NCLAT rules that disbursement occurred before the tribunal's order, rendering contempt allegations unsustainable.
In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) at its Principal Bench in New Delhi has dismissed the contempt petition filed against Mr. Vijendra Kumar Jain, the liquidator, by Ashok Dattatray Atre and others. The petition alleged that Mr. Jain had disbursed the sale proceeds of a corporate debtor's assets in violation of the tribunal's order dated March 11, 2026.
The tribunal, comprising Member (Judicial) N. Seshasayee and Member (Technical) Indevar Pandey, held that the disbursement took place prior to the issuance of the March 11 order and was therefore unenforceable. The judgment clarified that no willful disobedience could be attributed to the liquidator, as the order was passed under a mistaken impression of facts.
According to the tribunal's findings, the liquidation process was initiated after the corporate debtor's resolution plan could not be completed within the stipulated timeline. Although the liquidation order dated January 4, 2024, was initially set aside by NCLAT, it was pending adjudication before the Supreme Court in a related civil appeal. Subsequently, a second order of liquidation was passed on October 30, 2025, which was challenged by the Successful Resolution Applicant (SRA) in the pending appeal.
On February 16, 2026, the liquidator sold the corporate debtor's assets and disbursed the sale proceeds to the State Bank of India after adjusting liquidation costs. This disbursement was completed on February 17, 2026, weeks before the tribunal's order on March 11, 2026, which instructed the liquidator to retain the funds in an interest-bearing account.
The tribunal emphasized that contempt proceedings cannot be initiated based on orders passed under erroneous impressions. It further stated that contempt proceedings differ from execution proceedings, as the petitioner's role is limited to highlighting perceived violations. The court retains the prerogative to determine whether contempt has occurred and how to address it.
The judgment also elaborated on the nature of contempt proceedings, reiterating the principle "actus curiae neminem gravabit," which means an act of the court shall prejudice no one. This principle was applied to the mistaken March 11 order, underscoring its unenforceability.
In dismissing the contempt petition, the tribunal affirmed that the erroneous order could not serve as a basis for initiating contempt actions. The tribunal also disposed of the related application, I.A. No. 2328 of 2026, acknowledging the factual disbursement of funds on February 17, 2026, which rendered the March 11 order unworkable.
The ruling reinforces the importance of factual accuracy in judicial proceedings and underscores the tribunal's role in preserving judicial dignity while handling contempt allegations.
Bottom line:-
A contempt petition cannot be sustained if the alleged contemptuous act occurred prior to the issuance of the order in question, and the order itself was passed under a mistaken impression of facts.
Statutory provision(s): Contempt of Court Act, 1971, Insolvency and Bankruptcy Code, 2016
