Judicial discipline or lack thereof in NCLT and NCLAT

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Judicial discipline or lack thereof in NCLT and NCLAT

Summary – In this blog, Ritima Singh reflects on emerging concerns around judicial discipline within the NCLT and NCLAT. She explores how systemic inefficiencies, gaps in oversight, and instances of inconsistent conduct have raised questions about the functioning of these critical institutions. Drawing on high-profile cases like Jet Airways, the blog illustrates how such challenges can impact the broader insolvency ecosystem. Ritima emphasises the need for constructive reforms, such as enhanced judicial training and improved institutional governance, to strengthen accountability and reinforce trust in India’s insolvency framework.

The National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT), established in 2016, are specialised quasi-judicial bodies that primarily look into company law, competition law, and insolvency laws. Through their statutes and jurisdiction, the tribunals have become key institutions in India’s business and commercial ecosystem. Unfortunately, and within a very short period, their effectiveness and credibility have been brought into question, among practitioners, in open court, and through pronouncements of the apex court, which tarnishes their image in the public eye.

At this juncture, it is necessary to revisit the great thought by former American Attorney, Earl Warren, “It is the spirit and not the form of law that keeps justice alive”. These words are a reminder of how institutions are made up of individuals, and they hold the responsibility for delivering “justice” across a broad spectrum of schemes and subject matter.

Tribunal members, both judicial and technical, are the face and soul of these tribunals. In commercial and business disputes, it is their availability/accessibility, understanding, actions, and reputation that come together to form the “discipline” of the institution. The article explores this idea of “judicial discipline” extending beyond ethical conduct to encompass procedural fairness, internal governance, and the maintenance of decorum.

The Problem : Systemic Challenges and Grave Misconduct in NCLT and NCLAT

The myriad issues that affect judicial discipline can be broken into systemic/cultural anomalies and grave/one-off situations of bad actors.

a. Systemic/cultural challenges

A time and motion study of NCLT conducted by DAKSH has revealed that tribunal members frequently fail to sit for the required number of hours, directly impacting case disposal rates. The study was conducted for a week in February 2024, observing court proceedings for the Delhi and Mumbai Benches. This issue, amongst others, has also been flagged by the Supreme Court of India in the Jet Airways judgment. At the Chennai Bench, members have been absent for extended periods, leading to severe delays in hearings and exacerbating case backlogs.

The Jet Airways insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC), were initiated in 2019 before the NCLT. The resolution process was expected to be a landmark case for India’s bankruptcy regime, given its scale and cross-border nature. However, the process and the result were plagued by judicial discipline issues, such as delay due to frequent adjournments. The NCLT Mumbai Bench in this case faced constant criticism for its “go-slow” approach by allowing repeated adjournments and delays in listing and hearing. If we take this action as an input in the business ecosystem, a major output was that the Jala-Kalrock consortium (JKC), which proposed a resolution plan, remained clueless throughout the process because of vague NCLT Orders and the ambiguity of the procedure before these tribunals. The second output was, of course, the winding up of India’s premier airline. As a result, the case became emblematic of the risk of engaging with India’s bankruptcy process.

A profiling of the technical members as of February 2025 reveals that around 23% of them are retired civil servants who may or may not have any judicial experience. Recently, a technical and judicial member at the Chandigarh Bench had an altercation in an open court where the judicial member rebuked the technical member for his behaviour and misconduct. The altercation disrupted the tribunal proceedings. When such disputes occur in open court, they expose deeper issues of discipline, decorum by the judges, governance, and institutional mismanagement. Later on, all the cases were withdrawn from this particular technical member on account of various complaints by the stakeholders. Such incidents give a major blow to the reputation and credibility of such institutions and establish that judicial training is crucial for technical members.

b. Grave and one-off problems

More serious cases of judicial indiscipline amongst the NCLT and NCLAT members have also been a recurring red flag in Supreme Court rulings. In Finolex Industries Ltd. v. NCLT & Ors. (2023) ibclaw.in 667 NCLAT, the Supreme Court reprimanded NCLT members for defying its orders, emphasising that failure to comply with its directives amounts to judicial indiscipline and weakens the tribunal system’s credibility. When tribunals disregard Supreme Court rulings, it creates uncertainty and inconsistency in adjudication, ultimately eroding the predictability upon which corporate stakeholders rely.

When stories are circulated about corruption, altercations between members in open court, people lose trust in the tribunal. This triggers a domino effect with serious consequences for democracy, economic health, and social cohesion. If citizens and businesses perceive the tribunals as biased, corrupt, or ineffective, they are less likely to approach them for redress. This fosters a culture of impunity, where rogue actors behave without fear of consequences. Investors and banks will choose investment destinations with some level of predictability, a strong sense of credibility, and impeccable efficiency. A recent CBI investigation into a former NCLT member accused of accepting bribes for favourable orders has laid bare the vulnerabilities in the tribunal system.

Potential solutions: Bridging Gaps in Training, Ethics, and Governance

A key factor contributing to these problems is the lack of structured judicial training for NCLT and NCLAT members. Unlike the other judges, tribunal members often assume their roles without systematic education in ethics or procedural conduct. International tribunal systems emphasise continuous judicial education, ensuring that members remain well-versed in legal principles and ethical standards. India must adopt a similar approach, with training programs tailored to the unique responsibilities of tribunal members. The Supreme Court has repeatedly stressed the necessity of judicial discipline, and adapting elements from the Code of Conduct applicable to High Court judges could provide a foundational framework for improving ethical and procedural standards within the tribunals.

Addressing these issues requires a multi-pronged approach. Establishing clear accountability mechanisms, enforcing stricter ethical guidelines, and instituting mandatory training programs are critical first steps. The tribunals were created to expedite corporate justice and streamline insolvency proceedings. However, without significant reform to enhance judicial discipline, their purpose stands compromised. The time for action is now, before public confidence in these critical institutions erodes beyond repair.

Judicial discipline or lack thereof in NCLT and NCLAT

Table of Contents

The Problem : Systemic Challenges and Grave Misconduct in NCLT and NCLAT

Potential solutions: Bridging Gaps in Training, Ethics, and Governance

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