How to Apply for Recall of an Admission Order Under the Insolvency and Bankruptcy Code
An application for recall of an admission order is not an appeal and is not a review, and the three are refused for different reasons. This guide sets out how to apply for recall of an order admitting a company into the corporate insolvency resolution process, in the order the steps arise, beginning with the choice of route that decides everything after it.
Step 1: Choose Between Recall, Review and Appeal Before Drafting
The National Company Law Tribunal has no power to review its own order. It does have an inherent power to recall one. Rule 11 of the National Company Law Tribunal Rules, 2016 provides that nothing in the rules shall be deemed to limit or otherwise affect the inherent powers of the Tribunal to make such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal.
The separate route is the appeal. Section 61(1) of the Insolvency and Bankruptcy Code, 2016 gives any person aggrieved by an order of the Adjudicating Authority an appeal to the National Company Law Appellate Tribunal, and Section 61(2) requires it within thirty days, with a proviso permitting a further period of not more than fifteen days on sufficient cause being shown. Where the defect is discovered inside that window, file the appeal as well. The inherent power is the answer to a case the appellate clock has already closed, not a substitute for an appeal that is still available.
Step 2: Identify the Ground, and Keep It Off the Merits
In Union Bank of India v. Dinkar T. Venkatasubramanian a five member bench of the National Company Law Appellate Tribunal held that there is no power of review but that an application to recall may be entertained in exercise of the inherent jurisdiction. It identified two grounds. The first is procedural error, for example where a necessary party was not served or was not before the tribunal when a judgment adverse to it was delivered. The second is fraud practised on the tribunal in obtaining the order.
Draft to one of those two. An application that argues the admission was wrong on the material is a review, whatever it is called, and the label will not save it. An application that says the tribunal was not told something it was entitled to be told, or was not given the parties it needed, is a recall.
Step 3: Work Out Why the Admission Enquiry Did Not Catch It
The admission thresholds are narrow, and explaining that narrowness is part of the application. Under Section 7(5) of the Code a financial creditor's application is admitted where the Adjudicating Authority is satisfied that a default has occurred, the application is complete and no disciplinary proceeding is pending against the proposed resolution professional. Under Section 9(5) an operational creditor's application is admitted where the application is complete, the debt is unpaid, the invoice or demand notice was delivered, and no notice of dispute has been received or record of dispute exists. Both contemplate an order within fourteen days of receipt.
That is the answer to the objection that the tribunal has already considered the matter. It considered default, completeness and the absence of a dispute notice. It did not consider whether the applicant and the company were acting together, because neither section asks it to.
Step 4: Particularise the Fraud or the Collusion
Fraud on a tribunal is pleaded, not asserted. The application should set out who approached whom and when, what was placed before the tribunal, what was withheld, and what the tribunal would have done had it known. Where the allegation is collusion between the applicant creditor and the company, the documents that carry it are usually the ledgers, the demand notice and its service, and the timing of the default relied on.
Attach the material rather than describing it. A recall founded on inference competes with an order regular on its face, and the tribunal will not revisit its own satisfaction on argument alone.
Step 5: Address What Happens to the Process, Not Only to the Order
This is the step most applications leave out. Once a petition is admitted the proceedings are no longer confined to the original applicant and the company: they operate in rem, and the creditors of the corporate debtor become stakeholders. Setting aside the admission does not automatically unwind what followed, and a tribunal asked only to set it aside may do that and nothing else.
So the prayer should deal with the consequences: whether the resolution process is to continue, what becomes of the claims already admitted, the position of the resolution professional, and who bears the costs incurred. Section 60(5) of the Code gives the jurisdiction to deal with them, extending to any application or proceeding by or against the corporate debtor, any claim by or against it, and any question of priorities or of law or facts arising out of or in relation to the insolvency resolution or liquidation proceedings.
Step 6: Run the Penal Application Alongside
Section 65 of the Code is the penal provision and it does different work from the recall. Sub-section (1) applies where a person initiates the insolvency resolution process or liquidation proceedings fraudulently or with malicious intent for any purpose other than the resolution of insolvency or liquidation, and permits a penalty of not less than one lakh rupees and not more than one crore rupees. Sub-section (2) covers voluntary liquidation initiated with the intent to defraud any person, and sub-section (3) covers a pre-packaged insolvency resolution process so initiated.
The value of running it with the recall is that it obliges the tribunal to make findings on intent, and those findings are the material the recall needs. The penalty itself is secondary. What the application must not do is treat Section 65 as the source of the power to undo the admission, because it is not.
Step 7: Distinguish the Consensual Exit
Where the real objective is to end the process rather than to establish a fraud, the consensual route is shorter. Section 12A permits the Adjudicating Authority to allow withdrawal of an application already admitted, on an application made by the applicant with the approval of ninety per cent of the voting share of the committee of creditors.
The reason it is no answer in a collusion case is the same reason the fraud succeeded: the creditors whose approval is required may be the people the arrangement was built to serve. Check the composition of the committee before choosing the route.
Common Pitfalls to Avoid
Pleading the merits of the admission: The tribunal has no power of review. An application that re-argues default or completeness is refused on that ground alone.
Relying on the inherent power when an appeal is still available: Section 61(2) gives thirty days and a further fifteen on sufficient cause. Inside that window the appeal is the primary route and should be filed.
Asking only for the order to be set aside: The process continues unless the tribunal is asked to deal with it. Consequential directions belong in the same prayer.
Treating Section 65 as the source of the power: It imposes a penalty. The order unwinding the admission comes from the inherent power to prevent abuse of process.
Ignoring the stakeholders who joined after admission: Creditors and allottees who filed claims in good faith did nothing wrong, and sweeping their claims away with the fraud invites opposition from the people whose support would help.
Delaying because the power has no limitation period: The longer the process has run, the more there is to unwind and the less willing a tribunal will be to unwind it.
Key Statutory Provisions
Section 7 of the Insolvency and Bankruptcy Code, 2016: Initiation by a financial creditor, admitted on default, completeness and the absence of a pending disciplinary proceeding.
Section 9 of the Insolvency and Bankruptcy Code, 2016: Initiation by an operational creditor, admitted where the debt is unpaid, the demand notice was delivered and no dispute is recorded.
Section 12A of the Insolvency and Bankruptcy Code, 2016: Withdrawal of an admitted application on an application by the applicant with the approval of ninety per cent of the voting share of the committee of creditors.
Section 60 of the Insolvency and Bankruptcy Code, 2016: Jurisdiction of the Adjudicating Authority over any proceeding by or against the corporate debtor and any question arising in relation to it.
Section 61 of the Insolvency and Bankruptcy Code, 2016: Appeal to the Appellate Tribunal within thirty days, with a further period of not more than fifteen days on sufficient cause being shown.
Section 65 of the Insolvency and Bankruptcy Code, 2016: Penalty of not less than one lakh rupees and not more than one crore rupees for fraudulent or malicious initiation of proceedings.
Rule 11 of the National Company Law Tribunal Rules, 2016: The inherent powers of the Tribunal to make such orders as may be necessary for meeting the ends of justice or to prevent abuse of its process.
Sources and References
Union Bank of India v. Dinkar T. Venkatasubramanian: grounds for recall
Insolvency and Bankruptcy Code, 2016, Sections 7, 9, 12A, 60, 61 and 65; National Company Law Tribunal Rules, 2016, Rule 11
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers should consult a qualified legal professional for advice specific to their circumstances.
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