NCLAT Expunges Stigmatic Remarks Against SBI Officials, Affirms Tribunals Must Give Fair Hearing Before Making Adverse Observations
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, comprising Justice Sharad Kumar Sharma (Judicial Member) and Jatindranath Swain (Technical Member), has expunged the stigmatic remarks made by the National Company Law Tribunal (NCLT), Amaravati Bench, against State Bank of India (SBI) officials and its counsel. The appellate tribunal held that tribunals cannot make adverse or stigmatic observations, nor impose costs, without first giving an opportunity to the concerned parties to explain their conduct.
The dispute arose from proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC). In its order dated April 23, 2025, the NCLT Amaravati Bench dismissed SBI’s petition by observing that the bank and its counsel had acted in a negligent and casual manner. The NCLT criticized SBI for filing the petition without invoking the bank guarantee and without submitting the relevant supporting documents, rendering the petition defective and liable to dismissal. Consequently, the tribunal imposed a cost of ₹50,000 and directed that the order be communicated to the Chairman and Managing Director of SBI, as well as the General Manager of the Stressed Asset Management Branch, to ensure better supervision in future proceedings.
SBI later filed an application before the NCLT seeking recall of this order. However, in its order dated May 6, 2025, the tribunal declined to recall its earlier remarks, reiterating its view that negligence was established on part of SBI and its counsel. Aggrieved, SBI challenged both orders before the NCLAT.
During the appellate proceedings, SBI argued that the remarks were stigmatic and damaging to the reputation and careers of both its officials and counsel, but no opportunity was provided to them to defend themselves before such adverse findings were recorded.
The NCLAT agreed with these submissions and emphasized that before any stigmatic or adverse remark is made against professionals, including lawyers or bank officials, they must be given ample opportunity to defend themselves. Observing otherwise, the appellate tribunal held that the NCLT’s approach amounted to violation of principles of natural justice. The NCLAT noted that similar issues had earlier been considered in State Bank of India v. Potluri Mohana Murali Krishna & Anr. (Company Appeal (AT) (CH) (INS) No. 363 of 2025), where it had already expunged comparable stigmatic remarks made by the NCLT. Since the present appeals involved factually identical issues, the bench disposed of them in line with its earlier ruling.
Accordingly, the appellate tribunal expunged the stigmatic observations made against SBI officials and counsel, as well as the ₹50,000 cost imposed by the NCLT. However, it modified the direction regarding communication of orders to SBI’s top management. Instead of forwarding the stigmatic remarks, the NCLAT directed that its fresh order be communicated to the Chairman, Managing Director, and the General Manager of the Stressed Asset Management Branch, with an observation that subordinates must diligently and promptly assist the NCLT in future proceedings. By partially allowing SBI’s appeals, the NCLAT reinforced an important principle: tribunals cannot make stigmatic or adverse observations that may impact the reputation and careers of professionals without giving them a fair chance to respond.
Appearance
For Appellant: Mr. K. Chandrasekaran, Advocate
Cause Title: State Bank of India V. Smt. Nandamuri Meenalatha & M/s. Vantage Spinners Pvt. Ltd.
Case No: Company Appeal (AT) (CH) (INS) Nos. 362 & 383 of 2025
Coram: Justice Sharad Kumar Sharma (Judicial Member), Jatindranath Swain (Technical Member)
