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NCLAT does not have the authority to retain the hands of the High Court to hear a Section 9 petition or any other cause of action under the Arbitration Act.

In the most recent case, the Bombay Supreme Court found that NCLAT did not have the power to stand by the Supreme Court in hearing Section 9 motions or any other cause of action under the Arbitration Act. In this case, there was an order issued by NCLAT in 2015 that suspended proceedings against IFIN and therefore the other party’s plea, Bay Capital, was unsustainable.

The NCLAT relied on the provisions of the Companies Act of 1956 and, in the interests of the wider public, made a resolution that the establishment or continuation of lawsuits or other proceedings against ILFS and its 348 group companies in a court of law, tribunal, arbitration authority.

The Bay Capital attorney, who defied the order, argued that NCLAT was not a tribunal, judicial authority, or constitutional court empowered to issue high prerogative remedies. Pursuant to Section 242 of the Companies Act, he argued that the law does not give NCLAT any authority to oversee the other courts, and in particular those courts that are neither subordinate to nor subject to NCLAT’s supervision.

Such an order may be made by the Supreme Court or the Supreme Court in relation to courts over which the Supreme Court has judicial oversight, but certainly not the NCLAT.

In this regard, the Bombay Supreme Court stated that they cannot see how the words “court” can be read because there is no judicial authority other than the NCLT over which the NCLAT exercises such oversight. The court also found that even if NCLAT has the power to stay arbitration for a moment, it certainly does not have the power to keep the hands of that court in hearing a petition under Section 9 or any other petition duly preceded by it stands trial under the Arbitration and Conciliation Act, 1996.

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