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. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether the Adjudicating Authority was justified in rejecting the application seeking recall of the order forfeiting the corporate debtor's right to file a counter/reply, in light of the corporate debtor's prior participation and repeated non-filing despite time granted. 2. Whether the subsequent commencement of CIRP against the same corporate debtor in a parallel proceeding rendered the pending company petition and the recall application infructuous, warranting closure without adjudication on merits. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of rejecting recall of forfeiture of right to file counter/reply Legal framework (as discussed by the Court): The Court treated notice in judicial proceedings as serving the object of imparting knowledge and enabling effective opportunity to contest; where a party has knowledge and participates, the 'mode of service' becomes irrelevant for alleging denial of opportunity. Interpretation and reasoning: The Court relied on the order-sheets showing that the corporate debtor appeared through counsel/proxy on multiple dates, sought and obtained time to file a reply, yet failed to file any counter for nearly three months after time was granted. The Court found the recall grounds internally inconsistent: the corporate debtor simultaneously claimed lack of proper notice/knowledge while also admitting participation through counsel and seeking time to file reply. The explanation that counsel mis-noted the date was held insufficient to justify recall, particularly when the corporate debtor neither filed the counter nor sought extension even when the Tribunal indicated a 'last opportunity'. Conclusions: The Court held that the corporate debtor was not denied opportunity; rather, it failed to avail the opportunity granted. The forfeiture of the right to file reply/counter and refusal to recall it were upheld as not suffering from legal infirmity. Issue 2: Effect of commencement of CIRP in a parallel proceeding-whether the petition and recall application became infructuous Legal framework (as applied by the Court): The Court applied the principle that there cannot be multiple CIRP processes against the same corporate debtor; once CIRP has been initiated and an IRP appointed in another proceeding, further adjudication on merits in the parallel petition is unnecessary. Interpretation and reasoning: The Court noted that by the time the recall application was considered, CIRP had already been commenced in the parallel proceeding and an IRP appointed. Accordingly, deciding the recall application (and continuing the parallel company petition) would have no practical significance because the corporate debtor was already under CIRP. The Court accepted the Adjudicating Authority's reasoning that, since the main petition had become infructuous due to the existing CIRP, the recall application filed within that petition also became infructuous and unsustainable. Conclusions: The Court held that closing the parallel petition and rejecting the recall application as infructuous was legally justified, and the impugned rejection did not warrant appellate interference; the appeal was dismissed.