The transfer of a proceeding from one NCLT Bench to another is an extraordinary procedural step. It is not a matter of the petitioner’s convenience; it is a power exercised by the President to ensure the proper administration of justice. The power is derived from Section 419(3) of the Companies Act, 2013, read with Rule 16(d) of the NCLT Rules, 2016, and it is exercised when the circumstances warrant a departure from the ordinary territorial rule.
The Source and Nature of the Power
Section 419(3) provides that where a case or matter is heard by a Bench consisting of two Members, it may be transferred by the President, or referred to him for transfer, to such other Bench as the President may deem fit. Rule 16(d) supplements the statutory power by providing that the President shall have the power to transfer any case from one Bench to another when the circumstances so warrant.
The NCLAT has held that the President, in passing an order under Rule 16(d), exercises the power of the NCLT. The transfer order is therefore a judicial order, not a mere administrative direction, and it is subject to the principles of natural justice.
The Grounds for Transfer
The grounds for transfer are not exhaustively listed in the statute or the rules. The President exercises the power where the circumstances warrant it, and the circumstances include the avoidance of conflicting findings, the consolidation of related matters, and the convenience of the parties and the witnesses. The transfer may also be ordered where the Bench before which the matter is pending is unable to hear it, or where the matter is connected with a proceeding before another Bench.
The IBC has introduced a specific transfer rule. Where a petition is filed against a corporate guarantor before a Bench other than the Bench dealing with the principal borrower’s insolvency, the petition is transferred to the Bench dealing with the principal borrower. The rule is designed to ensure that the resolution of the principal borrower and the guarantor is conducted by the same adjudicating authority.
The Procedure
The transfer may be initiated by an application by a party, or by a reference by the Bench before which the matter is pending. The application must set out the grounds for the transfer and the prejudice that would be caused if the matter continues before the present Bench. The President considers the application and the response, and he may hear the parties before passing the order.
The transfer order does not decide the merits of the matter. It only changes the forum. The transferee Bench hears the matter de novo or from the stage at which it was transferred, depending on the terms of the transfer order.
A transfer application should not be used as a dilatory tactic. The President is conscious of the fact that a transfer delays the proceedings, and the application is granted only where the grounds are substantial.
Call to Action
Anuj Desai & Associates advises companies and petitioners on the transfer of NCLT proceedings—from the grounds for transfer and the procedure to the IBC-specific transfer rule and the response to a transfer application. If you are considering a transfer or opposing one, we can help you assess the position.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
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