The Supreme Court on Monday agreed to examine the Gujarat High Court’s ruling that restricts the National Company Law Tribunal (NCLT) President from transferring pending cases to benches located in other states. The judgment had interpreted Rule 16(d) of the NCLT Rules, 2016, as confining transfer powers strictly within a state.
A bench led by Chief Justice Surya Kant and Justice Joymalya Bagchi observed that the issue raised significant procedural implications for tribunal functioning across India and merited closer scrutiny. The matter is now posted for hearing on February 23.
The dispute centers on the interpretation of Rule 16(d) of the NCLT Rules, which allows the Tribunal President to “transfer any case from one Bench to another Bench when the circumstances warrant.” The Gujarat High Court, however, ruled that this authority extends only to intra-state transfers, holding that the President cannot modify the territorial jurisdiction as established by the Central Government through notification.
In effect, the High Court invalidated the NCLT President’s decision to transfer certain high-stakes cases related to ArcelorMittal from Ahmedabad to Mumbai, after both benches in Ahmedabad recused themselves.
The Gujarat High Court set aside five orders and directed the NCLT President to reassign the matters to any other Ahmedabad bench, or alternatively constitute a virtual bench in Ahmedabad to ensure speedy adjudication.
The controversy arose after both NCLT benches in Ahmedabad recused themselves from hearing disputes involving ArcelorMittal. The recusal prompted the NCLT President in Delhi to transfer the case to Mumbai. However, this move was challenged by ArcelorMittal, which alleged that the transfer was the result of “forum shopping” and “bench hunting” by opposing parties.
The Supreme Court appeared skeptical of the Gujarat High Court’s restrictive interpretation.
“First, let us forget that there are two benches. Assuming there is only one bench at a place and a member must recuse due to conflict of interest. In such a scenario, how can the matter proceed if it can’t be transferred elsewhere?” the bench asked.
The Chief Justice further raised concerns over the practical consequences of denying such transfer powers to the Tribunal President, especially in situations involving recusals or member unavailability. “What is the business of the High Court to cut in the powers of the Tribunal like this?” the bench remarked.
On the issue of member recusals under pressure, the CJI also questioned whether recusal is an appropriate response to external influence. “Why can’t tribunal members recuse? The tribunal should come heavily on the party which does it. A party which threatens a tribunal can’t get away with it,” he stated.
At the heart of the dispute lies a crucial question: Does the NCLT President have the administrative authority to transfer matters across state boundaries in exceptional circumstances, or is that power circumscribed by geographic limits set by the Central Government?
The Supreme Court’s upcoming decision is expected to clarify the scope of administrative flexibility under the NCLT Rules, and could have wide implications for the functioning of specialized tribunals dealing with corporate law and insolvency cases across the country.
