NCLT President Cannot Alter/Extend Territorial Jurisdiction of Any Bench: Gujarat HC Quashes Transfer of Arcelor Mittal Case [Read Order]

The transfer orders by the Delhi Bench moved matters relating to ArcelorMittal Nippon Steel India Ltd. out of the jurisdiction of the Ahmedabad NCLT to the Mumbai Bench after the Ahmedabad Bench recused itself from the matters.

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The instant issue arose from a long-running insolvency litigation in which the Ahmedabad NCLT had earlier approved the resolution plan in respect of Essar Steel India Ltd., and subsequent contempt and transfer applications led to a sequence of recusal orders by NCLT Bench members on 9 January, 23 April and 24 April 2024.

Consequently, the NCLT, Delhi issued administrative orders transferring the matters to other Benches, including NCLT Mumbai.

The controversy originated when an email sent by a representative of ArcelorMittal to members of the NCLT Ahmedabad Bench expressing concerns over the manner of proceedings. The Bench perceived this communication as inappropriate interference, leading to multiple recusal orders in January and April 2024.

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The situation was further inflamed when ArcelorMittal disclosed before the Bench that it had arranged for witnesses in the courtroom to transcribe the proceedings for record-keeping, which the members considered a breach of decorum. These events prompted the President of the NCLT to transfer the case from the Ahmedabad Bench to the Mumbai Bench through administrative orders.

In the present matter, Senior Counsel Mihir Joshi appeared on behalf of the petitioner, and submitted that the Bench could not recuse itself from the hearings for any reason except those under Rule 62(1) of the National Company Law Tribunal Rules, 2016 (NCLT Rules) and that the conduct of the NCLT, Delhi in transferring the matter to the Mumbai Bench is violative of Rule 16 of the NCLT Rules.

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P.Y. Divyeshvar, Kshitij M. Amin, Deepak Khosla and Jaydeep M. Shukla represented the respondents and contended that the NCLT Delhi used its administrative capacity to constitute the Bench in the present case with the intention to save judicial time.

Justice Niral R. Mehta examined Rules 62 and 16 of the NCLT Rules, 2016 and observed that the President’s powers were limited to transfers within the same territorial jurisdiction and did not extend to altering or expanding the jurisdictional boundaries of a Bench.

The Court also held that the recusal orders in the present case were passed without adequate justification and influenced by extraneous factors rather than the merits of the proceedings; however the High Court noted that the Rule 62(2) does not mandate the President or members of the NCLT to record reasons for such recusal, leaving it to the wisdom of the President or Members to only recuse matters in situations where it calls for the same.

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The High Court opined that the NCLT ought not to have recused itself from the matter on the basis of the email sent by the representative, and that if Courts and the Tribunals begin to succumb to pressure or intimidation from counsel or litigants, it would only embolden those who seek to manipulate judicial proceedings.

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Accordingly, the Gujarat High Court concluded that both the recusal and transfer orders were beyond the scope of the administrative authority of the NCLT, thus quashing the impugned orders and directed that the matters be heard by an appropriately constituted Ahmedabad NCLT Bench or through a virtual Bench to ensure expeditious adjudication.

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