Tribunal says oral family settlement plea must be considered on merits; past conduct cannot be used to defeat adjudication under Section 111 of the Companies Act, 1956.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has set aside an order dismissing a company petition under Section 111 of the Companies Act, 1956, after holding that the case could not have been thrown out solely because the appellant failed to place a family settlement on record.
The appeal arose from TCP No. 06 of 2013, a long-pending proceeding originally instituted before the Company Law Board. The dispute centered on alleged divesting of rights based on a family settlement. The Tribunal below had dismissed the petition on 1 June 2026 after the appellant did not produce the settlement document during the course of the day, despite earlier directions to do so.
Before the NCLAT, the appellant argued that the Tribunal had ignored written submissions specifically stating that the parties had entered into an oral family settlement. It was submitted that the finding that the appellant had failed to place the family settlement on record was perverse, as the Tribunal had not considered the written stand already taken in the matter.
The respondents opposed the appeal and contended that the appellant had no sustainable right to continue the proceedings under Section 111. They also argued that the appellant had shown a lack of diligence by not filing earlier order sheets and by repeatedly failing to produce the settlement document despite being granted time on prior occasions.
The appellate tribunal, however, declined to go into the merits of the underlying dispute, noting that the Tribunal below had dismissed the petition purely on a procedural ground and had not adjudicated the substantive issues concerning the maintainability or sustainability of the proceedings. NCLAT observed that deciding the merits at the appellate stage would prejudice the rights of the parties.
Importantly, the NCLAT rejected the respondents’ reliance on the appellant’s past conduct. The Bench held that when a matter is being considered on merits, earlier inaction or defaults are irrelevant and should not influence the decision-making process. The tribunal said such consideration would amount to an extraneous factor and could introduce bias, thereby affecting fair adjudication.
In support of this principle, the NCLAT relied on the Allahabad High Court’s ruling in Qaiser Sibtain v. District Judge, which held that while deciding matters such as adjournment or recall, the court must examine only the position on the relevant date and not be guided by past conduct.
Finding that the dismissal order rested exclusively on the failure to produce the family settlement, while the appellant had already asserted an oral family settlement in written submissions, the NCLAT held that the issue still required consideration on merits by the Tribunal. Accordingly, the impugned order dated 1 June 2026 was quashed.
The matter has now been remitted back to the Tribunal for fresh consideration. The appellant has been granted one week to file written submissions, if not already filed, and the Tribunal has been directed to decide the company petition expeditiously, preferably within three months.
Bottom Line :
Company petition under Section 111 of the Companies Act, 1956 could not have been dismissed solely for failure to place family settlement on record when appellant’s specific case in written submissions was that there was an oral family settlement; while considering recall/adjournment type issues or procedural defaults, past conduct of party is immaterial and merits on relevant date alone are to be seen.
Statutory provision(s): Section 111, Companies Act, 1956
