Introduction:

In a recent ruling, the Supreme Court addressed a critical question regarding the Adjudicating Authority’s (NCLT) power to recall its order approving a resolution plan under the Insolvency and Bankruptcy Code, 2016 (IBC). The case stemmed from a recall application filed by a Resolution Applicant (RA), asserting that the initially approved plan did not adhere to the specified conditions in Section 30(2) of the IBC. Both the NCLT and NCLAT had rejected the recall application, leading the RA to appeal to the Supreme Court.

Arguments:

The Resolution Applicant contended that the NCLT had the authority to recall its order, citing a recent judgment involving Union Bank of India and Financial Creditors of M/s Amtek Auto Ltd. & Ors. The RA argued that the Adjudicating Authority had made a grave mistake by approving a plan that failed to meet the conditions outlined in the IBC. On the other hand, the opposing view maintained that once the resolution plan was approved, the NCLT lacked the jurisdiction to entertain a recall application.

Court’s Judgment:

The Supreme Court, drawing from its precedent in the M/s Amtek Auto Ltd. case, emphasized the inherent power of the NCLT to recall an order, even in the absence of a specific provision empowering such action. The judgment highlighted that Section 60(5)(c) of the IBC empowers the NCLT to entertain questions of law or facts related to insolvency resolution proceedings. The court acknowledged that the power to recall an order should be exercised sparingly and outlined specific grounds for a valid recall application, including jurisdictional issues, lack of notice to the aggrieved party, or orders obtained through misrepresentation or fraud.

In conclusion, the Supreme Court affirmed the NCLT’s authority to recall an order approving a resolution plan under the IBC, provided there are valid grounds such as jurisdictional issues or fraud. The judgment underscored the inherent power of the NCLT to secure justice and prevent abuse of the court’s process. This ruling establishes a balanced approach, allowing for the recall of orders in exceptional circumstances while maintaining the integrity of the insolvency resolution process.