NCLT Has Inherent Contempt Power Under Section 425 : Bombay HC

The Bombay High Court has delivered a significant ruling clarified that the National Company Law Tribunal (NCLT) possesses the inherent, self-contained authority to punish for contempt of its own orders, even when acting under the Insolvency and Bankruptcy Code (IBC). In a judgment delivered by Justice Milind N. Jadhav, the court emphasized that the NCLT is not a "fragmented" forum and that parties cannot bypass the tribunal by filing parallel contempt petitions in the High Court.

The Conflict: A Disputed Settlement

The matter arose from a contention between S.G. Mittal Enterprises Private Limited (Petitioner) and The Satara Sahakari Bank Ltd. (Respondent), which had reached an amicable settlement regarding a debt of Rs. 5,71,07,504. While the NCLT had recorded these consent terms and disposed of the insolvency proceedings in April 2024, the petitioner alleged that the bank later demanded an additional Rs. 18.57 lakh.

When the bank allegedly failed to issue a "No Dues Certificate" and reportedly provided erroneous credit reporting to TransUnion CIBIL, causing disruptions to the petitioner’s other loan applications, the petitioner approached the Bombay High Court under the Contempt of Courts Act, 1971.

Key Arguments: Does the High Court Have Parallel Jurisdiction?

Counsel for the petitioner argued that because the IBC itself does not explicitly confer contempt powers upon the NCLT, and Section 425 of the Companies Act lacks an explicit amendment to cover IBC proceedings, the High Court must exercise its constitutional jurisdiction to ensure compliance. It was argued that to hold otherwise would render the NCLT a "paper tiger."

Conversely, the court analyzed the statutory framework, noting that the NCLT finds its parentage in the Companies Act, 2013, and is tasked with adjudicating matters under the IBC as well. The court found that interpreting the tribunal’s authority as being split between the Companies Act and the IBC would be "bizarre."

Legal Analysis: The Unity of the Tribunal

The Bombay High Court firmly rejected the notion that the NCLT possesses a "split or fragmented personality" depending on the statute being invoked. Justice Jadhav held that Section 425 of the Companies Act, 2013, is a comprehensive provision that applies regardless of the source of the NCLT's jurisdiction in a specific case.

"The contempt jurisdiction under Section 425 is plenary and self-contained. It is neither conditional nor limited by the source of jurisdiction exercised by the Tribunal," the Court observed in its analysis.

Key Observations

• On Institutional Integrity: "Once contempt powers are conferred by statute, they vest in the Tribunal as an institution and apply to all proceedings before it irrespective of whether the Tribunal is exercising jurisdiction under the Companies Act, the IBC, or any other law."
• On Statutory Interpretation: "An adjudicating authority cannot be attributed with a split or fragmented personality. An adjudicating authority cannot be said to function with divided powers."
• On the Risk of Ineffectiveness: "If one is to give such a restricted interpretation that the Adjudicating Authority (NCLT) has no jurisdiction of contempt then its orders will be implemented and in fact, the IBC would be reduced to a paper tiger."
• On Parallel Jurisdiction: "It is, therefore, clear that entertaining contempt petitions directly before the High Court would allow parties to bypass the forum expressly empowered by the statutes."

Court’s Decision

The Bombay High Court dismissed the Contempt Petition, ruling that it was not maintainable at the threshold. The court clarified that while its supervisory powers under Articles 226 and 227 of the Constitution remain intact, a direct Contempt Petition under the 1971 Act is not an appropriate substitute for the NCLT’s own contempt jurisdiction.

The decision serves as a firm reminder to litigants that the NCLT is a robust, self-sufficient adjudicatory body. Parties aggrieved by non-compliance with NCLT-sanctioned consent terms must seek recourse through the tribunal itself, ensuring that the procedural integrity of the insolvency framework is preserved.