June 11: The National Company Law Tribunal (NCLT) has ruled that the Central Government’s notification to increase the threshold limit from INR 1 Lakh to INR 1 Crore for initiating insolvency proceedings has prospective effect i.e. applicable from March 24, 2020.
The Operational Creditor, Rockwell Industries Ltd. had filed a plea under Section 9 of the Insolvency and Bankruptcy Code (IBC) for initiation of insolvency proceedings against the Corporate Debtor, Arrowline Organic Products, taxscan.in reported. On May 5, an order of admission was passed by the NCLT.
Subsequently, the application was moved by the Corporate Debtor for recall of the admission order in view of the Central Government Notification which raised the minimum threshold limit for initiation on insolvency to Rs 1 crore from Rs 1 lakh.
The corporate debtor contended that the Notification which was issued on March 24 was retrospective in nature, the Corporate Debtor submitted that since the proceedings in the present case pertained to an amount lesser than Rs 1 crore, the NCLT was required to recall the order of admission.
The Operational Creditor, on the other hand, stated that NCLT had no power to either recall or review an order which was passed on merits. It was submitted that the only recourse available to the Corporate Debtor was filing an appeal under Section 61 IBC before the National Company Law Appellate Tribunal (NCLAT).
The NCLT consisting of a Judicial Member R. Vardharajan held that it had no power to recall or review its own order and held that the Central Government’s notification to increase the threshold limit from INR 1 Lakh to INR 1 Crore for initiating insolvency proceedings has a prospective effect. “it has become trite by virtue of judicial pronouncements by this Tribunal as well as the Appellate Tribunal, both being creatures of statute, namely Companies Act, 2013 that unless the said statute specifically provides under which it was created for the exercise of such a power of review or recall of its own order is not available,” the tribunal said.
“In the absence of any power of recall or review under Section 420 of the Companies Act, 2013 or Rule 11 of the NCLT Rules, the appropriate remedy was an appeal before NCLAT,” the tribunal further stated.