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2021 (11) TMI 793 - AT - Insolvency and BankruptcyInitiation of contempt proceedings against the Respondent for wilful disobedience - Jurisdiction of NCLT - Section 425 of the Companies Act, 2013 r/w Section 12 of the Contempt of Courts Act, 1971 and Rule 11 of the NCLT Rules, 2016) - HELD THAT - This Tribunal relevantly points out that the Adjudicating Authority (National Company Law Tribunal) in Contempt Application No.A-01(PB) of 2020 in CA-1081/2019 in (IB)-560(PB)/2017 (filed under Section 425 of the Companies Act, 2013 r/w Section 12 of Contempt of Courts Act and Rule 11 of the NCLT Rules, 2016) seeking to initiate the contempt proceedings against the Respondent therein (1st Respondent in the Appeal) for wilful disobedience of the Order dated 7.11.2019 passed by the Tribunal in Contempt Application No.A-01(PB) of 2020 in CA-1081/2019 in (IB)-560(PB)/2017 on 23.9.2020, had finally dismissed the application by observing that IBC is devoid of contempt jurisdiction , leaving it open to the Appellant/Applicant to seek remedy through recourses available. The definition of Section 5(1) of the I B Code under Part II Insolvency Resolution and Liquidation for Corporate Persons Chapter I Preliminary means the Adjudicating Authority for the purpose of this Part as National Company Law Tribunal constituted under Section 408 of the Companies Act, 2013. Section 408 of the Companies Act, 2013 provides for the constitution of National Company Law Tribunal . Section 410 of the Companies Act, 2013 pertains to constitution of the Appellate Tribunal - the National Company Law Tribunal is to act as an Adjudicating Authority for the purpose of matters pertaining to the I B Code. Under the I B Code, 2016 the Adjudicating Authority (National Company Law Tribunal) adjudicates all proceedings before it and renders its decision. Just because the I B Code does not specifically mention about the contempt provisions, it cannot be said that the Adjudicating Authority (National Company Law Tribunal) has no powers of contempt. If one is to give such a restricted interpretation that the Adjudicating Authority (National Company Law Tribunal) has no jurisdiction of contempt, then it orders cannot be implemented and in fact, the I B Code will remain in Black Letters without a teeth to bite, in the considered opinion of this Tribunal - as per Section 425 of the Companies Act, 2013 it is clear that the Contempt proceedings can be exercised by the National Company Law Tribunal , being the Adjudicating Authority as per Section 5(1) of the I B Code. Also that a conjoined reading of Section 408 and 425 of the Companies Act, 2013 will unerringly points out that the power to punish for Contempt is vested with the Tribunal shall be while adjudicating on matter not only confine to the Companies Act, 2013 but also to matters relating to the I B Code, 2016. The Tribunal (NCLT) and the Appellate Tribunal (NCLAT) have the same jurisdiction , powers and Authority in respect of contempt of it as the High Court viewed in that perspective, the conclusions arrived at by the Adjudicating Authority (National Company Law Tribunal) in the impugned order by making it clear that the IBC is devoid of contempt of jurisdiction and thereby dismissing the application, leaving it open to the Appellant/Applicant to seek remedy through recourses available, are clearly unsustainable in the eye of Law and the same is interfered with by this Tribunal in furtherance substantial cause of justice, sitting in Appellate Jurisdiction . Application allowed.
Issues Involved:
1. Whether the National Company Law Tribunal (NCLT) has contempt jurisdiction under the Insolvency and Bankruptcy Code (IBC), 2016. 2. Whether the NCLT can direct the release of payments using its inherent powers. 3. Whether the Tribunal erred in dismissing the contempt application filed under Section 425 of the Companies Act, 2013. Issue-wise Detailed Analysis: 1. Contempt Jurisdiction under IBC, 2016: The primary issue in this case is whether the NCLT has contempt jurisdiction under the IBC, 2016. The NCLT dismissed the contempt application on the grounds that Section 425 of the Companies Act, 2013 does not extend contempt jurisdiction to the IBC. The Tribunal observed that contempt jurisdiction is an extraordinary jurisdiction, typically conferred upon Constitutional Courts, and is not interchangeable between the Adjudicating Authority under IBC and the Tribunal under the Companies Act, 2013, except as permitted by law. Appellant's Contentions: The Appellant argued that the NCLT has contempt jurisdiction under Section 425 of the Companies Act, 2013, which came into effect from 01.06.2016. They cited the Tribunal's inherent powers under Rule 11 of the NCLT Rules, 2016, and the power conferred by Article 323B of the Constitution of India, which allows the Legislature to empower Tribunals to exercise contempt jurisdiction. The Appellant relied on several judgments, including the Delhi High Court's decision in McDonald’s India Pvt Ltd and Ors Vs Union of India and Ors, and the NCLAT's decisions in Gireesh Kumar Sanghi vs Ravi Sanghi and Ors, and Manoj K. Daga Vs ISGEC Heavy Engineering Limited and Others, to support their contention. Respondents' Submissions: The Respondents contended that the power to punish for contempt under Section 425 of the Companies Act, 2013 is limited to matters under the Companies Act and does not extend to the IBC. They cited the Supreme Court's decision in Innoventive Industries Vs ICICI Bank & Anr, which held that the IBC is an exhaustive code on insolvency matters. The Respondents also argued that the payment of bills was subject to the approval of the Committee of Creditors and that they acted in good faith under Section 233 of the IBC. Evaluation: The Tribunal evaluated the statutory provisions and judicial precedents to determine the scope of contempt jurisdiction. They noted that Section 425 of the Companies Act, 2013 confers the same jurisdiction, powers, and authority in respect of contempt as the High Court, which includes matters under the IBC. The Tribunal emphasized that a restrictive interpretation would render the IBC ineffective and that the NCLT, as the Adjudicating Authority under the IBC, has the power to enforce its orders through contempt proceedings. 2. Inherent Powers to Direct Payment Release: The Appellant argued that the NCLT could have directed the release of the payment of bills using its inherent powers under Rule 11 of the NCLT Rules, 2016, to meet the ends of justice or to prevent abuse of process. The Tribunal agreed that the NCLT has the power to regulate its own procedure in accordance with the principles of natural justice and equity, as per Rule 51 of the NCLT Rules, 2016. 3. Tribunal's Error in Dismissing Contempt Application: The Appellant contended that the Tribunal erred in dismissing the contempt application by not recognizing its jurisdiction under Section 425 of the Companies Act, 2013. The Tribunal concluded that the NCLT has the jurisdiction to punish for contempt in matters under the IBC, as the power of contempt under Section 425 is not limited to the Companies Act but extends to all proceedings before the NCLT, including those under the IBC. Disposition: The Tribunal allowed the appeal, set aside the impugned order dated 23.09.2020, and directed the Adjudicating Authority to restore the Contempt Application No.A-01(PB) of 2020 and dispose of it on merits. The Tribunal emphasized the need for a purposeful and rational construction of statutes to ensure the effective implementation of the IBC. Conclusion: The Tribunal held that the NCLT has contempt jurisdiction under the IBC, 2016, and can exercise its inherent powers to direct the release of payments. The Tribunal's dismissal of the contempt application was deemed unsustainable, and the case was remanded for a fresh decision on merits.
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