NCLAT's Approach To Rectifying Errors In Insolvency Cases

NCLAT's Approach To Rectifying Errors In Insolvency Cases

Introduction

The National Company Law Appellate Tribunal (NCLAT) issued its decision in the case of Howen International Funds SPC vs. Raj Singhania (Liquidator) of Gontermann Peipers India Ltd. The appeal was filed in response to a ruling issued by the National Company Law Tribunal, Division Bench, Court No. II, Kolkata on October 4, 2024.

Factual Background

The Corporate Insolvency Resolution Process (CIRP) against Gontermann Peipers India Ltd. commenced on 11.12.2019. The resolution plan was submitted, but not approved by the Committee of Creditors (CoC). Subsequently, a liquidation order was passed on 30.04.2021. In the liquidation, e-auction process was held in which Appellant was declared Successful Auction Purchaser.

Procedural Background

The appellant filed an application (IA (IB) No.1277/KB/2023) praying for certain reliefs and concessions, which was allowed by the Adjudicating Authority vide order dated 10.05.2024. The Liquidator and Indian Bank filed applications for correction of an inadvertent error in the order, which was allowed by the Adjudicating Authority vide impugned order dated 04.10.2024.

Issues Involved

1. Whether the Adjudicating Authority has jurisdiction to correct an inadvertent error in its order.

2. Whether the appellant is entitled to extinguishment of personal guarantees.

Contentions of the Parties

Appellant's Contentions: The appellant contended that the impugned order was a review of the judgment dated 10.05.2024, which is not within the jurisdiction of the Adjudicating Authority.

Respondent's Contentions: The respondent contended that the Adjudicating Authority has inherent powers to correct inadvertent errors and that the appellant is not entitled to extinguishment of personal guarantees.

Reasoning and Analysis

The coram of Justice Ashok Bhushan (Chairperson), Technical Member Arun Baroka and Technical Member Barun Mitra held that the Adjudicating Authority has inherent powers under Rule 11 and Rule 154 of the NCLT Rules, 2016 to correct inadvertent errors. The tribunal also held that the appellant is not entitled to extinguishment of personal guarantees, as there was no foundation for grant of such relief.

Final Decision

The NCLAT dismissed the appeal, holding that there is no error in the order dated 04.10.2024, rectifying the inadvertent typographical error in the order dated 10.05.2024. The judgment was pronounced on 9th May, 2025.

Law Settled

The judgment clarifies the scope of inherent powers of the Adjudicating Authority under the Insolvency and Bankruptcy Code.

In this case the appellant was represented by Mr. Abhijeet Sinha, Sr. Advocate with Mr. Akshat Malpani, Advocate. The respondent was represented by Mr. Kumarjeet Banerjee, Ms. Sanchari Chakraborty, Mr. Aadil Naushad, Mr. Devanshu Lahiry, Advocates.