NCLT President can't alter territorial jurisdiction of NCLT Benches while transferring cases: Gujarat HC

The President of the National Company Law Tribunal (NCLT) has no administrative power to alter or extend the territorial jurisdiction of any NCLT Bench, the Gujarat High Court has ruled while quashing the transfer of Essar Steel-related cases from the Ahmedabad Bench to the Mumbai Bench [ArcelorMittal Vs NCLT].

Justice Niral R Mehta held that the NCLT President’s authority under Rule 16(d) of the NCLT Rules, 2016, is confined to transfers within the same territorial limits and cannot be exercised to move cases across jurisdictions.

"The President of the NCLT has no administrative power to alter or extend the territorial jurisdiction of any Bench," the October 16 ruling said.

The Court passed the judgment on petitions filed by ArcelorMittal Nippon Steel India Limited (formerly Essar Steel India Ltd.).

Two NCLT Benches at Ahmedabad had earlier recused from hearing cases concerning ArcelorMittal, following which the NCLT Bench at Delhi passed an administrative order transferring the matter to Mumbai instead.

ArcelorMittal challenged the NCLT’s recusal and transfer orders as contrary to the NCLT Rules and alleged that they were the result of Bench hunting and forum shopping by certain respondents.

Setting aside all five impugned orders, the High Court directed the President of the NCLT, Delhi, to re-allot the cases to any Bench at Ahmedabad or, if necessary, to constitute a virtual bench for expeditious adjudication.

Explaining the limits of the transfer powers conferred on the President of the NCLT, the High Court said,

“The Rule (Rule 16(d) of NCLT Rules) does not confer any power to transfer a case beyond the territorial jurisdiction of a particular Bench .. In the present case, the NCLT, New Delhi, while acting on the administrative side, has committed a serious error by transferring the cases from the NCLT, Ahmedabad, to the NCLT, Mumbai."

Justice Mehta added that since transfer applications in the matter were already pending before the NCLT, Delhi, on the judicial side, the President’s administrative intervention would have rendered those proceedings ineffective, further compounding the impropriety.

"Such an administrative decision directly affecting pending judicial proceedings is, therefore, subject to judicial review," the Court said before quashing the transfer order.

Notably, the Court also cautioned that NCLT Benches should not recuse from cases merely because of the conduct of lawyers or litigants before it.

"It is increasingly being observed that when judicial officers do not align with the expectations of certain litigants, attempts made to browbeat or pressurize them to avoid the passing of unfavourable orders. Such conduct cannot be tolerated. Judicial magnanimity should never be mistaken for weakness. Courts and Tribunals are not powerless to deal with such situations; they possess ample authority to take appropriate action against such misconduct. Therefore, instead of resorting to recusal in such circumstances, the proper course would be to take firm and lawful measures against the wrongdoers," the High Court said.

The Court made the observation after noting the recusal orders passed by the NCLT Benches at Ahmedabad appeared to have been prompted by the conduct of certain lawyers and litigants before it.

Justice Mehta found that the first recusal order dated January 9, 2024, was passed immediately after an email was sent by a lawyer representing certain operational creditors, and that no other reasons for recusal were recorded. The second Bench, NCLT-II, recused itself in April 2024 following alleged misconduct and intimidation by the same counsel.

"In my view, the NCLT – II ought not to have recused itself or yielded to such conduct of the parties. 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 and promote practices such as browbeating, forum shopping, and attempts to influence the Bench. Courts and Tribunals are expected to be magnanimous, but such magnanimity should never be at the cost of judicial dignity or independence," the High Court held.

It proceeded to strike down recusal orders passed by two NCLT Benches in Ahmedabad, observing that tribunal members cannot withdraw from a case except in the circumstances expressly provided under Rule 62 of the NCLT Rules.

The Court also clarified that its ruling was confined to questions of law, leaving all factual disputes to be raised before the NCLT in accordance with law.

ArcelorMittal were represented by Senior Advocate Mihir Joshi with Advocates Keyur Gandhi, Raheel Patel, Isa Hakim, and Aradhana Jain (Gandhi Law Associates).

Advocate PY Divyeshvar appeared for the NCLT (administrative side) while Advocates Kshitij Amin, and Deepak Khosla with Jaydeep Shukla represented certain other respondents.

[Read Judgment]