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 held that notice is meant to impart knowledge enabling an effective contest; once a party has knowledge and participates, the mode of service becomes immaterial. The record showed the appellant's representative repeatedly appeared, obtained time to file a reply, and yet failed to do so until the adjudicating authority closed the right to file counter; the plea of non-service was contradicted by the appellant's own filings and the order sheets. The recall rejection was upheld, and the appeal was dismissed.

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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.

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