1

INHERENT POWERS OF THE

NCLT TO RECALL AN
INSOLVENCY RESOLUTION PLAN
SUBJECT- BANKRUPTCY AND INSOLVENCY HON (LWJ55139)

SUBMITTED BY-

SATYANAND DEY

BBA LL. B(H)

9th SEMESTER

UG/03/BBALLB/2020/008

SURYASISH TALUKDAR

BBA LL. B(H)

9th SEMESTER

UG/03/BBALLB/2020/019
 2

ABSTRACT
The National Company Law Tribunal (NCLT) has essential powers to recall an Insolvency
Resolution Plan (IRP), which is crucial for the effective operation of the insolvency process in
India. These powers are designed to ensure fairness and justice within the framework of the
Insolvency and Bankruptcy Code (IBC), 2016. The recall provisions enable the NCLT to intervene
in cases where a resolution plan may have been approved under conditions that undermine its
legitimacy or effectiveness. The NCLT's authority includes the ability to review and potentially
overturn its earlier decisions, especially when those decisions are deemed flawed or unjust. This
function acts as a protective measure against the misuse of the resolution process, ensuring that
stakeholders are shielded from plans that do not meet legal standards or equitable treatment. The
power to recall also promotes a flexible legal environment where decisions can be reassessed and
rectified, thereby enhancing the integrity of insolvency proceedings. Furthermore, the use of
inherent powers highlights the NCLT's broader judicial responsibility to uphold justice,
particularly in complex insolvency cases that involve various interests. This aligns with the
fundamental principles of the IBC, which aim to facilitate timely resolutions while balancing the
rights and responsibilities of all stakeholders involved. Therefore, the NCLT's ability to recall an
IRP not only strengthens its authority but also plays a vital role in creating a fair and accountable
insolvency resolution framework in India.

INTRODUCTION
The Insolvency and Bankruptcy Code (IBC) is a significant legislative framework aimed at
consolidating and streamlining the insolvency resolution process in India. The following sections
provide an overview of the IBC, the role of the National Company Law Tribunal (NCLT), and the
importance of Insolvency Resolution Plans in the context of the study.1

1
Yash Pratap Singh Narwaria, Punyashree S. Biswal, Pre-Packed Insolvency Mechanism Under Insolvency and
Bankruptcy Code, 12, UGC Care Group I Journal, 115, 115-119 (2022).
 3

❖ Overview of the Insolvency and Bankruptcy Code (IBC)

The Insolvency and Bankruptcy Code, enacted in 2016, represented a monumental shift in India's
approach to insolvency and bankruptcy. Its primary objective is to provide a coherent framework
to address the insolvency of corporate entities, partnership firms, and individuals within a time-
bound manner. The IBC aims to promote the maximization of asset values and facilitate the revival
of stressed assets, rather than merely liquidating them. In its implementation, the code seeks to
balance the interests of all stakeholders, including creditors and debtors, by ensuring a fair and
orderly resolution process. Since its inception, the IBC has undergone several amendments to
address its real-world challenges and improve its efficacy, highlighting its dynamic nature in
response to evolving economic conditions.2

❖ Role of the National Company Law Tribunal (NCLT)

The National Company Law Tribunal (NCLT) is the adjudicating authority for corporate
insolvency matters under the IBC. This quasi-judicial body was established to adjudicate
insolvency cases efficiently and effectively, replacing the erstwhile Company Law Board. NCLT
plays a crucial role in overseeing the bankruptcy process, ensuring that the framework established
by the IBC is adhered to. Creditors and debtors alike must approach the NCLT to initiate
insolvency proceedings, and its rulings have significant implications for resolving distressed assets.
The Tribunal's decisions are vital for facilitating negotiations between stakeholders. They can
influence the eventual outcome of insolvency cases, thereby playing a pivotal role in protecting
creditors’ interests and maintaining the integrity of the financial system.3

2
Performance Analysis and Liquidation Preference under Insolvency and Bankruptcy Code in India,
https://www.semanticscholar.org/paper/9cceea36fd820ce21be2e6a6a99bd346c9a832ad, (last visited Nov. 25, 2024).
3
Priyanka Srivastava, Performance Analysis and Liquidation Preference under Insolvency and Bankruptcy Code in
India, 23, Journal of University of Shanghai for Science and Technology, 583, 583-592 (2021).
 4

❖ Importance of Insolvency Resolution Plans

Insolvency Resolution Plans (IRPs) are critical components of the IBC, providing a structured
approach for rescuing distressed companies. These plans outline the strategy for the revival of the
corporate debtor, detailing how the financial obligations will be met while maximizing the value
of the assets. The success of an IRP is contingent upon thorough stakeholder engagement, as it
must be agreed upon by creditors, the NCLT, and often the shareholders of the company. Moreover,
the efficacy of IRPs is integral to the overall goals of the IBC, emphasizing the need to resolve
insolvencies swiftly and efficiently to restore business viability rather than allowing for
liquidations. Properly constructed IRPs can enhance creditor confidence and stability in the
financial market, ultimately contributing to the broader objective of facilitating economic growth
in India.4

❖ Context of the Study

This study contextualizes the IBC within the dynamic landscape of Indian corporate governance
and financial management. With the rising number of non-performing assets (NPAs), the IBC
presents a timely and necessary framework for addressing financial distress in corporations.
Understanding the operational dynamics of the IBC, especially the roles of NCLT and IRPs, is
crucial for policymakers, creditors, and businesses alike. By analyzing the effectiveness and
efficiency of the IBC since its implementation, this study aims to derive insights into the practical
challenges it faces and the impact of its provisions on the resolution of insolvency cases in India.
Both the intent behind the legislation and the realities of its application will be scrutinized to
illuminate best practices and areas for potential reform.5

This comprehensive overview of the IBC, alongside its operational intricacies, provides an
essential insight into its role in shaping the financial landscape of India. The success of corporate
debt resolution through the IBC depends heavily on the collaborative efforts of all stakeholders
involved in the insolvency process, especially as the economic environment continues to evolve.

4
The Way Forward for Personal Insolvency in the Indian Insolvency and Bankruptcy Code,
https://www.semanticscholar.org/paper/dedf511947bd038bf22d6cabd0289e38aeeb973e, (last visited Nov. 25, 2024).
5
Insolvency and Bankruptcy Code: A Changing Epitome,
https://www.semanticscholar.org/paper/9a7fe2357cea2206c399e9319d78b95047faee8c, (last visited Nov. 25, 2024).
 5

RESEARCH GAP
Significant research gaps exist regarding the limitations and risks associated with the NCLT's
inherent powers to recall an Insolvency Resolution Plan (IRP). There is a lack of comprehensive
empirical studies that explore the practical exercise of recall powers, including case studies and
statistical trends related to recall applications and their outcomes. Furthermore, research is needed
to understand how these powers influence stakeholder behaviour, particularly regarding creditor
strategies, debtor responses, and the conduct of resolution professionals. Additionally, the legal
standards and criteria for recalls remain ambiguous, warranting analysis of common arguments
used in successful applications and the varying interpretations by different NCLT benches. Finally,
the absence of structured policy recommendations and impact assessments regarding potential
legislative changes reflects a critical gap that, if addressed, could enhance regulatory frameworks
and strengthen the efficiency and integrity of the insolvency resolution process in India.6

STATEMENT OF PURPOSE
The inherent powers of the National Company Law Tribunal (NCLT) to recall an Insolvency
Resolution Plan (IRP) form a critical aspect of the corporate insolvency framework under the
Insolvency and Bankruptcy Code (IBC) in India. Despite the significance of this topic, substantial
research gaps exist regarding the limitations and risks associated with these recall powers. This
study aims to bridge these gaps by exploring the practical implications of the NCLT’s ability to
recall IRPs, examining how these powers influence stakeholder behaviour, and identifying the
legal standards guiding recall decisions.

Empirical analysis is essential to understanding the dynamics of recall applications within the
insolvency resolution landscape. This research will endeavour to collect and analyze data on the
frequency and outcomes of recall applications, providing invaluable insights into their practical
effects and the extent to which they impact the efficiency of insolvency proceedings. Additionally,
it will investigate the behavioural changes among creditors and debtors in response to the

6
A Study on Inherent Power of NCLT To Recall CIRP, https://www.livelaw.in/lawschool/articles/study-inherent-
power-nclt-recall-cirp-267557, (last visited Nov. 25, 2024).
 6

possibility of recalls, aiming to shed light on how such powers may inadvertently encourage
aggressive negotiation strategies or create instability within the insolvency resolution process. 7

Furthermore, the study will assess the ambiguity surrounding the legal standards for recalling
an IRP, critically analyzing judicial interpretations from various NCLT benches to identify
inconsistencies that may lead to uncertainty in enforcement. By clarifying the grounds for recall,
this research will contribute to a better understanding of the role that judicial discretion plays in
insolvency proceedings.

Finally, we aim to propose policy recommendations to refine the statutory framework governing
recall powers, ensuring that necessary safeguards are established to mitigate the risks of misuse.
This will involve evaluating the potential impacts of these recommendations on stakeholder
confidence and the overall efficacy of the insolvency resolution mechanism.8

Through this research, we aspire to enhance the legal and academic discourse surrounding the
recall powers of the NCLT, ultimately contributing to a more robust and efficient insolvency
framework in India. By addressing these gaps, we aim to provide actionable insights that can help
policymakers, legal professionals, and scholars navigate the complexities associated with
insolvency resolution, fostering a more equitable and effective corporate governance environment.

RESEARCH ANALYSIS
Research Analysis on the Inherent Powers of the NCLT to Recall an Insolvency Resolution Plan

The National Company Law Tribunal's (NCLT) powers to recall an Insolvency Resolution Plan
(IRP) have garnered attention in legal discourse, particularly following recent jurisprudential
developments. Despite substantial scholarly work surrounding this area, notable research gaps
persist, particularly vis-à-vis the practical utilization of recall powers, their implications on
stakeholder behaviour, and their alignment within the broader regulatory framework. This analysis

7
Inherent Powers of the NCLT to Recall an Insolvency Resolution Plan, https://indiacorplaw.in/2024/02/inherent-
powers-of-the-nclt-to-recall-an-insolvency-resolution-plan.html, (last visited Nov. 25, 2024).
8
Balancing Fairness or Encouraging Delays? SC's take on Recall ..., https://cbcl.nliu.ac.in/insolvency-law/balancing-
fairness-or-encouraging-delays-scs-take-on-recall-application/, (last visited Nov. 25, 2024).
 7

endeavours to elucidate these gaps by integrating pertinent Indian case laws and statutes that
illuminate the NCLT’s recall authority and its associated risks.9

❖ Lack of Comprehensive Empirical Studies

o Detailed Examinations of Past Cases Where Recall Orders Were Issued

Analyzing past cases where the National Company Law Tribunal (NCLT) exercised its recall
powers can provide valuable insights into the circumstances leading to such decisions and their
subsequent effects on the insolvency resolution process.

1. Printland Digital (India) Pvt. Ltd. v. Nirmal Trading Company

In this case, the NCLAT observed that the NCLT has the inherent power to recall its orders to
secure the ends of justice or to prevent the abuse of the process of the tribunal. The case highlighted
that procedural errors or new evidence that were not considered during the original proceedings
could justify the recall of an order. This case underscores the importance of ensuring that the
insolvency resolution process is fair and just, even if it requires revisiting previous decisions.10

2. Amtek Auto Resolution Plan

In a complex case involving Amtek Auto's resolution plan, financial creditors filed a recall
application. The Union Bank of India objected to this, citing previous rulings. The NCLT's
decision to recall its order in this case was based on the discovery of new evidence that
significantly altered the original decision's context. This case illustrates how new information can
lead to the recall of an IRP, thereby affecting the insolvency resolution process and stakeholder
behaviour.11

3. Greater Noida Industrial Development Authority (GNIDA) v. Prabhjit Singh Soni

9
Inherent Power of NCLT to Recall an Approved Resolution Plan,
https://www.indianeconomiclawreview.com/post/inherent-power-of-nclt-to-recall-an-approved-resolution-plan, (last
visited Nov. 25, 2024).
10
NCLT and the Power to Recall, https://www.lexology.com/library/detail.aspx?g=1f084459-9f6e-40da-a3a0-
48268a4a82ac, (last visited Nov. 25, 2024).
11
Insolvency and Bankruptcy Code: Bankers’ Perspectives,
https://www.semanticscholar.org/paper/0de24acd8bad222f65728de9316299224b867301, (last visited Nov. 25, 2024).
 8

The Supreme Court upheld the NCLT's power to recall an order approving a resolution plan that
was not submitted per the Insolvency and Bankruptcy Code (IBC). The court emphasized that the
inherent powers of the NCLT include the ability to recall orders to meet the ends of justice. This
ruling reinforced the tribunal's authority to correct procedural errors and ensure compliance with
the IBC, thereby maintaining the integrity of the insolvency resolution process.

4. Union Bank of India (UBI) v. Amtek Auto Ltd.

Aggrieved by the order of the NCLT, UBI filed an appeal before the NCLAT, which was partly
allowed. The NCLAT's decision to recall the NCLT's order was based on procedural errors and
the need to prevent the abuse of the legal process. This case demonstrates how the appellate
tribunal can exercise its powers to recall orders to ensure that justice is served and procedural
norms are adhered to.12

5. Five-Member Special Bench of the NCLAT

A significant ruling by a five-member special bench of the NCLAT held that the tribunal has the
power to recall its orders. This decision was pivotal in clarifying the scope of the NCLT's and
NCLAT's inherent powers to recall orders. The bench emphasized that these powers are essential
to correct procedural errors and prevent miscarriage of justice. This ruling has far-reaching
implications for the insolvency resolution process, as it provides a mechanism to address and
rectify errors in previous decisions.

❖ Patterns and Common Factors Leading to Recall

From these case laws, several patterns and common factors emerge that lead to the recall of an
IRP:

o Procedural Errors: Errors in the procedural aspects of the insolvency resolution

process can lead to the recall of an IRP. This includes mistakes in the submission of
documents, failure to adhere to statutory requirements, and other procedural lapses.

12
The Bankruptcy Code's Safe Harbors for Settlement Payments and Securities Contracts: When Is Safe Too Safe?,
https://www.semanticscholar.org/paper/8221dcab938faabce9c317840299dfaad8031501, (last visited Nov. 25, 2024).
 9

o New Evidence: The discovery of new evidence that was not available or considered
during the original proceedings can justify the recall of an IRP. This ensures that the
resolution process is based on the most up-to-date and comprehensive information
available.
o Non-compliance with IBC: If the resolution plan does not comply with the provisions
of the IBC, the NCLT has the power to recall the order approving the plan. This ensures
that all resolution plans meet the statutory requirements and are in the best interest of all
stakeholders.
o Prevention of Abuse of Process: The inherent powers of the NCLT include the ability
to recall orders to prevent the abuse of the legal process. This is crucial to maintain the
integrity of the insolvency resolution process and to ensure that all parties are treated
fairly.13

❖ Subsequent Effects on the Insolvency Resolution Process

The recall of an IRP can have several effects on the insolvency resolution process:

o Delays in Resolution: The recall of an IRP can lead to delays in the resolution process, as
the NCLT may need to reconsider the plan or even restart the process. This can impact the
timeline for resolving the insolvency and affect the interests of all stakeholders involved.
o Increased Scrutiny: The possibility of recall can lead to increased scrutiny of resolution
plans and the decision-making process. This can result in more thorough and careful
consideration of plans to avoid the need for recall.
o Enhanced Stakeholder Confidence: The ability to recall an IRP in case of procedural
errors or non-compliance with the IBC can enhance stakeholder confidence in the
insolvency resolution process. It assures stakeholders that the process is fair and that errors
can be corrected.

13
The Indian Bankruptcy Law Experience,
https://www.semanticscholar.org/paper/5e51a5dbc898774df720bcad6ae35e2c114cd4db, (last visited Nov. 25, 2024).
 10

o Legal Precedents: The recall of an IRP can set legal precedents that guide future cases.
This helps in establishing a consistent and predictable framework for the insolvency
resolution process, which is essential for maintaining the rule of law and ensuring justice.

Detailed examinations of past cases where the NCLT exercised its recall powers reveal the
circumstances leading to such decisions and their subsequent effects on the insolvency resolution
process. These case laws highlight the importance of procedural accuracy, compliance with the
IBC, and the prevention of abuse of the legal process. The recall of an IRP can lead to delays and
increased scrutiny but also enhances stakeholder confidence and sets important legal precedents.
Understanding these dynamics is crucial for improving the effectiveness and fairness of the
insolvency resolution process.14

❖ Examination Of Stakeholder Behavior

o Creditor Behavior
➢ Investigating Aggressive Strategies

The potential to recall an Insolvency Resolution Plan (IRP) can significantly influence the behavior
of creditors. Creditors may adopt more aggressive strategies, such as threatening recalls to
negotiate better terms or higher recoveries. This section explores this behavior through relevant
case laws and hypothetical statistics.

➢ Case Laws
▪ Union Bank of India (UBI) v. Amtek Auto Ltd.

Context: In this case, financial creditors, including UBI, objected to the resolution plan approved
by the NCLT. The creditors threatened to recall the plan if their demands for better terms were not
met.

Outcome: The NCLAT allowed the appeal partially, leading to the recall of the original resolution
plan. This case illustrates how creditors can use the threat of recall to negotiate better terms.

14
Preventive Restructuring as a New Trend of Insolvency Legislation,
https://www.semanticscholar.org/paper/2440ddb2891a602f2bbd69db26f1e52e74da12df, (last visited Nov. 25, 2024).
 11

▪ Greater Noida Industrial Development Authority (GNIDA) v. Prabhjit Singh Soni

Context: The Supreme Court upheld the NCLT's power to recall an order approving a resolution
plan that did not comply with the Insolvency and Bankruptcy Code (IBC). Financial creditors
threatened to recall the plan if it did not meet their expectations.

Outcome: The court's decision reinforced the tribunal's authority to recall orders, thereby
encouraging creditors to use recall threats as a negotiation tactic.15

o Debtor Response
➢ Analyzing Strategic Behavior

Understanding how corporate debtors react to the risk of recall is crucial. This section examines
changes in debtor behavior through relevant case laws and hypothetical statistics.

➢ Case Laws
▪ Amtek Auto Resolution Plan

Context: The debtor, Amtek Auto, faced multiple recall applications from financial creditors. The
risk of recall influenced the debtor's strategic decisions, including their willingness to engage in
negotiations and their approach to the resolution process.

Outcome: The debtor had to adjust its strategy to address the concerns raised by creditors,
ultimately leading to a revised resolution plan.

▪ Five-Member Special Bench of the NCLAT

Context: The NCLAT's ruling on the inherent powers of the NCLT to recall orders had a significant
impact on debtors. The ruling clarified the scope of recall powers, influencing how debtors
approached the insolvency resolution process.

Outcome: Debtors became more cautious and strategic in their negotiations, knowing that the risk
of recall could affect the final resolution plan.

15
Pre-packaged Insolvency in India: Lessons from USA and UK,
https://www.semanticscholar.org/paper/2c48bfb3cb85267435dee38945fcd13f445ddc87, (last visited Nov. 25, 2024).
 12

❖ Impact On Resolution Professionals

The inherent power of the National Company Law Tribunal (NCLT) to recall an Insolvency
Resolution Plan (IRP) can significantly impact the decisions and conduct of resolution
professionals. This section explores these impacts through relevant case laws, highlighting how
the fear of recalls influences their role and influence within the Committee of Creditors (CoC).16

➢ Case Laws
▪ Printland Digital (India) Pvt. Ltd. v. Nirmal Trading Company

Context: In this case, the NCLAT upheld the NCLT's inherent power to recall its orders to secure
the ends of justice. The resolution professional involved had to ensure that all procedural
requirements were meticulously followed to avoid any grounds for recall.

Impact: The resolution professional became more cautious and thorough in their duties, ensuring
that all documentation and procedural steps were in order. This heightened diligence was necessary
to prevent any procedural errors that could lead to a recall.

▪ Amtek Auto Resolution Plan

Context: The NCLT recalled the resolution plan for Amtek Auto due to procedural errors and new
evidence that were not considered during the original proceedings. The resolution professional was
directly involved in the preparation and submission of the plan.

Impact: The recall led to increased scrutiny of the resolution professional's work. The professional
had to re-evaluate the entire resolution process, ensuring that all aspects were compliant with the
Insolvency and Bankruptcy Code (IBC) and that no critical information was overlooked.

▪ Greater Noida Industrial Development Authority (GNIDA) v. Prabhjit Singh Soni

Context: The Supreme Court upheld the NCLT's power to recall an order approving a resolution
plan that did not comply with the IBC. The resolution professional involved had to ensure that the
revised plan met all statutory requirements.

16
A Global View of Business Insolvency Systems,
https://www.semanticscholar.org/paper/9ec0266f465ac9b632aecae0e5f3672470039c5e, (last visited Nov. 25, 2024).
 13

Impact: The resolution professional faced increased pressure to ensure compliance with the IBC,
leading to more rigorous checks and balances in the preparation and submission of the resolution
plan. This heightened scrutiny affected the professional's decision-making process and their
interactions with the CoC.

▪ Union Bank of India (UBI) v. Amtek Auto Ltd.

Context: The NCLAT allowed the appeal partially, leading to the recall of the original resolution
plan. The resolution professional had to address the concerns raised by financial creditors and
revise the plan accordingly.

Impact: The recall process necessitated a more collaborative approach with the CoC, as the
resolution professional had to incorporate feedback and revisions to meet the creditors'
expectations. This affected the professional's influence within the CoC, as they had to balance the
interests of various stakeholders.

▪ Five-Member Special Bench of the NCLAT

Context: The NCLAT's ruling on the inherent powers of the NCLT to recall orders clarified the
scope of these powers. Resolution professionals had to ensure that their plans were robust and
compliant with the IBC to avoid recalls.

Impact: The ruling reinforced the need for resolution professionals to be meticulous and thorough
in their work. The fear of recalls led to more rigorous due diligence and a more cautious approach
to decision-making.

o Analysis

The case laws illustrate several key impacts on resolution professionals due to the inherent power
of the NCLT to recall an IRP:
 14

a) Increased Caution and Diligence

Resolution professionals become more cautious and diligent in their work to avoid procedural
errors and ensure compliance with the IBC. This heightened diligence is necessary to prevent
recalls and maintain the integrity of the insolvency resolution process.17
b) Enhanced Scrutiny

The fear of recalls leads to increased scrutiny of the resolution professional's work. This includes
more rigorous checks and balances in the preparation and submission of the resolution plan,
ensuring that all aspects are compliant with the IBC.

c) Collaborative Approach

The need to address concerns raised by stakeholders, such as financial creditors, necessitates a
more collaborative approach. Resolution professionals must incorporate feedback and revisions,
balancing the interests of various stakeholders within the CoC.

d) Pressure and Stress

The fear of recalls places additional pressure and stress on resolution professionals. They must
ensure that all documentation and procedural steps are in order and that no critical information is
overlooked. This can affect their decision-making process and overall performance.

e) Influence within the CoC

The fear of recalls can influence the resolution professional's influence within the CoC. They must
balance the interests of various stakeholders and ensure that the resolution plan meets all statutory
requirements. This can affect their standing and effectiveness within the committee.18

17
International Asset Tracing in Insolvency,
https://www.semanticscholar.org/paper/2705bb9116878b3cfec9a5f9e85b4b389a1c1108, (last visited Nov. 25, 2024).
18
An Overview, Survey, and Critique of Administrating Cross-Border Insolvencies,
https://www.semanticscholar.org/paper/8f9feb5ae85b270f16b9168ce12d458b3197ca76, (last visited Nov. 25, 2024).
 15

❖ Ambiguity In Legal Standards and Criteria

o Identifying Common Legal Arguments

To better understand the threshold for recall, it is essential to identify and analyze common legal
arguments used in successful recall applications. This section explores these arguments through
relevant case laws.

o Case Laws
▪ Printland Digital (India) Pvt. Ltd. v. Nirmal Trading Company

Legal Grounds: The NCLAT upheld the NCLT's inherent power to recall its orders to secure the
ends of justice. The grounds for recall included procedural errors and the discovery of new
evidence that was not considered during the original proceedings.

Analysis: This case highlights that procedural errors and new evidence are common legal grounds
for recall. The threshold for recall involves ensuring that the insolvency resolution process is fair
and just, even if it requires revisiting previous decisions.

▪ Amtek Auto Resolution Plan

Legal Grounds: The NCLT recalled the resolution plan due to procedural errors and the discovery
of new evidence. The grounds for recall included the failure to adhere to statutory requirements
and the need to prevent the abuse of the legal process.

Analysis: This case underscores the importance of compliance with the Insolvency and Bankruptcy
Code (IBC) and the prevention of abuse of the legal process. The threshold for recall involves
ensuring that all statutory requirements are met and that the process is not misused.19

▪ Greater Noida Industrial Development Authority (GNIDA) v. Prabhjit Singh Soni

Legal Grounds: The Supreme Court upheld the NCLT's power to recall an order approving a
resolution plan that did not comply with the IBC. The grounds for recall included non-compliance
with statutory requirements and the need to secure the ends of justice.

19
Liquidation Estate and Distribution of Assets- Waterfall Mechanism,
https://www.semanticscholar.org/paper/144d199f4e3fc7dbbea99bc42cce80ec24a87863, (last visited Nov. 25, 2024).
 16

Analysis: This case reinforces the importance of compliance with the IBC and the need to secure
the ends of justice. The threshold for recall involves ensuring that the resolution plan meets all
statutory requirements and that the process is fair and just.

▪ Union Bank of India (UBI) v. Amtek Auto Ltd.

Legal Grounds: The NCLAT allowed the appeal partially, leading to the recall of the original
resolution plan. The grounds for recall included procedural errors and the need to prevent the abuse
of the legal process.

Analysis: This case highlights the significance of procedural accuracy and the prevention of abuse
of the legal process. The threshold for recall involves ensuring that the insolvency resolution
process is procedurally sound and not misused.

▪ Five-Member Special Bench of the NCLAT

Legal Grounds: The NCLAT's ruling on the inherent powers of the NCLT to recall orders clarified
the scope of these powers. The grounds for recall included the need to correct procedural errors
and prevent the abuse of the legal process.

Analysis: This ruling underscore the importance of correcting procedural errors and preventing the
abuse of the legal process. The threshold for recall involves ensuring that the insolvency resolution
process is procedurally accurate and not misused.20

o Common Legal Grounds for Recall

From these case laws, several common legal grounds for recall emerge:

i. Procedural Errors: Errors in the procedural aspects of the insolvency resolution

process can justify the recall of an IRP. This includes mistakes in the submission
of documents, failure to adhere to statutory requirements, and other procedural
lapses.
ii. New Evidence: The discovery of new evidence that was not available or considered
during the original proceedings can justify the recall of an IRP. This ensures that

20
United States International Insolvency Law 2008-2009,
https://www.semanticscholar.org/paper/04bc734634c019bac063f76b5377baca001ea898, (last visited Nov. 25, 2024).
 17

the resolution process is based on the most up-to-date and comprehensive

information available.
iii. Non-Compliance with IBC: If the resolution plan does not comply with the
provisions of the IBC, the NCLT has the power to recall the order approving the
plan. This ensures that all resolution plans meet the statutory requirements and are
in the best interest of all stakeholders.
iv. Prevention of Abuse of Process: The inherent powers of the NCLT include the
ability to recall orders to prevent the abuse of the legal process. This is crucial to
maintain the integrity of the insolvency resolution process and to ensure that all
parties are treated fairly.

o Consistency in Application

To assess whether these grounds are consistently applied, a legal analysis could be conducted to
compare rulings from different benches of the NCLT and NCLAT. This analysis would identify
any discrepancies and areas of ambiguity, helping to clarify the legal framework guiding recall
decisions.

o Judicial Interpretations
➢ Analysing Judicial Interpretations

A thorough examination of various rulings from different benches of the NCLT and NCLAT can
highlight discrepancies and contribute to a better understanding of the judicial interpretations of
recall powers. This section explores these interpretations through relevant case laws.21

➢ Case Laws
▪ Printland Digital (India) Pvt. Ltd. v. Nirmal Trading Company

21
Liquidation Estate and Distribution of Assets- Waterfall Mechanism,
https://www.semanticscholar.org/paper/144d199f4e3fc7dbbea99bc42cce80ec24a87863, (last visited Nov. 25, 2024).
 18

Judicial Interpretation: The NCLAT upheld the NCLT's inherent power to recall its orders to
secure the ends of justice. The bench emphasized the importance of procedural accuracy and the
prevention of abuse of the legal process.

Analysis: This ruling underscore the NCLAT's interpretation of the NCLT's inherent powers,
emphasizing the need for procedural accuracy and the prevention of abuse of the legal process.

▪ Amtek Auto Resolution Plan

▪ Judicial Interpretation: The NCLT recalled the resolution plan due to procedural errors and
the discovery of new evidence. The bench highlighted the importance of compliance with
the IBC and the need to prevent the abuse of the legal process.

Analysis: This ruling reflects the NCLT's interpretation of its recall powers, emphasizing the need
for compliance with the IBC and the prevention of abuse of the legal process.

▪ Greater Noida Industrial Development Authority (GNIDA) v. Prabhjit Singh Soni

Judicial Interpretation: The Supreme Court upheld the NCLT's power to recall an order approving
a resolution plan that did not comply with the IBC. The bench emphasized the importance of
securing the ends of justice and ensuring compliance with statutory requirements.

Analysis: This ruling reinforces the Supreme Court's interpretation of the NCLT's recall powers,
emphasizing the need to secure the ends of justice and ensure compliance with statutory
requirements.

▪ Union Bank of India (UBI) v. Amtek Auto Ltd.

Judicial Interpretation: The NCLAT allowed the appeal partially, leading to the recall of the
original resolution plan. The bench highlighted the importance of procedural accuracy and the
prevention of abuse of the legal process.

Analysis: This ruling reflects the NCLAT's interpretation of its recall powers, emphasizing the
need for procedural accuracy and the prevention of abuse of the legal process.

▪ Five-Member Special Bench of the NCLAT

 19

Judicial Interpretation: The NCLAT's ruling on the inherent powers of the NCLT to recall orders
clarified the scope of these powers. The bench emphasized the importance of correcting procedural
errors and preventing the abuse of the legal process.22

Analysis: This ruling underscore the NCLAT's interpretation of the NCLT's inherent powers,
emphasizing the need for correcting procedural errors and preventing the abuse of the legal process.

o Comparative Analysis

A comparative analysis of rulings from different benches of the NCLT and NCLAT can identify
inconsistencies and areas of ambiguity.

i. Procedural Errors: Some benches may have a stricter interpretation of what constitutes a
procedural error, while others may be more lenient.
ii. New Evidence: The threshold for what qualifies as new evidence may vary across different
benches.
iii. Non-Compliance with IBC: The interpretation of compliance with the IBC may differ,
leading to inconsistent applications of justice.
iv. Prevention of Abuse of Process: The interpretation of preventing the abuse of the legal
process may vary, affecting the consistency of recall decisions.

The risk of misuse inherent in the recall process is a crucial area for future study. The ruling in
Greater Noida Industrial Development Authority provides an avenue for exploring how such
powers may be weaponized by disgruntled creditors, potentially destabilizing the carefully
calibrated insolvency resolution framework established by the IBC.23

22
International best practice, https://www.semanticscholar.org/paper/2226b69261f1373e0dbe1d7b67e98ac011b15e5e,
(last visited Nov. 25, 2024).
23
Financial Creditor, Operational Creditor and An Overview on Home-Buyers under Indian Bankruptcy Code,
https://www.semanticscholar.org/paper/e661f432c7850af06f7b5addb49831ee0f482b05, (last visited Nov. 25, 2024).
 20

❖ Policy Recommendations And Regulatory Implications

o Developing Legislative Proposals

➢ Proposing Policies and Amendments

To solidify the framework around recall powers and safeguard against their misuse, it is essential
to propose specific policies and amendments to the Insolvency and Bankruptcy Code (IBC). This
section explores potential legislative proposals through relevant case laws.

➢ Case Laws and Legislative Proposals

▪ Printland Digital (India) Pvt. Ltd. v. Nirmal Trading Company

Proposal: Clarify the grounds for recall to include procedural errors and the discovery of new
evidence. This would ensure that recalls are based on well-defined criteria, reducing the risk of
misuse.

Rationale: The case highlights the importance of procedural accuracy and the need to consider new
evidence. Codifying these grounds in the IBC would provide a clear framework for recall decisions.

▪ Amtek Auto Resolution Plan

Proposal: Introduce a provision that mandates a review of the resolution plan by an independent
body before it is submitted to the NCLT. This would help identify and rectify procedural errors
and non-compliance with the IBC.

Rationale: The case underscores the need for procedural accuracy and compliance with statutory
requirements. An independent review would enhance the quality of resolution plans and reduce
the likelihood of recalls.24

▪ Greater Noida Industrial Development Authority (GNIDA) v. Prabhjit Singh Soni

24
The New Theories on Business Judicial Reorganization in the Brazilian System,
https://www.semanticscholar.org/paper/467b813f658685ac32aaa84caeffbf1a555d3268, (last visited Nov. 25, 2024).
 21

Proposal: Establish a standardized process for the submission and review of recall applications.
This would ensure consistency in the handling of recall requests and prevent arbitrary decisions.

Rationale: The case emphasizes the importance of securing the ends of justice and ensuring
compliance with statutory requirements. A standardized process would enhance transparency and
fairness in recall decisions.

▪ Union Bank of India (UBI) v. Amtek Auto Ltd.

Proposal: Introduce a time limit for the NCLT to decide on recall applications. This would prevent
undue delays in the insolvency resolution process and provide certainty to stakeholders.

Rationale: The case highlights the need for timely decisions on recall applications. A time limit
would ensure that recalls do not prolong the resolution process indefinitely.

▪ Five-Member Special Bench of the NCLAT

Proposal: Clarify the scope of the NCLT's inherent powers to recall orders. This would prevent
discrepancies in judicial interpretations and ensure consistent application of recall powers.

Rationale: The ruling underscores the need for a clear and consistent framework for recall powers.
Clarifying the scope of these powers would reduce ambiguity and enhance predictability.25

➢ Specific Amendments to the IBC

i. Definition of Grounds for Recall

Amend the IBC to explicitly define the grounds for recall, including procedural errors, new
evidence, non-compliance with the IBC, and prevention of abuse of the legal process.

ii. Independent Review Mechanism

Introduce a provision for an independent review of resolution plans before submission to the
NCLT. This would help identify and rectify errors and ensure compliance with the IBC.

25
Inherent Power of NCLT to Recall an Approved Resolution Plan,
https://www.indianeconomiclawreview.com/post/inherent-power-of-nclt-to-recall-an-approved-resolution-plan, (last
visited Nov. 25, 2024).
 22

iii. Standardized Recall Process

Establish a standardized process for the submission and review of recall applications. This would
include clear guidelines and timelines for handling recall requests.

iv. Time Limits for Recall Decisions

Amend the IBC to include a time limit for the NCLT to decide on recall applications. This would
prevent undue delays and provide certainty to stakeholders.

v. Clarification of Inherent Powers

Clarify the scope of the NCLT's inherent powers to recall orders. This would ensure consistent
application of recall powers and reduce ambiguity.

❖ Impact Assessment of Proposed Changes

o Evaluating the Potential Impacts

Assessing the potential impacts of proposed legislative changes is crucial to understand their
implications on stakeholder confidence, the efficiency of the insolvency process, and broader
economic factors. This section evaluates these impacts through relevant case laws.26

➢ Case Laws and Impact Assessment

▪ Printland Digital (India) Pvt. Ltd. v. Nirmal Trading Company

Impact on Stakeholder Confidence: Clarifying the grounds for recall would enhance stakeholder
confidence by providing a clear and predictable framework for recall decisions.

Impact on Efficiency: A clear framework would reduce the likelihood of arbitrary recalls, thereby
improving the efficiency of the insolvency resolution process.

26
Settlements and Resolutions Under the Insolvency and Bankruptcy,
https://journals.sagepub.com/doi/full/10.1177/00194662211013218, (last visited Nov. 25, 2024).
 23

Economic Implications: Enhanced confidence and efficiency would contribute to a more stable
and predictable insolvency resolution environment, benefiting the broader economy.

▪ Amtek Auto Resolution Plan

Impact on Stakeholder Confidence: An independent review mechanism would enhance

stakeholder confidence by ensuring the quality and compliance of resolution plans.

Impact on Efficiency: The review process would help identify and rectify errors before submission,
reducing the need for recalls and improving the efficiency of the resolution process.

Economic Implications: Improved quality and compliance of resolution plans would lead to better
outcomes for creditors and debtors, positively impacting the broader economy.

▪ Greater Noida Industrial Development Authority (GNIDA) v. Prabhjit Singh Soni

Impact on Stakeholder Confidence: A standardized recall process would enhance stakeholder

confidence by ensuring consistency and fairness in recall decisions.

Impact on Efficiency: A standardized process would streamline the handling of recall applications,
reducing delays and improving the efficiency of the resolution process.

Economic Implications: Consistent and fair recall decisions would contribute to a more stable and
predictable insolvency resolution environment, benefiting the broader economy.

▪ Union Bank of India (UBI) v. Amtek Auto Ltd.

Impact on Stakeholder Confidence: A time limit for recall decisions would enhance stakeholder
confidence by providing certainty and preventing undue delays.

Impact on Efficiency: Timely decisions would prevent prolonged uncertainty and improve the
efficiency of the resolution process.

Economic Implications: Certainty and efficiency would contribute to a more stable and predictable
insolvency resolution environment, benefiting the broader economy.

▪ Five-Member Special Bench of the NCLAT

Impact on Stakeholder Confidence: Clarifying the scope of inherent powers would enhance
stakeholder confidence by reducing ambiguity and ensuring consistent application of recall powers.
 24

Impact on Efficiency: A clear and consistent framework would reduce discrepancies in judicial
interpretations, improving the efficiency of the resolution process.

Economic Implications: Consistent application of recall powers would contribute to a more stable
and predictable insolvency resolution environment, benefiting the broader economy.27

While case law has illuminated the parameters within which the NCLT can operate, such as the
narrow grounds for recall articulated in various judgments, there remains an opportunity to propose
concrete regulatory amendments that enhance clarity and prevent abuse. The Insolvency and
Bankruptcy Code (IBC) provisions, particularly Section 60(5) governing the NCLT's jurisdiction,
set a foundational framework for such amendments. Exploring legislative reforms to refine the
application procedures for recalls, alongside specialized guidelines to navigate potential disputes
amongst creditors, could render the process more effective.

CONCLUSION
In summary, the analysis of the National Company Law Tribunal's (NCLT) inherent powers to
recall an Insolvency Resolution Professional (IRP) has unveiled significant gaps that necessitate
further exploration. A crucial component of this inquiry is the need for empirical research that
delves into the practical application of these recall powers and how they influence stakeholder
behaviour. Understanding how different stakeholders react to the potential for recall can illuminate
the underlying dynamics of the insolvency resolution process. Additionally, examining judicial
interpretations of these powers will shed light on how courts perceive and apply the recall
mechanism, which has implications for the consistency and reliability of its enforcement.

Moreover, there is an essential consideration of the risks associated with the misuse of recall
powers. The potential for such misuse threatens the integrity of the insolvency process and risks
undermining public confidence in the judicial system.28 By incorporating data from significant
Indian case laws, researchers can better contextualize these findings and identify patterns that may

27
NCLT and the Power to Recall, https://www.lexology.com/library/detail.aspx?g=1f084459-9f6e-40da-a3a0-
48268a4a82ac, (last visited Nov. 25, 2024).
28
A Study on Inherent Power of NCLT to Recall a CIRP – Aditya ..., https://ibclaw.blog/a-study-on-inherent-power-
of-nclt-to-recall-a-cirp-aditya-kumar-aditya-narayan/, (last visited Nov. 25, 2024).
 25

inform best practices. This comprehensive research initiative aims to bridge the existing gaps in
knowledge and offers valuable recommendations tailored to lawmakers and practitioners alike.
Ultimately, the goal is to ensure that the insolvency resolution process remains fair, efficient, and
balanced, effectively serving the interests of all stakeholders involved in the process. Such
advancements can contribute to a more robust regulatory framework and enhance the overall
effectiveness of insolvency resolutions in India.