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March 24 Notification on enhanced minimum threshold of Rs 1 crore for IBC proceedings prospective in nature: NCLT
A Bench comprising of Judicial Member R Varadharajan of National Company Law Tribunal (NCLT), Chennai held that the March notification issued by the central government on enhanced minimum threshold of Rs. 1 crore for initiation on solvency proceedings is prospective in nature. The Rockwell industries ltd. had filed a petition under section 9 IBC for initiation of solvency proceedings against the corporate debtor, Arrowline organic products. In accordance with this an order of admission was passed by the NCLT. Thereafter, the application was moved by the corporate debtor for recall of the admission order passed by the NCLT in view of the central government notification which raised the minimum threshold limit for initiation on insolvency to Rs 1 crore from 1 lakh.
The corporate debtor claiming that the notification which was issued on March 24 was retrospective in nature. Further it was submitted that since 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. They were contended that the enhanced pecuniary limit was applicable even to pending cases and the NCLT should have desisted in passing the order of admission, especially when the corporate debtor was an MSME which dealt in essential services.
Thereafter the operational creditor stated that NCLT had no power to either recall or review an order which was passed on merits and the only recourse available to the corporate debtor was filing an appeal under section 61 IBC before the national company law tribunal (NCLT). Further it was pointed out that the default in the present case had occurred much prior to the date of notification i.e. March 24 and even the order was reserved on March 4.
After considering all the submissions made by the parties and provisions of law, the NCLT held that it had no power to recall or review its own order. That 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 exercise of such a power of review or recall of its own order is not available.
