2026 (1) TMI 525 - AT - IBC

Recall bid over missed counter-filing after notice dispute-participation showed knowledge; rejection upheld and appeal dismissed

Whether rejection of a recall application was justified where the appellant alleged lack of notice and denial of opportunity to file a counter. The NCLAT ... Rejection of recall application - right of the Appellant to file Counter was forfeited - parallel proceedings initiated by an Operational Creditor - commencement of CIRP in respect of the CD and appointment of IRP - No Opportunity to contest the case - Concept of issuance of notice in any judicial proceeding - HELD THAT:- The concept of issuance of notice in any judicial proceeding is only to impart knowledge to the opposite party to the proceedings in order to give him an effective opportunity to contest the same. The mode of service becomes an irrelevant issue when the opposite party already has the knowledge and he appears and participates in the proceedings. Participation in the proceedings itself would suffice the object of issuance of a notice in a judicial proceedings. In the present case, when Appellant on several occasions has sought to file the reply / counter affidavit as per his own Recall Application, mode of service cannot be taken as a ground to raise the allegation of not being given opportunity to contest the case. The order of 31.01.2025 reflects that, there was a direction to issue notice and file compliance memo within 7 days. Subsequent order sheets reflect that, the Appellant’s representative was participating in the proceedings and was granted time to file counter and that the Appellant has not availed the same till the passing of the impugned order dated 13.06.2025, by which his opportunity to file the counter affidavit was closed. The Ld. Tribunal has not taken any action except for closing the opportunity. In the instant case, the Appellant himself has not availed the opportunity to contest the case, has instead taken the ground in the recall application that no notice was served upon him nor he was furnished with the records of the CP, which is contrary to the contents of the recall application itself as well as to the order sheet of the proceedings. Hence, the Application has been rightly rejected and as a consequence thereto, the instant Company Appeal, would too stand dismissed. Issues: (i) Whether the recall application IA (IBC)/179/2025 should be allowed on the ground of defective service and non-receipt of notice and/or counsel's inadvertence, and (ii) Whether CP(IB) No.1/7/AMR/2025 could be closed as infructuous and the recall application rejected because a parallel CIRP against the same Corporate Debtor had been commenced under Section 9 of the IBC, 2016.Issue (i): Whether the recall application should be allowed on grounds of defective service and non-receipt of notice and counsel's alleged misunderstanding of dates.Analysis: The Tribunal examined the record of appearances and orders in CP(IB) No.1/7/AMR/2025 showing that the Corporate Debtor's representative appeared on multiple dates, was granted time to file a reply, and did not avail the opportunities granted. The mode of service was held to be immaterial where the party had knowledge and participated in proceedings. The appellant's inconsistent assertions regarding presence and notice undermined the claim that denial of opportunity was due to defective service or counsel's mistake. The Tribunal considered the conduct and participation of the Corporate Debtor as negating the need to reopen the forfeiture of the right to file a reply.Conclusion: The recall application cannot be allowed on the ground of defective service or counsel's misunderstanding; the forfeiture of the right to file a reply was justified and the ground relied upon in IA (IBC)/179/2025 fails.Issue (ii): Whether the Company Petition CP(IB) No.1/7/AMR/2025 and the recall application became infructuous because a parallel CIRP had been initiated under Section 9 and an IRP appointed in CP(IB) No.34/9/AMR/2021.Analysis: The Tribunal noted that an order commencing CIRP and appointing an IRP in parallel proceedings had been passed before the recall application was decided. Once CIRP has been validly initiated against the same Corporate Debtor by appointment of an IRP under Section 9 of the IBC, there is no utility in adjudicating a separate company petition on merits that would result in multiple CIRP processes against the same entity. The Tribunal found no legal infirmity in treating the earlier petition as infructuous in view of the subsequent valid initiation of CIRP in the parallel matter.Conclusion: CP(IB) No.1/7/AMR/2025 and IA (IBC)/179/2025 were correctly held to be infructuous and the recall application was rightly rejected in view of the prior commencement of CIRP in the parallel proceedings.Final Conclusion: The appellate decision upholds that procedural forfeiture for non-availing of granted opportunities is not cured by asserted defective service when the party participated in proceedings, and that a later valid initiation of CIRP in parallel proceedings renders earlier pending company petition proceedings and related interlocutory applications infructuous, removing the necessity for further adjudication in the earlier petition.Ratio Decidendi: Where a Corporate Debtor has participated in proceedings yet fails to avail opportunities granted, asserted defects in mode of service do not justify reopening forfeiture of procedural rights; and once CIRP is validly commenced against the same Corporate Debtor by appointment of an IRP under Section 9 of the IBC, parallel company petition proceedings concerning the same insolvency cause become infructuous and may be closed.