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of <h1>NCLAT upholds rejection of recall prayer, confirms admission order remains intact under Section 12A IBC</h1> The NCLAT upheld the Adjudicating Authority's rejection of the appellant's prayer to recall the admission order dated 08.10.2021, finding no error in the ... Rejection of recall of the admission order - withdrawal of CIRP u/s 12A of the Insolvency and Bankruptcy Code (IBC) - exercise of inherent jurisdiction permitting withdrawal of CIRP proceedings against the CD. Rejection of recall of the admission order - HELD THAT:- The Adjudicating Authority did not commit any error in rejecting the prayer of the Appellant in IA No.2241 of 2024 for recall of the order dated 08.10.2021. The Adjudicating Authority has also in paragraph 26 has noted the order passed by this Appellate Tribunal and has rightly observed that no case has been made out for recall of the admission order dated 08.10.2021. There are no error in the order of the Adjudicating Authority rejecting the prayer of the Appellant to recall order dated 08.10.2021. The order of Adjudicating Authority to that extent is not interfered with. Withdrawal of CIRP u/s 12A of the Insolvency and Bankruptcy Code (IBC) - exercise of inherent jurisdiction permitting withdrawal of CIRP proceedings against the CD - HELD THAT:- With regard to withdrawal under Section 12A of the IBC, the law has been settled by Hon’ble Supreme Court in Glass Trust Company LLC v. BYJU Raveendran [2024 (10) TMI 1185 - SUPREME COURT (LB)]. The Hon’ble Supreme Court in the said judgment has noticed the procedure for withdrawal of the CIRP as provided in Section 12A and Regulation 30A of the CIRP Regulations - In the present case, Section 7 Application has been filed by Respondent Nos.6 to 9 and unless an Application is filed by the Applicant, who has initiated Section 7 Application, compliance of Section 12A read with Section 30A, cannot be made. The present is not a case where CIRP can be withdrawn under Section 12A read with Regulation 30A. There can be no quarrel to the proposition that in a case where Adjudicating Authority comes to the conclusion that ingredients of Section 65 are attracted, i.e. Application has been filed with fraudulent or/ with malicious intent for the purpose other than the resolution of the Corporate Debtor, the Adjudicating Authority may impose on such person penalty. In a case where finding is returned within the meaning of Section 65, the Adjudicating Authority can very well exercise its inherent jurisdiction to close such CIRP proceedings. While considering the exercise of inherent power by the Adjudicating Authority, it is already noticed the judgment of the Hon’ble Supreme Court in SBI vs. Consortium of Murari Lal Jalan & Florian Fritsch [2024 (1) TMI 1021 - SUPREME COURT], wherein the Hon’ble Supreme Court laid down that in an appropriate case, the Adjudicating Authority very well can exercise its inherent power. The order passed by Adjudicating Authority rejecting the prayer of the Appellant to recall order of admission is upheld - appeal disposed off. Issues Involved:1. Whether the Adjudicating Authority erred in rejecting the recall of the admission order dated 08.10.2021.2. Whether the Corporate Insolvency Resolution Process (CIRP) can be withdrawn under Section 12A of the Insolvency and Bankruptcy Code (IBC).3. Whether the Adjudicating Authority should exercise inherent jurisdiction to permit withdrawal of CIRP proceedings due to alleged fraudulent initiation.4. Consideration of pending applications alleging fraudulent initiation of CIRP.Detailed Analysis:1. Recall of the Admission Order:The appellant sought to recall the admission order dated 08.10.2021, which admitted the Corporate Debtor (CD) into insolvency. The Adjudicating Authority rejected this request, noting that the appellant had already challenged the order through an appeal process, which was dismissed both by the Appellate Tribunal and the Supreme Court. The Tribunal found no error in the Adjudicating Authority's decision, as the appellant had exhausted the appeal process without success. The dismissal of previous appeals reinforced the finality of the admission order, and the Tribunal upheld the Adjudicating Authority's decision to reject the recall request.2. Withdrawal under Section 12A of the IBC:The appellant argued for the withdrawal of CIRP under Section 12A, citing a settlement with financial creditors holding 92.17% of the Committee of Creditors (CoC) vote share. However, the Tribunal noted that withdrawal under Section 12A requires an application by the party who initiated the CIRP, which was not done by Respondent Nos.6 to 9. The Tribunal concluded that without compliance with Section 12A and Regulation 30A, withdrawal was not permissible. The procedure for withdrawal, as outlined by the Supreme Court, necessitates the applicant's initiation, which was absent in this case.3. Exercise of Inherent Jurisdiction:The appellant contended that the CIRP was initiated fraudulently and malafidely, warranting the Adjudicating Authority's inherent jurisdiction to permit withdrawal. The Tribunal recognized that inherent powers could be invoked in extraordinary circumstances to prevent the frustration of the IBC's objectives. However, it emphasized that such powers should be exercised judiciously and only when statutory procedures are insufficient. The Tribunal referenced the Supreme Court's stance that inherent powers should not bypass established procedures unless exceptional circumstances justify such a deviation.4. Pending Applications Alleging Fraudulent Initiation:The appellant had filed IA No.1238 of 2022, alleging that the initiation of CIRP was fraudulent and malicious, which was still pending before the Adjudicating Authority. The Tribunal noted that the Adjudicating Authority had issued a direction to stay voting on the Resolution Plan, indicating ongoing consideration of the allegations. The Tribunal highlighted the need for the Adjudicating Authority to address the pending application, which raised issues under Section 65 of the IBC concerning fraudulent initiation. The Tribunal refrained from expressing any opinion on the merits of the pending application but emphasized its importance in determining the legitimacy of the CIRP process.Conclusion:The Tribunal upheld the Adjudicating Authority's decision to reject the recall of the admission order and emphasized the procedural requirements for withdrawal under Section 12A. It acknowledged the potential for inherent jurisdiction in extraordinary cases but stressed the necessity of following statutory procedures. The Tribunal directed the Adjudicating Authority to prioritize the hearing and resolution of the pending application alleging fraudulent initiation before proceeding further in the CIRP process.
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