NCLAT Holds Adjudicating Authority Lacks Jurisdiction Over Customs Liability Disputes Under IBC Framework

The NCLAT held that the Adjudicating Authority lacks jurisdiction to adjudicate customs liability disputes under the framework of the Insolvency and Bankruptcy Code (IBC).

The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka, reviewed an appeal along with the connected interlocutory application and held that the Adjudicating Authority under the Insolvency and Bankruptcy Code (IBC) lacks the jurisdiction to determine liabilities arising under the Customs Act. The Tribunal emphasised that such matters fall exclusively within the purview of the designated customs authorities. Consequently, any observations made by the Adjudicating Authority on the merits of such claims are unwarranted and without legal effect.

The National Company Law Appellate Tribunal (NCLAT) dealt with an appeal challenging the order dated 13 August 2024 passed by the Adjudicating Authority (NCLT) in IA No. 3925 of 2022. The application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, was filed by the appellant seeking various directions concerning alleged liabilities under a Slump Sale Agreement dated 30 March 2011. Specifically, the appellant sought recognition of the Corporate Debtor’s obligations to comply with customs-related demands arising from Advance Licenses and for these obligations to be reflected in the Resolution Plan.

The Adjudicating Authority rejected the application, holding that it lacked jurisdiction to adjudicate issues relating to liabilities under the Customs Act. It noted that such matters fall within the exclusive domain of the Customs Authority. Despite this finding, the Adjudicating Authority made additional remarks concerning the merits of the appellant’s claims, which the appellant contended were unnecessary.

During the hearing before the NCLAT, it was revealed that customs authorities had issued a show cause notice to the appellant, and the matter was still pending final determination following remand by the appellate authority under the Customs Act. Both the Successful Resolution Applicant (SRA) and the Resolution Professional (RP) opposed the appellant’s plea, arguing that the issue must be adjudicated by the competent customs authority and not by the Adjudicating Authority under IBC.

The NCLAT held that, once the Adjudicating Authority had correctly concluded it lacked jurisdiction over the customs liability dispute, it ought to have refrained from making further observations on the merits. The Tribunal clarified that the customs authority should decide the matter independently, uninfluenced by any remarks made in the NCLT’s impugned order. With this clarification, the appeal was dismissed.

Mr. Gaurav Mitra, Mr. Himanshu Satija, Mr. Jay Zaveri, Ms. Rhea Prakash and Ms. Ridhi Ranjan, Advocates, represented the Appellant.

Mr. Vivek Kohli, Sr. Advocate with Mr. Asav Rajan, Ms. Vasudha, Mr. Akash Saxena, Ms. Charu Trivedi, Mr. Kashish Chadha and Mr. Devang Shrotriya, Advocates, appeared for the Respondent No. 2.

Mr. Krishnendu Datta, Sr. Advocate with Mr. Ankur Singh, Ms. Pallavi Sengupta, Mr. Rahul Gupta and Mr. Arjun Krishnan, Advocates, appeared for the Respondent No. 4.

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