SC agrees to examine NCLT's power to transfer cases outside state

The Supreme Court on Monday agreed to examine the Gujarat High Court judgement which ruled that the National Company Law Tribunal cannot transfer a pending petition to another NCLT bench outside the state.

A bench comprising Chief Justice Surya Kant and Justice Joymalya Bagchi agreed to examine the scope of the NCLT President's power to transfer cases across NCLT benches in different states.

The controversy stems from Rule 16(d) of the NCLT Rules, 2016, which allows the NCLT President to "transfer any case from one Bench to another Bench when the circumstances warrant".


The Gujarat High Court, in its recent order, held that this power is strictly intra-state.

The High Court said that the Tribunal President cannot "alter or extend" territorial jurisdiction established by the central government, meaning that cases cannot be moved from one state to another.

The top court "prima facie doubted" the stand and gave a hypothetical example that if a member must recuse at a location with only one bench, a transfer across state lines might be the only way to avoid a total standstill of proceedings.

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

ArcelorMittal challenged the NCLT's recusal and transfer orders as being 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 orders under challenge, the Gujarat High Court directed the President of NCLT Delhi to re-allot the cases to any bench at Ahmedabad or, if necessary, to constitute a virtual bench for expeditious adjudication.

During the hearing, the CJI questioned the premise that tribunal members should recuse in the face of threats or litigant pressure.

"Why can't the tribunal members recuse (themselves)? The tribunal should come heavily on the party which does it. A party which threatens a tribunal can't get away with it," the CJI said.

The bench also questioned the rigidity underlying the approach adopted in the Gujarat High Court ruling that has been relied on to shut out transfer requests.

"What is the business of the High Court to cut in the powers of the Tribunal like this?" the bench asked.

"First, let us forget that there are two benches, assuming that there is only one bench at one place. And one of the members on account of conflict of interest, let us assume he has to recuse. Therefore, in that place, the matter cannot be heard. So it has to go from Ahmedabad... to A place, B place or C place," the top court said.

The bench has now posted the case for hearing on February 23.