Union Bank of India Vs Air Travel Enterprises India Limited (Kerala High Court)
Summary: The Kerala High Court allowed the writ petition filed by Union Bank of India challenging certain observations and the imposition of Rs. 1 lakh exemplary costs by the National Company Law Tribunal, Kochi Bench, in proceedings concerning withdrawal of an insolvency application.
The petitioner, a nationalized bank, had extended credit facilities to the company and, following default in payment of arrears, instituted proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 against the corporate guarantor. Subsequently, the liabilities payable to the petitioner were settled under an OTS. Following the settlement, the petitioner sought withdrawal of the proceedings before the NCLT, Kochi Bench by filing Ext.P3, which was numbered as I.A. (IBC)/313/KOB/2026.
The NCLT found several errors in the withdrawal application. The cause title contained mistakes and a person who was not a party to the application was shown as a respondent and consequently appeared before the Tribunal. The NCLT also noted that the application should have been presented under Section 12A of the IBC rather than under the general provisions of Rule 11 of the National Company Law Tribunal Rules, 2016. Further, the proposed withdrawal had not been placed before the Committee of Creditors as required under the IBC. On these grounds, the NCLT rejected the application by order dated 21.07.2026.
Before the High Court, the petitioner clarified that its challenge was confined to certain observations in paragraphs 5 and 14 to 17 of the NCLT order, including the imposition of Rs. 1 lakh costs. The NCLT had described the application as having been drafted in a casual and careless manner and had expressed concern that a nationalized bank had filed an application containing material errors. It imposed Rs. 1 lakh costs payable to the National Defence Fund and directed that the amount be borne personally by the applicant/financial creditor without recovering it from the corporate debtor, personal guarantor or any other stakeholder.
The High Court acknowledged that the petitioner ought to have presented the withdrawal application with reference to Section 12A of the IBC and that the matter had not been placed before the CoC. The Court also noted the clerical errors in the application, including the incorrect inclusion of a person as a respondent. However, the Court considered the procedural circumstances in assessing the observations and costs imposed by the Tribunal.
The High Court observed that where errors or mistakes occur in an application filed before the Tribunal, it was incumbent upon the NCLT Registry to notice them and inform the applicant. The Bench also had a duty to point out the mistakes and seek rectification in the filing and presentation of the application. The Court therefore found that the NCLT ought to have proceeded on that basis rather than making the impugned observations concerning the manner in which the application had been filed.
Importantly, the High Court did not find illegality in the rejection of the withdrawal application itself for the reasons highlighted in the NCLT order. The interference was confined to the observations contained in paragraphs 5 and 14 to 17 and the consequential exemplary cost of Rs. 1 lakh.
The Court also took note of the fact that the petitioner was a nationalized bank. In view of the circumstances, the High Court allowed the writ petition and directed that the observations contained in paragraphs 5 and 14 to 17 of the NCLT order be expunged. It further made clear that the petitioner would not be required to deposit the Rs. 1 lakh cost imposed by the Tribunal. Thus, while the rejection of the withdrawal application was left undisturbed, the adverse observations and exemplary costs against Union Bank of India were set aside.
The decision therefore distinguishes between the procedural defects that justified rejection of the withdrawal application and the separate question of whether those defects warranted the severe observations and exemplary costs imposed on the nationalized bank.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The petitioner is a nationalized bank. It extended credit facilities to a company. Since the company defaulted payment of the arrears to the petitioner bank, petitioner instituted proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for short ‘the IBC’) against the corporate guarantor respondent herein. Subsequently, a settlement was arrived at between the petitioner bank and the Corporate debtor/guarantor. The liabilities payable to the petitioner have been settled also under OTS. This is not in dispute. In view of the settlement as above, the petitioner sought for withdrawing the petition filed before the National Company Law Tribunal, Kochi Bench (Tribunal) by submitting Ext.P3 application. It may straight away be noticed that Ext.P3 is an application presented under the provisions of Rule 11 of the National Company Law Tribunal Rules, 2016 (for short ‘NCLT Rules’).
2. The application filed as above numbered as I.A. (IBC)/313/KOB/2026 was posted for hearing before the Tribunal. The Tribunal noticed that in the application seeking for withdrawal filed – Ext.P3 – there were various mistakes even in the cause title. The respondent, who was not a party to the application at Ext.P3 also had to appear before the Tribunal. The Tribunal further noticed that the application ought to have been presented with reference to the specific provisions under Section 12A of the IBC and not with reference to the general provisions under the NCLT Rules. The Tribunal again noticed that the application has been presented for seeking to withdraw the petition, without placing the afore proposal before the COC (Committee of Creditors), as provided under the provisions of IBC. Essentially on account of afore three errors/ mistakes, the Tribunal thought it fit to reject the application at Ext.P3, by Ext.P4 order dated 21.07.2026. It is seeking to challenge Ext.P4 order that the captioned writ petition has been presented by the petitioner.
3. Sri. Sadchith P. Kurup, the learned counsel for the petitioner would fairly point out that the challenge in this writ petition though styled as a challenge against Ext.P4, is limited only to certain observations made in paragraphs 5, 14 to 17, including the levy of a cost of Rs.1 lakh, on account of the mistakes pointed out as above.
4. I have also heard Sri.A.C.Venugopal, learned counsel for the respondent herein.
5. As already noticed, the challenge in this writ petition is only limited to the observations contained in paragraphs 5 and 14 to 17 in Ext.P4 order. For ease of reference, the afore paragraphs are extracted hereunder;
“ 5. We have carefully considered the pleadings and the documents placed on record. At the very outset, this Adjudicating Authority is constrained to observe that the present Application has been drafted in a wholly casual, contradictory and careless manner. The Application has been preferred under Rule 11 of the National Company Law Tribunal Rules, 2016, seeking withdrawal of the proceedings, without disclosing the correct statutory provision governing such withdrawal or the factual foundation necessary for invoking the jurisdiction of this Adjudicating Authority.
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14. It is also a matter of serious concern that the Application has been filed by a nationalised bank, which is expected to act with due diligence and to ensure that pleadings placed before a judicial forum are accurate, complete and legally sustainable. Financial institutions maintain dedicated legal departments and engage legal professionals for conducting litigation. In such circumstances, the filing of such applications reflects a disturbing lack of diligence and responsibility. Such a casual approach unnecessarily consumes judicial time and cannot be countenanced.
15 Judicial proceedings under the Insolvency and Bankruptcy Code are intended to be conducted in a time-bound and disciplined manner. Applications filed without due care, containing material inconsistencies and omitting essential statutory particulars, impede the effective administration of justice. This Adjudicating Authority expects all litigants, particularly institutional creditors, to exercise a far higher degree of diligence while invoking the jurisdiction of this Adjudicating Authority.
16. In view of the foregoing discussion, IN CP(IB)/33/KOB/2023 is dismissed with costs of Rs. (Rupees One Lakh only), payable by the Applicant to the National Defence Fund within five (5) days from the date of this Order.The Applicant shall place on record, in the main Company Petition, a compliance memo along with proof of payment within five (5) days thereafter.
17. It is further clarified that the aforesaid costs are imposed personally upon the Applicant/FinancialCreditor for filing the present Application in a wholly casual and legally unsustainable manner. Under no circumstances shall the said amount be recovered, directly or indirectly, from the Corporate Debtor, any Personal Guarantor, or any other stakeholder connected with the orate Insolvency Resolution Process. The Applicant shall bear the said costs from its own funds without passing on the burden to any other person or entity.”
6. As noticed earlier, the petitioner has submitted Ext.P3 application seeking for withdrawal of the proceedings before the Tribunal. True, the petitioner ought to have presented the application with reference to the specific provisions under Section 12A of IBC and the application was presented under the general powers of the Tribunal under the NCLT Rules. It is further true that the afore matter was not placed before the COC. It is also to be noticed that there was certain clerical errors with respect to the application filed, on account of which a person against whom there was no prayer was also shown as a respondent. The said person also had to appear before the Tribunal on account of it.
7. However, in my opinion, the Tribunal ought to have noticed that if there were errors or mistakes in an application being filed before it, it was incumbent on the part of the Registry of the NCLT to have noticed the same, and informed the applicant. Even the Bench had a duty to point out this and seek for rectification of mistakes / errors in the filing as well as the presentation of the application. Without proceeding on that basis, the NCLT has proceeded to reject the petition filed at Ext.P3. Though I do not find any illegality as regards the rejection of the application at Ext.P3 for the reasons highlighted in Ext.P4, I notice that certain observations as regards filing of the application, on account of the mistakes as above, have been made in paragraphs 14 to 17 of Ext.P4. The Tribunal has also went to the extent of imposing an exemplary cost of Rs.1 lakh on the applicant before it – the petitioner. The fact that the petitioner is a nationalized bank is not in dispute. The Tribunal ought to have taken that into consideration.
In view of the afore, I am of the opinion that this writ petition requires to be allowed. Therefore, this writ petition would stand allowed, by expunging the observations contained in paragraphs 5 and 14 to 17. It is also made clear that the petitioner would not be required to make deposit of the cost of Rs.1 lakh, imposed by the Tribunal.
