NCLAT Chennai Upholds NCLT's Decision to Dismiss Recall Application by RCC E-Construct Pvt. Ltd.

Tribunal affirms that Rule 11 of NCLT Rules does not permit review of orders passed on merits, limiting recall to procedural errors and fraud.

In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) Chennai has upheld the decision of the National Company Law Tribunal (NCLT) Chennai, dismissing the recall application filed by RCC E-Construct Pvt. Ltd. The appeal challenged an order dated 24 March 2025, which was rendered by the NCLT Division Bench-1, Chennai. The order directed RCC E-Construct, the Successful Resolution Applicant, to act according to the approved Resolution Plan concerning the sale of units developed by P Dot G Constructions Pvt Ltd.

The appellant sought to recall this order, invoking Rule 11 of the NCLT Rules, 2016, which provides inherent powers to the Tribunal to pass necessary orders to meet the ends of justice or prevent abuse of process. However, the tribunal emphasized that such powers do not extend to revisiting or reviewing orders passed on merits, especially when the parties have actively participated in the proceedings.

The NCLAT clarified that recall applications are permissible only under limited circumstances such as procedural errors, fraud, or lack of jurisdiction. The appellant argued that the order caused grave injustice and that their replies were not considered, but the tribunal held that these grounds effectively sought a review of the order, which is outside the scope of Rule 11.

Highlighting the distinction between recall and review, the tribunal cited several judgments, including the Supreme Court ruling in Greater Noida Industrial Development Authority v. Prabhjit Singh Soni and others, which differentiate procedural review from review on merits. The inherent powers under Rule 11 are reserved for correcting procedural defects and preventing abuse of process, not for re-examining the merits of an order.

The NCLAT's decision reaffirms the limited scope of inherent powers under Rule 11, underscoring the importance of procedural integrity and adherence to statutory provisions in insolvency proceedings.

Bottom Line:

Rule 11 of the NCLT Rules, 2016 provides inherent powers to the Tribunal for meeting the ends of justice or preventing abuse of process but does not include the power to review an order passed on merits.

Statutory provision(s): Rule 11 of the NCLT Rules, 2016; Insolvency and Bankruptcy Code, 2016 Section 60(5)(c); Cases cited include Grindlays Bank Ltd. v. Central Govt. Industrial Tribunal, Greater Noida Industrial Development Authority v. Prabhjit Singh Soni, and others.

RCC E-Construct Pvt. Ltd. v. Mr. J. Ramkumar, (NCLAT)(Chennai) : Law Finder Doc Id # 2797554