NCLAT Allows Deloitte’s Appeal, Strikes Down NCLT Order in IL&FS Case Over Unauthorised Amendment [Read Order]

The principal bench of the National Company Law Appellate Tribunal (NCLAT) has allowed an appeal filed by Deloitte Haskins & Sells LLP, setting aside a July 2024 order of the National Company Law Tribunal (NCLT), Mumbai Bench, in connection with the ongoing proceedings against Infrastructure Leasing and Financial Services Ltd. (IL&FS).

The Appellate Tribunal held that the Union of India’s unilateral amendment to Company Petition No. 3638/2018, specifically the inclusion of a new prayer clause (e), was carried out without the leave of the Tribunal and was unsustainable in law.

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In 2018, following certain financial irregularities, the Ministry of Corporate Affairs (MCA) filed a petition under Sections 241 and 242 of the Companies Act, 2013, before the NCLT against IL&FS and its group entities. The Tribunal allowed impleadment of various entities and individuals, including former auditors and directors.

As per SFIO reports in 2019, the MCA filed an application (MA 2696/2019) seeking leave to amend the petition and to expand its scope. The NCLT allowed this application on 25.11.2019, permitting the government to seek additional reliefs in the future through proper applications.

On 21.02.2024, the Union of India served an amended petition that included a new relief (prayer clause “e”), seeking to hold various respondents including auditors and ex-directors, liable under Section 339 of the Companies Act, for fraudulent conduct of business at IL&FS Financial Services Ltd.

Deloitte Haskins & Sells LLP and other affected parties challenged the amendment, arguing that it was introduced without filing any formal application and without obtaining the Tribunal’s permission, as required under Rule 155 of the NCLT Rules, 2016.

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The NCLT rejected their objections and upheld the inclusion of the new prayer, observing that the 2019 order had already granted sufficient liberty to the Union of India.

Reversing the NCLT’s order, the NCLAT held that the amendment introduced by the government could not have been made without a formal application. The Tribunal noted that the previous leave granted in 2019 merely allowed the MCA to seek further reliefs by filing new applications, and not to amend pleadings unilaterally.

The Appellate Tribunal held that the entitlement to amend the petition does not empower a party to bypass procedural requirements, and added that no party can alter the record of the court without its permission.

Citing Rule 155 of the NCLT Rules, 2016 and Supreme Court precedent in the case of Gurdial Singh & Ors. vs. Raj Kumar Aneja, the NCLAT asserted that all necessary amendments must be carried out only with the Tribunal’s express leave, particularly when they alter substantive reliefs.

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The Tribunal further relied on its own decision in Kochar Sung UP Acrylic Ltd. vs. Sunny Kochar, where it was held that substantial amendments, including new reliefs and new parties, cannot be made without due process and opportunity to the opposing side.

The Bench, comprising Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) allowed all connected appeals, including and the impugned NCLT order dated 22.07.2024 was quashed, and Deloitte’s Company Application (CA No. 60/2024) was allowed.

The Appellate Tribunal directed the Union of India to delete prayer clause (e) from the amended petition. However, it clarified that the government is at liberty to file a fresh application seeking similar reliefs, which may be considered by the NCLT in accordance with law.

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