The NCLAT ruled that banks cannot be held in wilful contempt for delays in the release of rolled-over non-fund based credit facilities under an approved resolution plan, citing bona fide interpretation disputes.
NCLAT on Contempt and Banking Obligations
The NCLAT has clarified that banks cannot be held guilty of wilful contempt merely for failing to release rolled-over non-fund based credit facilities under an approved resolution plan. The court acknowledged that discrepancies in interpretation do not equate to deliberate defiance of court orders.
This ruling highlights the nuances involved in financial commitments and the associated regulatory framework, proposing that banks should not face penalties for good faith misunderstandings of their obligations under resolution plans.
For attorneys representing financial institutions, this judgment reduces the risk of exposure to contempt claims. It serves as a critical guideline for interpreting the obligations under resolution plans and the need for clear communication between creditors and debtors.
Citations
- NCLAT (2026) NCLAT 5
