Supreme Court Criticizes NCLT & NCLAT Over Jet Airways Liquidation
In its recent judgment ordering the liquidation of Jet Airways, the Supreme Court delivered strong remarks on the National Company Law Tribunals (NCLT) and the National Company Law Appellate Tribunal (NCLAT), criticizing their operational shortcomings and deviations from judicial norms.
The Court expressed concern over the "growing tendency" among NCLT and NCLAT members to disregard Supreme Court orders, asserting that only individuals with “impeccable integrity” should serve as Tribunal members. The Court emphasized that these appointments should be free from political influence.
The bench, led by Chief Justice of India DY Chandrachud, along with Justice JB Pardiwala and Justice Manoj Misra, remarked:
"Persons with high ideals and impeccable integrity should be appointed as Members in the NCLT as well as NCLAT. There should not be any political appointment."
The judgment, authored by Justice Pardiwala, referred to the case as an "eye-opener" concerning the Tribunals' performance.
Concerns Over Tribunal Efficiency
Highlighting inefficiencies among Tribunal members, the Court noted:
"The Members often lack the domain knowledge required to appreciate the nuanced complexities involved in high-stake insolvency matters…The benches of NCLT(s) and NCLAT do not follow the practice of sitting for the full working hours. They are particularly lacking in the capacity to manage the growing number of cases, requiring undivided attention in such matters."
Legals365 can assist businesses affected by these delays and inefficiencies in corporate insolvency matters, ensuring their interests are safeguarded in proceedings.
Warning Against Judicial Indiscipline
The judgment included a strong admonition for NCLT and NCLAT members, warning against ignoring Supreme Court orders:
"Over a period of time, this Court has noticed the growing tendency amongst Members of the NCLT(s) and NCLAT to ignore the orders of this Court… We put the NCLT(s) and the NCLAT to notice, that any act of contravention of this Court's order and the larger rubric of judicial propriety will not be tolerated."
The Court insisted that these Tribunals take their roles seriously in ensuring timely and proper hearings, especially for insolvency resolutions, and not merely act as "rubberstamping authorities."
Issues in Listing and Vacancies
The judgment pointed out serious flaws in listing insolvency cases:
"There are serious issues in the manner in which insolvency matters are listed. There is no effective system in place…urgent mentionings and listings of time-sensitive matters are ignored, leading to asset value erosion."
Legals365, through its corporate legal services, can provide support to entities navigating these listing delays, minimizing the impact of stalled proceedings on corporate assets.
The Supreme Court also highlighted the problem of unfilled vacancies and infrastructure issues within these Tribunals:
"These vacancies heavily impact the insolvency reform initiative undertaken by the government…only sitting for a few days a week or a few hours in a day."
To combat these inefficiencies, the Court stressed the urgent need to fill these vacancies with individuals possessing relevant expertise and improve the Tribunal infrastructure. These actions would prevent delays in insolvency resolutions and ensure adherence to the Insolvency and Bankruptcy Code (IBC), 2016’s timelines.
Case Details and Citation
Case Details: STATE BANK OF INDIA AND ORS. Versus THE CONSORTIUM OF MR. MURARI LAL JALAN AND MR. FLORIAN FRITSCH AND ANR. | C.A. No. 5023-5024/2024 and Connected
Citation: 2024 (SC) 866
Click here to read the judgment
The judgment underscores the need for structural reforms and improved functioning within NCLT and NCLAT. Legals365 offers expert guidance in handling delays and challenges posed by these inefficiencies. Whether it’s insolvency solutions, debt recovery, or corporate compliance, Legals365 stands ready to support businesses in navigating these complex legal processes.
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