The Supreme Court's judgment that the National Company Law Appellate Tribunal (NCLAT) has no jurisdiction over matters of public law, such as decisions taken by statutory authorities under laws like the Prevention of Money Laundering Act (PMLA), has significant implications for the resolution process under the Insolvency and Bankruptcy Code (IBC). While the judgment clarifies the limits of NCLAT's jurisdiction, it will certainly lead to delays in the resolution process.
Matters involving public law, such as attachment of assets by the Enforcement Directorate (ED) under the PMLA, will now need to be adjudicated in separate forums, such as special courts/ tribunals, rather than being resolved within the IBC framework. This fragmentation of jurisdiction can lead to parallel proceedings, increasing the time required to resolve disputes and finalize the resolution process. If statutory authorities like the ED attach assets of a Corporate Debtor undergoing insolvency, the successful resolution applicant or creditors may need to challenge such actions in separate courts/tribunals, adding to number of litigations.These litigations can significantly prolong the resolution process, as courts outside the IBC framework may not prioritize or adhere insolvency timelines. Successful Resolution applicants may face uncertainty regarding the status of assets attached under public law, as such matters cannot be adjudicated by the NCLT or NCLAT. This uncertainty can deter potential bidders or delay the implementation of resolution plans. Resolution applicants may not file the resolution plans until public law disputes are resolved, slowing down the insolvency process. Resolution plans may need to account for unresolved public law disputes, such as asset attachments or ongoing investigations or statutory dues/taxes, making them more complex and harder to implement.The added complexity can lead to prolonged negotiations and approvals, further delaying the resolution process. Different courts/tribunals handling public law matters may pass judgments that conflict with the insolvency resolution process, creating legal uncertainty and complicating the implementation of resolution plans. Resolving such conflicts can take time, further delaying the resolution process. If assets are attached under public law and cannot be included in the resolution process, creditors may face reduced recoveries, leading to disputes and challenges that prolong the process. Creditors may contest the exclusion of attached assets, adding to the litigation and delaying the resolution.
The judgment warrants the need for legislative clarity on the interplay between the IBC and public law statutes like the PMLA. Until such clarity is provided, disputes over jurisdiction and asset attachment are likely to persist. Legislative reforms take time, and the lack of clarity in the interim can lead to delays in resolving insolvency cases.
While the Supreme Court's decision reinforces the principle that NCLT/NCLAT cannot adjudicate matters outside the scope of the IBC, it introduces practical challenges that can delay the resolution process. To mitigate these delays, legislative amendments may be needed to streamline the handling of public law disputes within the insolvency framework or ensure faster resolution in separate forums.
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