NCLAT Holds That Jurisdiction Exercised By The Adjudicating Authority Must Be Tested With Reference To The Source Of The Relief Granted

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench through its judgment dated 03.08.2026 in the matter of Ammeet Kumar Agarwal vs. Ssarvi Resolution Services LLP, Resolution Professional of Supreme Transport Organisation Pvt. Ltd¹., affirmed the order of the National Company Law Tribunal (“NCLT”), Mumbai directing the suspended directors of the Corporate Debtor to jointly and severally restore funds to the Corporate Debtor’s account withdrawn during Corporate Insolvency Resolution Process (“CIRP”).

In the present case, NCLT initiated CIRP against Corporate Debtor vide order dated 08.09.2023 which was challenged before NCLAT by Mr. Ammeet Kumar Agarwal, the suspended director of Corporate Debtor. NCLAT stayed the constitution of Committee of Creditors subject to Mr. Agarwal depositing a sum of INR 10,49,26,262/- in the form of fixed deposit before the Registrar, NCLAT within 30 days. Further, Mr. Agarwal filed an Interlocutory Application before NCLAT seeking permission to sell two unencumbered properties of the Corporate Debtor to arrange for the deposit, which was denied by NCLAT on the ground that CIRP has commenced. Thereafter, Mr. Agarwal made a fixed deposit of INR 7,59,26,262/- in the name of Registrar, NCLAT and sought time to deposit remaining sum, which was rejected by the NCLAT and stay was vacated.

Thereafter, Mr, Prashant Jain, the Resolution Professional of the Corporate Debtor (“RP”) instituted an application before NCLT alleging that a sum of INR 8,05,11,748/- has been wrongfully withdrawn from Corporate Debtor’s account. NCLT, vide order dated 19.12.2024, held that Mr. Agarwal and other respondents jointly and severally liable to contribute the said amount to Corporate Debtor’s account within 30 days and further directed to initiate prosecution against Mr. Agarwal under Section 74 of the Insolvency and Bankruptcy Code, 2016 (“IBC”). The present appeal has been filed challenging the said order under Section 61 of IBC contending that NCLT has exceeded its jurisdiction and given a direction founded upon violation under Section 14 without recording any finding on ingredients of Section 66 of IBC.

The principal issue before NCLAT was whether the NCLT could direct restoration of funds withdrawn during the moratorium without first recording a finding of fraudulent or wrongful trading under Section 66 of IBC.

NCLAT held that the jurisdiction exercised by the Adjudicating Authority must be tested with reference to the source of the relief granted. Section 60(5) of IBC confers wide jurisdiction upon the Adjudicating Authority to entertain or dispose of any question of law or fact arising out of or in relation to the insolvency resolution process. Preservation of the assets of the Corporate Debtor is one of the fundamental objectives of the Code. Where the Adjudicating Authority finds that the assets or funds of the Corporate Debtor have been dealt with in breach of the statutory framework governing the CIRP, it is not powerless to issue consequential directions for protecting or restoring the insolvency estate.

Footnote

1. Company Appeal (AT) (Insolvency) No. 86 of 2025.

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