Recall Application Filed By Shareholder Cannot Be Entertained When Director Who Pursued Earlier Proceedings Had Resigned: NCLAT

The National Company Law Appellate Tribunal (NCLAT) Chennai bench of Justice Rakesh Kumar Jain (Judicial Member) and Mr. Jatindranath Swain (Technical Member) has held that an application filed by a shareholder cannot be entertained when the Suspended Director, who pursued the proceedings leading to the order sought to be recalled, has resigned. A shareholder cannot substitute the Director due to their distinct legal status. Brief Facts: This appeal has been filed seeking recall of the order passed on 14 October 2024 by which the interim order granted on 18 April 2024 was vacated. The facts, which emerge for consideration are that when the matter came up for consideration on 14.10.2024, an objection was raised by the Respondents to the effect that, since the Appellant who was earlier represented through Mr. S. Baaskaran, the Suspended Director since he had resigned from the post of Director on 12.08.2024 and as a consequence thereto, when he does not continue to be the Director, the Appeal at his behest cannot be permitted to be continued and so, the Interim Order deserved to be vacated. The Tribunal agreed with the contentions of the Respondents and dismissed the Appeal. Seeking its recall an application has been preferred being IA No.1293/2024. The Applicant in IA 1293/2024 sought recall of the order dated 14 October 2024 on the ground that as a nominee director of the corporate debtor,M/s. Tarun Realtors Pvt, he had filed the Appeal against the order passed on 20 July 2023 in CP(IB) No.72/BB/2021 by which an application under section 9 of the code had been allowed. The Applicant, Mantri Developers Pvt. Ltd. which is holding 49.99 percent shares contended that multiple shareholder disputes existed even before the insolvency petition came to be filed. The Interim order which was granted initially remained in effect until it was vacated on 14 October 2024. The Applicant also filed a writ petition against an order passed on 14 October 2024 before the Karnataka High Court which directed that proceedings pursuant to the order should not be precipitated. Meanwhile, the financail creditor filed an SLP before the Supreme Court which on 22 November 2024 held that the CIRP would continue as per law subject to the final outcome of the pending writ petition. The Karnataka High Court directed that if any recall application is filed by the Applicant the same shall be heard. Based on the above, the present recall application has been filed. Observations: The Tribunal observed that the power of recall is not specifically vested in the Appellate Tribunals except in exceptional circumstances as outlined in Union Bank of India v. Mr. Dinkar T. Venkatasubramaniam & Ors by the Supreme Court.This judgment confines the application of recall to specific conditions and does not have universal applicability. Furthermore, a recall application if preferred under section 151 of the CPC shall not be maintainable. The Tribunal further observed that another reason for rejecting the recall application is that shareholders with a higher stake than the applicant are not before the Tribunal. Shareholders cannot replace the Suspended Director as their rights are limited to investment in the corporate debtor. The Tribunal held that since Mr. S. Baaskaran who filed the Company Petition as a Suspended Director had resigned before the order on 14 October 2024 came to be passed, he could not have continued the Appeal. Additionally, the shareholder seeking recall cannot substitute the Suspended Director due to their distinct legal status. Therefore the recall application was found to be misconceived and was. Dismissed. Accordingly, the present application was dismissed. Case Title: M/s. Mantri Developers Pvt. Ltd. V Ace Enviro Tech Pvt. Ltd. and Ors. Case Number: IA Nos.1293 & 1295/2024 in Company Appeal (AT) (CH) (Ins) No.129/2024 (IA Nos.1294 & 1296/2024) Order Date: 07/03/2025 For Applicant : Mr. M.S. Shyamsundar, Senior Advocate For Mr. Sriram Venkatavaradan, Advocate For Respondents : Mr. Chandramouli Prabhakar, Advocate for R1 Mr. Varghese Thomas, Advocate for R3 Mr. P.S. Raman, Senior Advocate For Mr. Vinod Kumar, Advocate for R6 Click Here To Read/Download The Order

Recall Application Filed By Shareholder Cannot Be Entertained When Director Who Pursued Earlier Proceedings Had Resigned: NCLAT

Mohd Malik Chauhan

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