NCLAT upheld the denial of permission for a fresh Section 9 application, stressing that withdrawals required sufficient grounds and strict adherence to insolvency timelines.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench led by Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra and Mr. Arun Baroka (Technical Members) reviewed a bunch of two appeals and observed that under Order 23 Rule 1 of the CPC, permission to withdraw a petition with liberty to file a fresh application is contingent on demonstrating sufficient grounds, and the Adjudicating Authority has discretion to deny such permission, particularly in the context of maintaining timelines in insolvency proceedings.
In the recent NCLAT judgment concerning two appeals against the National Company Law Tribunal, Ahmedabad, the Appellant challenged the decisions that permitted the withdrawal of two Section 9 applications related to operational debt claims against M/s Greenstone Granite Pvt. Ltd. The Appellant claimed an operational debt amounting to ₹3,51,72,942 based on invoices from May 2021 to March 2022. Following the initial application, the Corporate Debtor raised allegations regarding the veracity of the evidence presented. The Adjudicating Authority allowed the withdrawal of the applications but did not grant the Appellant liberty to file fresh petitions, prompting the current appeals.
The Appellant contended that the refusal to grant liberty impeded their statutory rights, arguing that such permission should be automatically granted upon withdrawal. However, the Adjudicating Authority justified its decision by indicating that insufficient cause had been established for both withdrawal and for granting liberty, particularly given the prolonged duration of the proceedings. The NCLAT emphasized that under Order 23 Rule 1 of the CPC, permission for withdrawal with liberty to file a fresh application is contingent on the establishment of sufficient grounds, which was not demonstrated in this case.
In support of their position, the Appellant cited the Supreme Court’s judgment in Vimlesh Kumari Kulshrestha vs. Sambhajirao and Anr., where the Court ruled that no permission was required for filing a second suit that responded to a defendant's objections. However, the NCLAT found this reliance misplaced, noting that the circumstances of that case differed significantly, as the second suit was necessitated by the objections raised, unlike the current scenario.
The Appellant also referred to the Bombay High Court's ruling in Chandrakant Pandurang Shingade vs. Walchand Gulabchand Bora, which discussed the inseparability of permission for withdrawal and the right to file a fresh suit. The NCLAT distinguished this case by asserting that the Adjudicating Authority had properly denied permission based on the specific facts presented. Furthermore, the NCLAT referenced the Rajasthan High Court's judgment in Bhalesingh vs. Karnaram and Ors., reiterating that courts possess discretion to allow withdrawals only when sufficient grounds are demonstrated.
Ultimately, the NCLAT upheld the Adjudicating Authority’s refusal to permit a fresh application under Section 9 of the IBC, reinforcing the necessity of adhering to timelines within insolvency proceedings. The Tribunal dismissed both appeals while deleting the previously imposed cost of ₹50,000, allowing the Appellant the option to explore other legal remedies. This judgment underscores the importance of procedural rigour and the judiciary's role in maintaining the integrity of insolvency processes.
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