Pranav B Pem

The Gujarat High Court has held that the President of the National Company Law Tribunal (NCLT) does not have the authority to transfer cases from one State to another through administrative orders. The Court further found that the repeated recusals by Members of the NCLT, Ahmedabad Bench, in matters connected to the Essar Steel insolvency proceedings, were neither legal nor justified. A single bench of Justice Niral R. Mehta delivered the ruling while allowing a petition filed by ArcelorMittal Nippon Steel India Limited (formerly Essar Steel India Limited) challenging a series of orders passed by NCLT Benches in Ahmedabad and New Delhi.

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Background

The proceedings stemmed from disputes arising after the completion of the Corporate Insolvency Resolution Process (CIRP) of Essar Steel India Limited, which was approved by the NCLT, Ahmedabad in March 2019 and subsequently upheld by the Supreme Court in November 2019. Following the conclusion of the CIRP, certain respondents filed contempt and recall applications before NCLT, Ahmedabad, alleging non-compliance with the resolution plan. On January 8, 2024, the NCLT, Ahmedabad dismissed the contempt petitions and imposed costs on the applicants. However, the very next day, on January 9, 2024, both Members of NCLT–I, Ahmedabad recused themselves from the pending matters. The recusal was followed by similar orders passed by NCLT–II, Ahmedabad on April 23 and April 24, 2024, after an advocate representing the respondents allegedly intimidated the Bench by bringing individuals into the courtroom to transcribe proceedings.

While these matters were still pending, the President of the NCLT, through administrative orders dated June 6, 2024, and February 10, 2025, transferred all related cases from the NCLT Ahmedabad Bench to the NCLT Mumbai Bench, citing powers under Rule 16(d) of the NCLT Rules, 2016. These transfer orders were challenged before the High Court.

Petitioner’s Contentions

Senior Advocate Mihir Joshi, appearing for the petitioner, argued that the recusal orders violated Rule 62 of the NCLT Rules, 2016, which exhaustively defines the circumstances under which a Member may recuse. He contended that the NCLT Members’ withdrawal from the cases was unsupported by any valid ground under the Rule and amounted to yielding to pressure tactics by certain advocates. It was also submitted that Rule 16 does not empower the NCLT President to transfer cases beyond the territorial jurisdiction of a Bench, and doing so effectively nullified pending judicial proceedings on the transfer applications before the Tribunal. The petitioner argued that the impugned transfers were administratively illegal and contrary to the principles of judicial propriety.

Respondents’ Position

Counsel for some of the respondents, Advocate Deepak Khosla, did not oppose the petitions and suggested that instead of transferring matters outside the State, the NCLT President could constitute a virtual Bench for Ahmedabad by assigning Members from other jurisdictions to ensure timely adjudication.

Court’s Observations

After examining the orders passed by the NCLT Benches, Justice Mehta found that the recusal orders dated January 9, April 23, and April 24, 2024 were passed without adherence to Rule 62, which permits recusal only in specific situations involving personal, professional, or other legitimate conflicts. The Court observed that the timing of the recusals and the surrounding events indicated that the Members had succumbed to external pressure rather than acting within the permissible scope of judicial discretion. It remarked: “If Courts and 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 Bench emphasized that tribunals are not powerless to deal with such conduct and must use their authority to take lawful measures against misconduct rather than resorting to recusal. It added that “judicial magnanimity should never be mistaken for weakness.”

President’s Power of Transfer

On the question of administrative transfers, the High Court held that Rule 16(d) of the NCLT Rules, 2016 empowers the President to transfer cases only between Benches within the same territorial jurisdiction. The Court clarified that no power exists to transfer matters from one State to another, and doing so amounts to altering territorial jurisdiction, which cannot be done through an administrative order. The Court observed: “The President of the NCLT has no administrative power to alter or extend the territorial jurisdiction of any Bench. Such an administrative decision directly affecting pending judicial proceedings is, therefore, subject to judicial review.”  Accordingly, the Court held that the administrative transfer orders dated June 6, 2024, and February 10, 2025, passed by NCLT, New Delhi, were without legal authority and liable to be quashed.

Judgment and Directions

Allowing the petitions in part, the High Court:

• Quashed the recusal orders of January 9, April 23, and April 24, 2024, issued by NCLT–I and NCLT–II, Ahmedabad.

• Set aside the administrative transfer orders dated June 6, 2024, and February 10, 2025, passed by the NCLT, New Delhi.

• Directed the NCLT President to reassign the matters to a suitable Bench at Ahmedabad, and if required, constitute a virtual Bench for expeditious adjudication.

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The Court clarified that its decision was confined to the legal issues of recusal and administrative authority, leaving all other contentions open for the parties to raise before the Tribunal.

Appearance

For Petitioner: Senior Advocate Mihir Joshi with Advocates Keyur Gandhi, Raheel Patel, Isa Hakim, and Aradhana Jain for Gandhi Law Associates

For Respondents: Advocate PY Divyeshvar for Registrar, NCLT ; Advocate Kshitij M. Amin for Respondent No. 2; Advocate Deepak Khosla with Advocate Jaydeep M. Shukla for other respondents

Cause Title: Arcelormittal Nippon Steel India Limited V National Company Law Tribunal

Case No: R/Special Civil Application No. 11679 Of 202

Coram: Justice Niral R Mehta