Supreme Court clarifies the boundaries of “Inherent Powers” of NCLAT
CIRP Withdrawal in GLAS Trust Company LLC v BYJU Raveendran & Ors
– Barsha Dikshit, Partner | resolution@vinodkothari.com
It is a well-established principle that the exercise of inherent powers is permissible only in the absence of an express provision within the statutory framework. Also, that the Insolvency and Bankruptcy Code, 2016 (IBC) is not to be used as a mechanism for mere debt recovery.
In a recent ruling in GLAS Trust Company LLC vs. BYJU Raveendran & Ors[1]., the Hon’ble Supreme Court set aside the order of the National Company Law Appellate Tribunal (NCLAT) [2]that permitted withdrawal of CIRP post admission by NCLT, by exercising inherent powers under Rule 11 of the NCLAT Rules, 2016, despite existing statutory procedures for CIRP withdrawal. The matter arose from a dispute concerning the validity of a settlement, wherein a financial creditor objected to the source of settlement funds, asserting that it constituted preferential payment or amounted to round-tripping, thereby warranting judicial scrutiny under the insolvency framework.
The article analyses the impact of the ruling on the jurisdiction of NCLAT to deal with various matters related to the corporate debtor under insolvency or liquidation.
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