr. Ajai Das Mehrotra, Member (Technical).

The appellants had moved the NCLT in relation to a scheme of arrangement. Their application sought primarily the dispensation of meetings of unsecured creditors of the applicant companies.

It was argued that there was no compromise or arrangement with unsecured creditors, their rights were not being altered under the scheme, and they would in any case be paid off in the ordinary course of business.

In the alternative, the applicants prayed for convening meetings of the unsecured creditors of both applicant companies to consider and, if found appropriate, approve the scheme with or without modifications.

The NCLT, while considering the first motion, rejected the main prayer for dispensation of creditors’ meetings and allowed only the alternative prayer by directing a meeting of unsecured creditors of the second applicant company. This decision was challenged before the NCLAT.

Senior Advocate Krishnendu Datta, appearing for the appellants, submitted that the tribunal had failed to apply its mind to the main prayer and had provided no reasons for its rejection. By choosing to allow only the alternative relief, the tribunal had effectively reversed the order of consideration and undermined the substantive claim of the applicants.

The counsel stressed that the scheme involved no compromise or arrangement affecting unsecured creditors and therefore, as a matter of company law practice, the primary relief of dispensation ought to have been considered first.

Another aspect raised was the dismissal of the appellants’ application for modification of the first motion order, filed as CA 130/2025.

The modification was rejected by the NCLT on the ground that it was not being heard by the same Bench which had passed the original order.

The appellants pointed to a comparable matter, CA 49/2024, where similar corrections had been allowed by order dated 16 January 2024. They contended that the rejection in their case on purely technical grounds, while similar relief had been granted in another case, reflected inconsistency and procedural arbitrariness.

The appellate tribunal agreed with these submissions. It noted that the impugned order revealed no cogent reasons for rejecting the main relief while granting the alternative.

The NCLAT emphasized that when multiple prayers are made, the tribunal must address the primary relief directly and provide clear reasoning if it is to be denied. Simply moving to the alternative prayer, without such reasoning, is unsustainable in law.

On the issue of modification, the NCLAT observed that the application was disallowed only because it was not placed before the same Bench, even though similar modifications had been entertained in other proceedings. Such a purely technical ground, without addressing the merits of the modification, was found to be insufficient justification.

In light of these findings, the NCLAT set aside the NCLT's order of May 28, 2025 and remanded the matter back for reconsideration.

The appellate tribunal directed that the NCLT re-examine the case, keeping in mind that the main prayer for dispensation of creditors meetings required substantive adjudication, and that applications for modification cannot be dismissed on technicalities alone.

The ruling underscores the principle that tribunals must apply judicial mind to the hierarchy of prayers placed before them. Allowing an alternative relief without addressing the main relief compromises the fairness of proceedings and risks creating an imbalance in how company law petitions are adjudicated.

By remanding the matter, the NCLAT reinforced the need for reasoned decision making, especially in cases where company schemes and creditors rights are involved.

The appeal was disposed of, with pending applications closed.

Case Title: Ini Agri Pvt. Ltd. & Anr. v. [Respondents]

Bench: Justice Yogesh Khanna (Judicial), Mr. Ajai Das Mehrotra (Technical)

Date of Order: September 11, 2025