Non-Examination of Matter on Merits: NCLAT upholds Recall and Adjudication by NCLT [Read Order]

The National Company Law Appellate Tribunal ( NCLAT ), Principal Bench, New Delhi, has dismissed Marvel Landmarks Pvt Ltd’s appeal and affirmed the decision of the National Company Law Tribunal (NCLT) to recall its own ex-parte dismissal of a home-buyer insolvency petition.

In the order dated 21 January 2025, the Bench of Justice Ashok Bhushan (Chairperson) and Technical Members Barun Mitra and Arun Baroka ruled that the NCLT had exercised its inherent power correctly because the earlier order had not examined the dispute on merits.

The controversy began when twelve purchasers of flats in the “Marvel Isola J Building” project—sanctioned for only forty-four units—invoked section 7 of the Insolvency and Bankruptcy Code on 30 November 2019 after the developer failed to hand over possession. The corporate debtor contested maintainability, asserting that the 2020 amendment required at least one hundred allottees or ten per cent of the total; it also told the tribunal the project had 282 apartments. On 4 June 2024, with only the debtor’s counsel present, the NCLT dismissed the case for falling short of the threshold. The allottees’ counsel was absent that day and at the previous listing on 15 May 2024 because his wife was in critical care, a fact supported by hospital records.

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On 14 September 2024 the home-buyers filed IA 4881 of 2024 under Rule 11 of the NCLT Rules seeking recall. They annexed the MAHARERA registration certificate showing a forty-four-flat project and argued that the earlier dismissal rested on a false factual premise supplied by the debtor. Accepting that the matter had never been tested on merits and that the court had been misled, the NCLT on 18 November 2024 recalled its order, restoring the company petition and allied applications.

Before the appellate tribunal, senior advocate Mr Abhijeet Sinha, with Mr Dhyal Deshpandy and Mr Amit Arsiwala, contended for Marvel Landmarks that the 4 June order was a final adjudication, that Rule 11 cannot authorise a review, and that the proper course for the respondents was an appeal filed within limitation. Mr Chaitanya Nikte, assisted by Mr Anuj Tiwari, replied that a litigant should not suffer for counsel’s bona-fide absence, and that the dismissal—procured by misrepresentation—was liable to be set aside to prevent injustice.

The NCLAT agreed with the purchasers, distinguishing the precedents cited by the developer and emphasising that recall is justified where an order is obtained by misrepresentation or passed without hearing an affected party. It concluded that the 4 June dismissal was not a reasoned decision on merits, upheld the recall and reinstatement by NCLT, dismissed the appeal and ordered that the insolvency petition proceed, with no order as to costs.

To Read the full text of the Order CLICK HERE

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