The National Company Law Appellate Tribunal, New Delhi (“NCLAT”), by its judgment dated May 26, 2026 has allowed appeals filed by lenders, namely, State Bank of India, Bank of India, Canara Bank, ICICI Bank, Indian Bank and Union Bank of India (“Lenders”) and set aside the order passed by the National Company Law Tribunal, Mumbai Bench (“NCLT”) dated February 16, 2026 (“Impugned Order”) which had held the Lenders to be in contempt and directed one day’s civil imprisonment in the event of non-compliance.
The resolution plan of Jyoti Structures Limited (“JSL”) was approved by the NCLT vide order dated March 27, 2019. Pursuant to the terms of the approved resolution plan, the lenders and JSL had entered into certain definitive documents inter alia setting out the terms for issuance of Bank Guarantees /Letter of Credits (“NFB Facilities”) by the Lenders to JSL. Certain disputes arose between the Lenders and JSL in relation to the terms on which the NFB Facilities were to be released. Following allegations by JSL and its shareholders that the Lenders had failed to release the NFB Facilities in compliance with orders passed by the NCLT and the NCLAT in relation to the said disputes, contempt applications were filed before the NCLT.
By the Impugned Order, the NCLT directed the Lenders to release the NFB Facilities as per the directions thereto and further ordered that, failing which, they would be liable to one day’s simple imprisonment in civil prison. Aggrieved by the said order, the Lenders preferred appeals before the NCLAT.
Key Findings of the NCLAT
The NCLAT set aside the contempt order and made the following significant observations:
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Contempt proceedings require strict procedural compliance – Before imposing any punishment, the adjudicating authority must record a prima facie finding of wilful disobedience and issue a specific show-cause notice identifying the alleged acts of contempt.
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Contempt cannot be imposed without identifying individual contemnors – Contempt jurisdiction, particularly where imprisonment is contemplated, must be exercised against specifically identified individuals and not against corporate entities in the abstract.
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Principles of natural justice must be followed – The alleged contemnors must be informed of the precise charges against them and afforded a meaningful opportunity to respond before any penal consequences are imposed.
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A composite contempt order against multiple banks is unsustainable – The NCLAT observed that each bank had issued separate sanction letters containing different terms and conditions, requiring an individual assessment.
The NCLAT held that the NCLT had failed to comply with the mandatory procedural safeguards applicable to contempt proceedings and, therefore, the impugned order could not be sustained. While setting aside the contempt order, the NCLAT also granted certain fact-specific directions in the matter.
The team representing the lenders was led by Tushar Mehta, Solicitor General, Sunil Fernandes, Senior Advocate, along with the Cyril Amarchand Mangaldas team comprising of Animesh Bisht, Abhishek Mukherjee, and Surabhi Khattar, Partners; with assistance from Aniruddh Gambhir, and Harsh Rathi, Principal Associates; Shivansh Vishwakarma, Pushkar Deo, Anushka Vyas and Raj Shukla, Associates.
