JSA successfully advised and represented Assets Care & Reconstruction Enterprises Limited (“ACRE”) and other members of the committee of creditors before the Hon’ble National Company Law Appellate Tribunal, Chennai (“NCLAT”), in dual applications seeking recall of the Hon’ble NCLAT’s order dated October 14, 2024, filed by Mantri Developers Private Limited (“Mantri”), a 49% shareholder of Tarun Realtors Private Limited (“Corporate Debtor”), and Mr. Baaskaran S., the ex-suspended director of the Corporate Debtor.
The said applications were filed for recall of the Hon’ble NCLAT’s order dated October 14, 2024 vide which an appeal filed by Baaskaran S., challenging the admission of the Corporate Debtor to corporate insolvency resolution process (“CIRP”), came to be dismissed owing to the resignation of Baaskaran S. from his post as a director of the Corporate Debtor. It was Mantri’s contention that on the date of dismissal of the appeal, it had filed an application for substitution in place of the ex-suspended director of the Corporate Debtor owing to his resignation, which was not numbered and listed on the date of hearing. Therefore, Mantri contended that owing to the dismissal of the appeal without considering its substitution application, principles of natural justice and due process were violated by the Hon’ble NCLAT.
Mantri further placed reliance on an order dated December 10, 2024 passed by the Hon’ble Karnataka High Court in a writ petition filed by it challenging the Hon’ble NCLAT’s order dated October 14, 2024, wherein the Hon’ble Karnataka High Court granted liberty to Mantri to file the said recall applications before the Hon’ble NCLAT.
Contending that the said recall applications were not maintainable and without merit, ACRE inter alia adduced the following submissions:-
- Mantri had no locus standi to pursue an appeal challenging the admission of the Corporate Debtor to CIRP in its capacity as a shareholder, as it is a mere investor and not an ‘aggrieved person’ under Section 61 of the Insolvency and Bankruptcy Code, 2016.
- The exceptional circumstances for recall of an order, as carved out in the judgment of the five-member bench the Hon’ble NCLAT, New Delhi in Union Bank of India Vs Mr. Dinkar T. Venkatasubramaniam & Ors., CA (AT) (Ins) No.729/2020, had not been made out in the present case as there existed no procedural lapses on the date of passing of the order in question.
- The recall application filed by Baaskaran S. cannot be maintainable owing to his resignation as a director of the Corporate Debtor, a fact which was not disclosed to the Hon’ble NCLAT on two separate occasions when the Hon’ble NCLAT was considering the said appeal.
By its judgment, the Hon’ble NCLAT was pleased to dismiss the recall applications filed by Mantri and Baaskaran S. and found that the conditions for recall of its order dated October 14, 2024, were not made out in the present case.
Furthermore, the Hon’ble NCLAT reaffirmed a shareholders’ lack of locus standi to challenge the admission of a corporate debtor to CIRP considering its status as a mere investor and opined that the same cannot be overcome / bypassed by seeking substitution in place of a suspended director considering the statutorily distinct roles.
ACRE was represented by Mr. P. S. Raman, Senior Advocate and Advocate General of Tamil Nadu. The remaining members of the committee of creditors were represented by Mr. Varghese Thomas.
Our Disputes Team comprised Lead Partner, Varghese Thomas, Partners, Aditi Deshpande and Srinivasan M.D., and Associates, Kabir Saund and Dharaniya Sri K.M
Aditi’s core area of practice is Dispute Resolution. She mainly practices in High Court(s), City Civil Court(s) various benches of the National Company Law Tribunal, the National Company Law Appellate Tribunal, and the Debt Recovery Tribunal.