Supreme Court Orders NCLAT to Explain Delay, Bars Formation of Insolvency Creditors Committee Pending Hearing

Binding effect of the Supreme Court’s request

In Sona Bansal v. Vashisht Kumar Goyal and others, a Bench of Justices J.B. Pardiwala and K. Vinod Chandran expressed serious concern that an appeal before the National Company Law Appellate Tribunal had remained unheard after the Supreme Court specifically asked that it be taken up on 23 July 2026.

In its order dated 27 October, the Bench clarified that a request made by the Supreme Court to a court or tribunal must be treated as a direction, even where the language reflects institutional courtesy. It warned that future non-compliance would be examined seriously. This was an express statement in the signed order, not merely a media interpretation of oral remarks.

How the procedural dispute developed

The underlying litigation involved an appeal arising from interim orders of the NCLAT Principal Bench in New Delhi. In July, the Supreme Court was informed that the National Company Law Tribunal had reserved an order on an application under Section 7 of the Insolvency and Bankruptcy Code. The appellant also sought relief concerning a proposed rights issue by the company.

The Supreme Court had declined to decide disputed factual questions itself and instead left the parties free to advance their legal arguments before the NCLAT. To ensure that the appellate forum heard those arguments while the insolvency application was still pending, the Court made an earnest request for a hearing on 23 July.

At the October hearing, senior counsel for the applicant informed the Bench that the appeal still had not been heard. They also reported that the NCLT had meanwhile pronounced its reserved decision and admitted the Section 7 insolvency application. The Supreme Court recorded these developments and considered the failure to hear the appeal a matter requiring an explanation.

The precise directions issued

The Court issued notice returnable on 19 November 2026 and permitted service by hand in addition to ordinary modes. It specifically required the NCLAT to explain why the appeal remained unheard despite the earlier direction. The Court also noted that the NCLAT had fixed 17 November as the next date.

The interim safeguard was targeted: no Committee of Creditors is to be constituted while the Supreme Court’s direction remains operative. The Court did not in this order finally decide the validity of the insolvency admission, the rights issue or the underlying shareholder dispute.

The restriction on constituting the creditors committee is significant because that body ordinarily plays a central role in decisions about a corporate debtor once the insolvency process advances. Temporarily withholding its formation preserves the procedural position while the appellate delay is examined.

Institutional courtesy does not dilute judicial authority

The Bench explained that it had used the language of an earnest request out of deference to the office held by the appellate tribunal’s members. Such courtesy, the order said, cannot be treated as permission to disregard the Supreme Court’s expectation that a matter be heard.

The distinction is important for judicial administration. A higher court may employ restrained language when communicating with another adjudicatory body, but the legal significance of that communication depends on its context and operative purpose, not solely on whether it uses the word “request”.

The order should not be read as a general finding of misconduct against individual tribunal members. The NCLAT has been called upon to provide an explanation, and that response remains to be considered.

Next hearing and practical consequences

The appellate tribunal’s next listed date was recorded as 17 November and the Supreme Court’s notice is returnable on 19 November. Parties will need to track both proceedings, particularly the interim prohibition on forming the creditors committee.

For insolvency practitioners, the immediate lesson is procedural rather than a new test for admitting Section 7 applications. The Court has insisted on compliance with its directions and protected the appeal from becoming ineffective through further steps in the corporate insolvency process.