Shivangi Nawalkha & Shreshtha Saha Ray
Introduction
The power of the National Company Law Tribunal’s (“NCLT”) and National Company Law Appellate Tribunal’s (“NCLAT”) power to recall their own orders is a blunt yet indispensable judicial instrument. It operates as a corrective safeguard to prevent the miscarriage of justice, to nullify orders procured by fraud or collusion and to cure jurisdictional or procedural illegality that would otherwise contaminate insolvency adjudication. Properly exercised, recall preserves the institutional integrity of the insolvency framework.
In recent years, however this jurisdiction has increasingly been invoked for a markedly different purpose i.e. strategic delay. In multiple matters, parties have resorted to recall petitions even where the legally appropriate remedy lies in appeal. Such applications are structured to exhaust procedural avenues, reopen concluded findings and stall the implementation of resolution processes.
Parties who have missed statutory appellate timelines or who are unable to assail commercial decisions on merits, frequently invoke recall as a collateral strategy. The objective in such cases is not correction of illegality but postponement of finality.
Naturally, such petitions are deployed to impede implementation of approved resolution plans, extract renegotiated concessions or secure interim orders that effectively paralyses the resolution process.
Recent jurisprudence illustrates this dual character of recall jurisdiction. On one hand, tribunals have rightly exercised recall powers in cases where evidence of collusion, fraud or related party manipulation tainted the insolvency process as seen in Experts Realty Professionals v. Logix Infrastructure Pvt. Ltd. and Directorate of Enforcement v. Alchemist Ltd. On the other hand, the tribunals have increasingly confronted meritless recall applications designed primarily to prolong litigation and unsettle concluded determinations such as in Advantagesai Projects Pvt. Ltd. v. Akshay Techforge Pvt. Ltd. and RCC E-Construct Pvt. Ltd. v. J. Ramkumar.
To examine this tension between corrective justice and procedural finality, this article proceeds in two parts. Part I diagnoses the problem. It situates recall within the architecture if the IBC, traces its statutory foundations and analyses how the structural design of insolvency proceedings renders them particularly vulnerable to recall based delay. It further identifies recurring patterns through which recall petitions are deployed as strategic instruments rather than corrective safeguards. Part II turns to the jurisprudence and reform. It examines the circumstances in which tribunals have legitimately exercised recall, distinguishes them from impermissible attempts at disguised review and proposes procedural guardrails to preserve finality while retaining recall as a narrowly confined remedy for fraud, jurisdictional error, and grave procedural injustice.
The Narrow Exception to Finality under the IBC
The Insolvency and Bankruptcy Code, 2016 (“IBC”) is constructed around the principle of finality. Section 31(1) makes an order approving a resolution plan binding on all stakeholders while sections 61 and 62 confine challenges to narrowly defined and time-bound appellate remedies before the NCLAT and the Supreme Court. This structure reflects a deliberate legislative choice i.e. once a resolution plan is approved, it should attain certainty by limiting the avenues and timelines for challenge.
At the same time, NCLT and NCLAT possess narrow corrective powers to remedy manifest injustice. The tribunals derive the same from their inherent jurisdiction contained in Rule 11 of the NCLT Rules which allow them to recall an order in case of a fraud, jurisdictional defect or a grave procedural irregularity. In the case of Greater Noida Industrial Development Authority v. Prabhjit Singh Soni, the Supreme Court held that even in the absence of an express statutory provision, the NCLT possesses an inherent power to recall its own orders to secure the ends of justice and prevent abuse of process. This authority flows from Section 60(5)(c) of the IBC which confers broad jurisdiction on the adjudicating authority over questions of law or fact arising in insolvency proceedings.
Similarly, in the case of Budhia Swain v. Gopinath Deb, the supreme court confined recall to situations of fraud, collusion, want of jurisdiction or the absence of service on a necessary party. This was affirmed by a five judge NCLAT bench in the case of Union of India v. Dinkar T. Venkatasubramanian which opined that recall does not permit NCLT or NCLAT to re-open a case for substantive review or to correct mere errors of judgment in the case of an insolvency.
Accordingly, while tribunals may set aside orders in exceptional circumstances, a recall remains an exception to finality rather than a substitute for appeal or review and so IBC’s time bound rescue objective presumes that resolution orders will stand unless the narrow and established criteria for recall is convincingly met.
Structural Vulnerability of Insolvency Proceedings to Recall Abuse
The Institutional design of the IBC makes insolvency proceedings structurally vulnerable to the misuse of recall jurisdiction. This vulnerability arises from the interaction of three features intrinsic to the insolvency framework i.e. strict statutory timelines, the fragility of enterprise value during insolvency and the high commercial stakes associates with transfer of corporate control. It is important to note that insolvency adjudication is intended to produce swift and definitive outcomes and so even limited procedural reopening through recall applications can generate disproportionate disruption.
First, the IBC is premised on strict timelines and rapid value preservation. The Corporate Insolvency Resolution Process (“CIRP”) ordinarily capped at 330 days reflects legislative recognition that the value of the distressed assets is acutely time sensitive. Additionally, delay is not a neutral factor in insolvency proceedings. This is because as proceedings stagnate, machinery deteriorates, inventories deplete, customer relationships weaken and employee attrition accelerates collectively diminishing the enterprise’s going concern value. Because the economic value of the debtor deteriorates during prolonged proceedings, market participants especially lenders and resolution applicants factor this heightened risk into their valuation models which in turn leads to more conservative bidding and consequently steeper haircuts as timelines extend.
Second, the insolvency process becomes path-dependent once a resolution plan in approved. This is because approval triggers immediate commercial commitments, financing arrangements, regulatory approvals. As implementation begins, these interconnected steps rely on stability and predictability so even short-lived stays arising from recall proceedings can destabilize arrangements disrupting the valuation assumptions on which the plan was negotiated.
Such situations compel resolution professionals to pause execution as a precaution effectively freezing revival effort. Unlike ordinary civil litigation where delays may be manageable, uncertainty at this stage directly threatens the viability of negotiated rescue outcomes
Third, insolvency proceedings involve a redistribution of control and economic interests which creates a strong incentive for strategic litigation. Promoters displaced by resolution outcomes, unsuccessful resolution applicants and other affected stakeholders may view recall applications as an opportunity to delay implementation and reopen negotiations. Judicial authorities have recognized this danger, in RCC E-Construct v. J. Ramkumar, the NCLAT cautioned that recall jurisdiction cannot serve as a camouflage to substantive review or re-examination of issues already decided.
This structural fragility is particularly evident in sectors such as real estate where ongoing projects depend on uninterrupted implementation of resolution plans. Matters such asExperts Realty Professionals v. Logix Infrastructure Pvt. Ltd. andDirectorate of Enforcement through deputy director v. Alchemist Ltd. illustrate how recall petitions can leave otherwise viable projects suspended in prolonged regulatory and commercial limbo. This harms the stakeholders who rely on timely completion rather than continued litigation.
Further, the misuse of recall jurisdiction intersects with concerns regarding related party influence. Despite the fact that IBC contains safeguards limiting related party participation in the Committee of Creditors (“CoC”), recall applications may be deployed to indirectly reassert influence or derail outcomes adverse to insider interests. In Balkrishan Baldawa v. Agri-Tech (India) Ltd., the NCLAT cautioned that insolvency proceedings initiated or manipulated for extraneous objectives may attract scrutiny under section 65 of the IBC[1] which penalizes fraudulent or malicious use of insolvency process.
Taken together, these factors demonstrate that insolvency proceedings are uniquely susceptible to recall abuse not merely because recall exists as a procedural tool but because the structure of insolvency itself magnifies the consequences of procedural reopening.
Patterns of Recall Misuse
Recent insolvency litigation reveals recurring patterns in the manner recall jurisdiction is invoked beyond its legitimate scope. Although framed as corrective application, many recall petitions function in practice as instruments of delay and leverage.
- Tactical Recalls as Time Bar Circumvention – These petitions are typically filed after the statutory appeal period has expired often on flimsy grounds with the object of circumventing the third-day limitation under section 61 or where an appeal is no longer available. The parties then attempt to reset the clock by invoking recall and seeking interim protection. For example, in Greater Noida Industrial Development Authority v. Prabhjit Singh Soni, the Supreme Court noted that the authority had filed interlocutory applications several months after approval of the resolution plan effectively attempting to use recall as a substitute for a time-barred appeal.
- Overlapping Recall Petitions – Parties sometimes file multiple recall applications either sequentially or through allied stakeholders to generate a rolling series of interim orders. Even where individual petitions lack merit, their cumulative effect is delay.
- Nit-Picking Recall Applications – Recall is occasionally sought on the basis of minor procedural defects that do not affect the commercial or legal validity of the resolution plan such as alleged irregularities in CoC notices, formatting of claims or technical documentation issues. For example, in Sri Bhudia Swain v. Gopinath Deb and RCC E-Construct Pvt. Ltd. v. J. Ramkumar & Ors., the tribunals have repeatedly cautioned that recall jurisdiction cannot be used to re-open concluded proceedings on trivial or formalistic grounds particularly where parties had full opportunity to raise such objections earlier.
- Fraud as a Litigation Strategy – Vague or speculative allegations of fraud unsupported by contemporaneous evidence are often introduced solely to secure interim stays. Such claims compel tribunals to engage in unnecessary fact-finding notwithstanding that the impugned order was passed on merits after participation by the applicant. In RCC E-Construct Pvt. Ltd., the NCLAT rejected a recall petition on this basis, holding that recall cannot operate as a disguised review where the party had voluntarily participated in the proceedings.
- Delay driven by related-party or promoter interests – Recall petitions are sometimes filed by entities that stand to gain commercially from stalling or reshaping the resolution outcome including promoters, affiliates or connected bidders. In cases such as Experts Realty Professionals v. Logix Infrastructure Pvt. Ltd. and Directorate of Enforcement through deputy director v. Alchemist Ltd.,tribunals were required to intervene where insolvency processes were manipulated to advance collateral objectives or reclaim control over assets.
Across these patterns, the common thread is evident, recall applications invoke procedural correction but function substantively as tools to re-litigate settled issues and extract a strategic advantage. This recurring misuse underscores the need for clearer and stronger procedural safeguards.
Shivangi Nawalkha is a 4th year B.A.LL.B (Hons.) student at National Law University, Patiala. Shreshtha Saha Ray is a 3rd year LL.B student at Shri Vile Parle Kelvani Mandals Pravin Gandhi College of Law Vile Parle, Mumbai.
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