Defying CIRP Orders 'Not In Public Interest', Amounts To Civil Contempt: NCLT Mumbai

The National Company Law Tribunal (NCLT) at Mumbai has held that deliberate disobedience of its directions during a corporate insolvency resolution process (CIRP), even on the ground that the quantification of a financial creditor's claim is pending in appeal, is against public interest and amounts to civil contempt.

Allowing a contempt application filed by the resolution professional (RP) of Hotel Horizon Private Limited against its suspended directors, coram of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar said that their conduct “meets the ingredients of section 2(b) of the Contempt of Courts Act, 1971.”

Rejecting the defence that compliance was not required because the quantum of claims was under challenge before the appellate forum, the tribunal observed:

“The defence of the Respondents to justify disobedience of the order on ground of incorrect quantification of claims of financial creditor, still sub-judice in appeal, is not in public interest.”

It added that “non-repayment of loans taken from banks/financial institutions is in itself against the public interest.”

Hotel Horizon was admitted into insolvency on November 19, 2024, on an application filed by Assets Care & Reconstruction Enterprise Limited.

After commencement of CIRP, the tribunal had passed multiple orders in 2025 directing the suspended board to cooperate with the interim resolution professional and the R. This included orders to hand over books of accounts, records, and possession and control of the company's assets. However, the orders were never complied.

The tribunal noted that the suspended directors failed to hand over custody and control of assets, including a valuable Juhu property, and withheld key records.

The tribunal held that such conduct obstructed the time-bound insolvency framework under the Insolvency and Bankruptcy Code, 2016, and “substantially interfered with the due course of justice.”

Sentencing the suspended directors to one week of simple imprisonment in civil prison, the tribunal said the ends of justice would be met by the punishment. However, it granted them an opportunity to purge the contempt by handing over possession and control of the corporate debtor's properties within 30 days, failing which the imprisonment would be enforced.