Order Passed On Mistaken Facts Cannot Be Basis For Contempt: NCLAT

The National Company Law Appellate Tribunal (NCLAT) has dismissed a contempt petition against a liquidator after holding that an order passed under a mistaken impression of facts cannot be enforced through contempt proceedings.

A bench of Judicial Member Justice N. Seshasayee and Technical Member Indevar Pandey observed, “The Order passed on a mistaken impression about the existence of a fact, therefore, can neither be understood as a direction to restore a certain status quo ante, nor can it be construed as capable of being obeyed.”

The contempt petition was filed by Ashok Dattatray Atre and three others against liquidator Vijendra Kumar Jain. They alleged that he had wilfully disobeyed the tribunal's March 11, 2026 order directing that the sale proceeds of one of the corporate debtor's assets be kept in an interest-bearing account.

The dispute arose during the liquidation of the corporate debtor after a resolution plan could not be implemented within the prescribed timeline. An earlier liquidation order was set aside by the NCLAT. That appellate decision is now pending before the Supreme Court.

While those proceedings were pending, the adjudicating authority passed another liquidation order on October 30, 2025. The successful resolution applicant challenged that order before the NCLAT. On January 5, 2026, the tribunal directed that any action taken in the liquidation process would remain subject to the outcome of the appeal and the proceedings before the Supreme Court.

The liquidator informed the tribunal that he had received the sale proceeds from one of the corporate debtor's assets on February 16, 2026. He transferred the amount to the State Bank of India the next day. On March 11, 2026, the tribunal directed that the sale proceeds be kept in an interest-bearing account.

The applicants argued that this direction had been violated. The liquidator maintained that the money had already been transferred on February 17, 2026, weeks before the March 11 order.

After examining the bank records, the tribunal found that the February 17 transfer was undisputed. It concluded that the March 11 order had been passed without being informed that the sale proceeds had already been disbursed.

It concluded that the March 11 order had been passed without being informed that the funds had already been transferred.

The tribunal held that contempt jurisdiction could not be invoked because the order relied upon by the applicants was incapable of compliance.

“Firstly, to constitute contempt, the Order which is alleged to have been disobeyed must be first capable of being obeyed,” the tribunal observed.

The tribunal also declined the applicants' attempt to use the contempt proceedings to restore the money to the corporate debtor's account. It noted that the March 11 order contained no such direction.

The tribunal further observed, “In that sense, a proceeding for contempt is not an adversarial proceeding in character. It is for the Court and up to the Court to decide what constitutes contempt and how to deal with it.”

Holding that the March 11 order was based on an erroneous factual assumption, the tribunal found it to be unworkable and unenforceable. It accordingly dismissed the contempt petition.