NCLAT's insolvency fraud order may cloud IBC interpretation

A recent ruling by the National Company Law Appellate Tribunal (NCLAT) upheld the National Company Law Tribunal's (NCLT's) authority to recall a resolution plan at any stage if fraud was detected during the insolvency process.

- BHAVINI MISHRA

According to experts, the order could create uncertainty in interpreting the Insolvency and Bankruptcy Code (IBC), particularly given the Supreme Court's (SC's) emphasis on the primacy of lenders' commercial wisdom in insolvency proceedings. "Fraudulent intent is a dangerously wide umbrella. If stretched too far, it undermines the finality that the SC has sought to protect. While the apex court has made the Committee of Creditors' wisdom paramount, the NCLAT's view that a resolution plan can be recalled at any stage creates confusion and erodes bidder confidence," says Raheel Patel, partner at Gandhi Law Associates. In its September 8 order, the NCLAT observed that "fraud" during the insolvency process "will vitiate everything, i