NCLAT Sets Aside NCLT Order in IL&FS Case: Parties Succeed in Appeal Over Unauthorised Amendment [Read Order]

The principal bench of the National Company Law Appellate Tribunal (NCLAT) has allowed multiple appeals filed by former auditors and executives of IL&FS Financial Services Ltd. (IFIN), including Deloitte Haskins & Sells LLP, Kalpesh Mehta, Rajesh Kotian, Milind Patel, Udayan Sen, and Manu Kochhar, who were impleaded in the government’s petition against IL&FS under Sections 241 and 242 of the Companies Act, 2013.

The tribunal set aside an order passed by the National Company Law Tribunal (NCLT) at its Mumbai Bench. The Appellate Tribunal ruled that the amendment introduced by the Union of India to include an additional relief, prayer clause (e), in the main company petition was carried out without judicial approval and was therefore not sustainable.

The appeals arose from the NCLT’s July 22, 2024, order in Company Petition No. 3638/MB/2018, initially filed by the Union of India under Sections 241 and 242 of the Companies Act, 2013. The petition targeted IL&FS and its management following revelations of large-scale financial mismanagement uncovered by the Serious FraudInvestigation Office (SFIO). Several interim and final reports were submitted, leading to a wide-ranging set of proceedings, including the implementation of former auditors, directors, and key managerial personnel.

In 2019, the NCLT had allowed an application permitting the government to amend the petition “by filing further documents or applications” based on subsequent findings.

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In February 2024, the Union of India submitted an amended petition that included a new relief (clause e), seeking that specific respondents be declared as knowingly party to fraudulent conduct under Section 339 of the Companies Act and be directed to compensate creditors. This was done without filing a fresh application or seeking permission from the Tribunal.

Deloitte Haskins & Sells LLP and several other individuals, such as Kalpesh Mehta, Milind Patel, Udayan Sen, Rajesh Kotian, and Manu Kochhar, objected to the insertion of the new prayer. They filed applications before the NCLT, submitting that such an amendment could not be introduced unilaterally and without due process. The NCLT, however, dismissed the application, holding that the newly added clause fell within the scope of the reliefs already permitted.

The NCLAT, however, disagreed with the NCLT’s interpretation and ruled that the Union of India had exceeded its permitted scope of action. It held that the 2019 amendment order did not grant permission to modify the petition at will but was contingent upon the filing of an appropriate application and judicial approval.

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The Appellate Tribunal relied on Rule 155 of the NCLT Rules, 2016, which mandates that any amendment to pleadings must be made with the leave of the Tribunal. It also referred to the Supreme Court’s decision in Gurdial Singh & Ors. v. Raj Kumar Aneja, reinforcing that no party can alter court-recorded pleadings without prior permission.

The NCLAT held that the Tribunal cannot allow any party to introduce new reliefs in a pending petition unilaterally, and also stated that doing so undermines both procedural fairness and the rights of the opposing parties.

The two-member bench of the appellate tribunal comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) further held that the 2019 order permitting amendment via “further applications” clearly implied that a separate application would be necessary to introduce new reliefs. The government’s omission of this procedural step, therefore, rendered the amendment invalid.

While setting aside the NCLT’s order, the NCLAT allowed the appeals filed by Deloitte and others. It directed the Union of India to delete clause (e) from the amended petition filed on February 21, 2024. However, it clarified that the government is at liberty to file a fresh application seeking inclusion of the relief, which the NCLT may consider by law.

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