Powers and Jurisdiction of NCLT/ NCLAT


A Single Judge Bench of the Calcutta High Court comprising Justice Bhaskaran Pillai Sudheendra Kumar, recently held the Liquidator's decision can be challenged before the Tribunal under section 42 of the Insolvency and Bankruptcy (I&B) Code, 2016 (IBC).

The court also said that since the petitioners had already decided to resort to the said provision by filing application for condoning the delay in filing the appeal, it is not just and proper for this Court to pass any order exercising the supervisory jurisdiction under Article 227 of the Constitution of India, particularly when so many appeals in this connection are pending consideration by the Tribunal.

The intention of the high court was to dispose off all the appeals pending before the Tribunal pertaining to the same issue expeditiously without depriving the parties of a reasonable opportunity to be heard.

P.X. Xavier and Ors. vs. Ravindra Chaturvedi and Ors. (13.07.2020 - KERHC): MANU/KE/1833/2020


The NCLAT, while referring to Binani Industries Limited and Ors. vs. Bank of Baroda and Ors. (14.11.2018 - NCLAT): MANU/NL/0284/2018, observed that corporate insolvency resolution process (CIRP) is not a 'suit' or 'litigation' or a 'money claim' for any litigation. Neither is it an auction or a recovery. The object is merely to bring about a resolution plan, so that the Company doesn't default on dues.

With regard to the issue of jurisdiction, the NCLAT held that, In terms of the said provision, the Central Government has notified and vested the power on respective National Company Law Tribunals to deal with the matter within its territory, where the registered Offices of the Companies are situated. As per Section 60 of the I&B Code, "The Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate person is located".

Excel Metal Processors Limited Vs. Benteler Trading International GMBH and Anr (21.08.2019 - NCLAT): MANU/NL/0430/2019

Q. Whether Insolvency and Bankruptcy Code can be invoked against a company whose name has been struck off from the Register of Companies?

The National Company Law Appellate Tribunal (NCLAT) has held that an application for initiation of Corporate Insolvency Resolution Process (CIRP) under Sections 7 and 9 of the Insolvency and Bankruptcy Code will be maintainable against a Corporate Debtor even if its name has been struck off from the Register of Companies (RoC).

The National Company Law Appellate Tribunal (NCLAT) also held that in terms of Section 248(5) of the Companies Act, 2013 the Adjudicating Authority i.e. NCLT is empowered to restore the Company's name, as well as the positions held by the officers in the Company, for the purpose of initiation of insolvency proceeding under Sections 7 and 9. However, such an application has to be filed filed by the 'Creditor' ('Financial Creditor' or 'Operational Creditor') or workman within twenty years from the date of the removal of the Company's name from the Register. MANU/NL/0436/2019

Q. What is the Jurisdiction of the Adjudicating Authority and NCLAT?

The limited judicial review available to AA has to be within the four corners of section 30(2) of the Code. In respect of the NCLAT, it has to be within parameters of section 32 read with section 61(3) of the Code. Such review can in no circumstance trespass upon a business decision of the majority of the CoC.

The residual jurisdiction of the NCLT under section 60(5)(c) cannot, in any manner, whittle down section 31(1) of the Code, by the investment of some discretionary or equity jurisdiction in the AA outside section 30(2) of the Code, while adjudicating a resolution plan.

There is no doubt whatsoever that the ultimate discretion of what to pay and how much to pay each class or subclass of creditors is with the CoC, but, the decision of such Committee must reflect the fact that it has taken into account maximising the value of the assets of the CD and the fact that it has adequately balanced the interests of all stakeholders including OCs. while the AA cannot interfere on merits with the commercial decision taken by the CoC, the limited judicial review available is to see that the CoC has taken into account the fact that the CD needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including OCs has been taken care of. If the AA finds, on a given set of facts, that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the CoC to re-submit such plan after satisfying the aforesaid parameters. The reasons given by the CoC while approving a resolution plan may thus be looked at by the AA only from this point of view, and once it is satisfied that the CoC has paid attention to these key features, it must then pass the resolution plan, other things being equal.

Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta and Ors. (15.11.2019 - SC) : MANU/SC/1577/2019

Q. Whether NCLTs/NCLTAT can allow exclusion of certain period from the 270 days period?

If an application is filed by the 'Resolution Professional' or the 'Committee of Creditors' or 'any aggrieved person' for justified reasons, it is always open to the NCLTs/NCLAT to 'exclude certain period' for the purpose of counting the total period of 270 days, if the facts and circumstances justify exclusion, in unforeseen circumstances. The NLCAT has however, stated a caution that after exclusion of the period, if further period is allowed the total number of days cannot exceed 270 days which is the maximum time limit prescribed under the Insolvency and Bankruptcy Code, 2016.

Quinn Logistics India Pvt. Ltd. vs. Mack Soft Tech Pvt. Ltd. and Ors. (08.05.2018 - NCLAT) : MANU/NL/0089/2018

Q. What can be the jurisdiction of the NCLT over default arising out of non-payment of debts?

No Jurisdiction

a) The Tribunal cannot go into roving enquiry into the disputed claims of parties as the object of IBC is to ensure reorganization and insolvency resolution of corporate persons, individuals, etc., in a time bound manner for maximization of value of assets persons to promoted entrepreneurship etc.

K.K.V. Naga Prasad vs. Lanco Infratech Limited (21.02.2017 - NCLT - Hyderabad): MANU/NC/0093/2017

b) The Tribunal cannot be misused to settle and determine the cases of disputed claims. Once a dispute is raised in respect of operational debt, the Tribunal does not have any jurisdiction to settle such disputes, which necessarily should be settled by Civil Court through a process of adjudication by leading evidence on the disputed questions of fact.

K.K.V. Naga Prasad vs. Lanco Infratech Limited (21.02.2017 - NCLT - Hyderabad) : MANU/NC/0093/2017.


c) On perusal of Sections 63, 231 and 238 of IBC, 2016, it is evident that no civil court shall have jurisdiction in respect of any matter in which the adjudicating authority is empowered by or under this court to pass any order, thereby it is clear that pendency of any proceeding before any court will not have any bearing on the proceedings initiated under this Code provided that dispute is covered under the respective section of this Code. Since this case is covered under Section 7 of the Code, pendency of Section 21 proceedings under Arbitration Act will not have bearing on this case.

Urban Infrastructure Trustee Ltd. vs. Neelkanth Township and Construction Pvt. Ltd. (21.04.2017 - NCLT - Mumbai) : MANU/NC/0322/2017

Q. Is the Insolvency & Bankruptcy Code, 2016 applicable retrospectively?

a) The IBC does not have a retrospective effect, and its provisions will apply to cases, where non-payment of an operational debt arises after its promulgation. The Insolvency proceedings cannot be exploited as a normal alternative to the ordinary mode of debt realisation.

K.K.V. Naga Prasad vs. Lanco Infratech Limited (21.02.2017 - NCLT - Hyderabad) : MANU/NC/0093/2017

Q. National Company Law Tribunal, Principal Bench has directed that Secretary, Ministry of Corporate Affairs, Government of India shall be made a party to all the cases under the Insolvency & Bankruptcy Code as well as the Company petitions before the Tribunals.

The order passed by a two-member Bench of President, Chief Justice (Retd.) MM Kumar and Member (Technical) SK Mohapatra reads, "We further direct that in all cases of Insolvency & Bankruptcy Code and Company Petition, the Union of India, Ministry of Corporate Affairs through the Secretary be impleaded as a party respondent so that authentic record is made available by the officers of the Ministry of Corporate Affairs for proper appreciation of the matters.

This shall be applicable throughout the country to all the benches of the National Company Law Tribunal. The Registrar shall send a copy of this order to all NCLT benches so that respective Deputy Registrar may ensure that proper parties are impleaded."

Oriental Bank of Commerce Vs. Sikka Papers Ltd. and Ors. (22.11.2019 - NCLT) : MANU/NC/9308/2019

Q. Whether the adjudicating authority (NCLT) or the appellate authority (NCLAT) can sit in an appeal over the commercial wisdom of the Committee of Creditors or not?

In the present case based on the facts, the proceedings of the 13th, 14th and 15th meetings of Committee of Creditors would clearly show that there were wide deliberations amongst the members of the Committee of Creditors while considering the Settlement Plan as submitted by the Appellant. Not only that, the proceedings would also reveal that after suggestions were made by some of the members of the Committee of Creditors , suitable amendments were carried out in the Settlement Plan by the Appellant. It is thus clear that the decision of the Committee of Creditors was taken after the members of the Committee of Creditors, had due deliberation to consider the pros and cons of the Settlement Plan and took a decision exercising their commercial wisdom. The Court considered the view that neither the learned NCLT nor the learned NCLAT were justified in not giving due weightage to the commercial wisdom of Committee of Creditors.

Therefore, hon’ble Supreme Court observed that if the Committee of Creditors arbitrarily rejects a just settlement and/or withdrawal claim, the learned NCLT and thereafter the learned NCLAT can always set aside such decision under the provisions of the IBC.

Vallal RCK vs. Siva Industries and Holdings Limited and Ors. (03.06.2022 - SC): MANU/SC/0753/2022