SC: Reserved Category Candidate Who Availed Prelims Relaxation Cannot Claim an Unreserved Seat  ||  SC: Public Sector Enterprises Cannot Act Against Retired Employees Without Clear Rules  ||  Supreme Court: Single FIR is Permissible in Mass Cheating Cases Arising From One Conspiracy  ||  SC: Courts Cannot Take Cognizance of Time-Barred Cheque Bounce Cases Without Condoning Delay  ||  SC: Exoneration in Disciplinary Proceedings Does Not Always Bar Criminal Prosecution  ||  SC: Judge Cannot Be Presumed Biased Merely Because a Litigant’s Relative Is Police or Court Staff  ||  Delhi HC: Delays From Medical Review Cannot Justify Ante-Dated Seniority For BSF Candidates  ||  Allahabad HC: Being ‘Proclaimed Offender’ Does Not Completely Bar Grant of Anticipatory Bail  ||  Delhi HC: Abortion by a Married Woman For Marital Discord is Legal under The MTP Act  ||  NCLT Kochi: Fraud Has No Time Limit and Directors Cannot Use Delay As a Defense    

E.S. Krishnamurthy and Ors. vs. Bharath Hi Tech Builders Pvt. Ltd. - (Supreme Court) (14 Dec 2021)

Adjudicating Authority and Appellate Authority under IBC cannot compel a party to the proceedings before it to settle a dispute

MANU/SC/1249/2021

Insolvency

In present matter, on a petition which was instituted by the Appellants under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) for initiating the Corporate Insolvency Resolution Process in respect of the Respondent, the NCLT declined to admit the petition and instead directed the Respondent to settle the claims within three months. The NCLAT found no merit in the appeal against the NCLT’s order.

The Adjudicating Authority has clearly acted outside the terms of its jurisdiction under Section 7(5) of the IBC. The Adjudicating Authority is empowered only to verify whether a default has occurred or if a default has not occurred. Based upon its decision, the Adjudicating Authority must then either admit or reject an application respectively. These are the only two courses of action which are open to the Adjudicating Authority in accordance with Section 7(5). The Adjudicating Authority cannot compel a party to the proceedings before it to settle a dispute.

The IBC is a complete code in itself. The Adjudicating Authority and the Appellate Authority are creatures of the statute. Their jurisdiction is statutorily conferred. The statute which confers jurisdiction also structures, channelises and circumscribes the ambit of such jurisdiction. Thus, while the Adjudicating Authority and Appellate Authority can encourage settlements, they cannot direct them by acting as courts of equity.

The order of the Adjudicating Authority, and the directions which eventually came to be issued, suffered from an abdication of jurisdiction. Plainly, the Adjudicating Authority failed to exercise the jurisdiction which was entrusted to it. A clear case for the exercise of jurisdiction in appeal was thus made out, which the Appellate Authority then failed to exercise. The impugned judgment and order of the NCLAT is set aside. The petition under Section 7 of the IBC is accordingly restored to the NCLT for disposal afresh. Appeal allowed.

Tags : DISPUTE   SETTLEMENT   DIRECTION  

Share :        

Disclaimer | Copyright 2026 - All Rights Reserved