Bare Claim Of Poverty Not Enough To Defend Contempt For Non-Payment: NCLAT

The National Company Law Appellate Tribunal (NCLAT) has observed that a bare claim of poverty is not enough to defend contempt proceedings for non-payment of a court-ordered amount. A person claiming inability to pay must fully disclose their assets and income and explain why they cannot comply with the order.

“We need to be cautious of the fact that only wilful disobedience is contempt, and genuine inability is a defence. But once non-payment of an order for money is shown, the reasons a person cannot pay are within his own knowledge. He must bring them forward, with full disclosure of his assets and income. A bare claim of poverty is not enough,” the bench of Judicial Member Justice Mohammad Faiz Alam Khan and Technical Member Naresh Salecha observed.

The tribunal made the observation while setting aside a National Company Law Tribunal (NCLT), Kolkata Bench, order holding five individuals guilty of contempt for failing to comply with a payment order in the liquidation proceedings of Mohan Motor Dealers Private Limited.

The three connected appeals were filed by Pradip Kumar Bajaj, Anju Bajaj, Harshit Bajaj, Gayetri Singh and Rohit Kumar Singh against the NCLT's June 12, 2026 order.

The contempt proceedings arose from alleged non-compliance with a January 30, 2024 order passed under Sections 43, 45 and 66 of the Insolvency and Bankruptcy Code, 2016.

The January 30, 2024 order directed seven individuals to repay specified amounts to the liquidation estate of Mohan Motor Dealers. It attained finality after the NCLAT dismissed appeals against it on December 6, 2024, due to delays in refiling.

The five individuals challenged the contempt findings, citing financial hardship and insolvency proceedings. They argued that the NCLT had not established wilful disobedience. Liquidator Vaibhav Khandelwal countered that they had not adequately disclosed their assets and finances.

The NCLAT set aside the contempt findings, noting that the NCLT had not framed specific charges. It also ruled that the ₹2 lakh fine exceeded the statutory limit of ₹2,000 and set aside directions for automatic imprisonment and attachment of personal properties.

The tribunal sent the matter back to the NCLT for fresh consideration but clarified that the original payment order would not be reopened

For Appellants: Advocates Anirban Bhattacharya, Radhika Misra, Sayantan Bose, Manisha Das, Subham Saurabh & Rajeev Choudhary

For Respondents: Advocates Rishav Banerjee, Shambo Nandy, Daksh Sharma, Moulinath Mitra