Kerala High Court Expunges NCLT's Adverse Remarks Against Union Bank, Sets Aside ₹1 Lakh Cost

The Kerala High Court has expunged adverse observations made by the National Company Law Tribunal, Kochi Bench, against Union Bank of India over errors in an application seeking withdrawal of insolvency proceedings.

The court also held that the bank would not be required to deposit the ₹1 lakh cost imposed by the tribunal.

Justice Harisankar V. Menon observed that the bank had made mistakes in the application. These included invoking the wrong provision and not placing the settlement proposal before the Committee of Creditors.

The judge, however, held that the NCLT Registry should have pointed out the errors to the bank. The bench, too, had a duty to identify the mistakes and seek their rectification.

“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,” Justice Menon observed.

The bank had extended credit facilities to a company, which later defaulted on its repayment obligations. It then instituted proceedings under Section 7 of the Insolvency and Bankruptcy Code against the corporate guarantor.

The bank and the corporate debtor/guarantor subsequently arrived at a settlement. The liabilities payable to the bank were settled under a one-time settlement.

Following the settlement, the bank moved the NCLT, Kochi Bench, seeking withdrawal of the insolvency proceedings.

The tribunal found several errors in the application. These included mistakes in the particulars of the respondent, because of which a person against whom there was no prayer was shown as a respondent and had to appear before the tribunal.

The tribunal further noted that the application did not disclose that the settlement proposal had been placed before the Committee of Creditors. It dismissed the application on July 21, 2026 and imposed ₹1 lakh in costs on the bank, payable to the National Defence Fund.

The bank challenged the adverse observations and the cost before the High Court. Its challenge was limited to the observations in paragraphs 5 and 14 to 17 of the NCLT order, including the levy of costs.

The High Court acknowledged the mistakes identified by the tribunal. Justice Menon observed that the application ought to have been presented under Section 12A and that the settlement proposal had not been placed before the Committee of Creditors.

The judge also noted the clerical errors in the application. Because of these errors, a person against whom there was no prayer was shown as a respondent and had to appear before the tribunal.

Justice Menon held that the NCLT Registry should have noticed the mistakes and informed the bank. The Bench also had a duty to point them out and seek rectification of the errors in the filing and presentation.

The High Court made it clear that it found no illegality in the tribunal's rejection of the withdrawal application. It therefore did not interfere with the rejection itself.

The judge also noted that the tribunal had imposed an exemplary cost of ₹1 lakh and made adverse observations against the bank. He observed that the tribunal ought to have taken into consideration that the petitioner was a nationalized bank.

“The fact that the petitioner is a nationalized bank is not in dispute. The Tribunal ought to have taken that into consideration,” the court observed.

The High Court accordingly allowed the writ petition and expunged the observations contained in paragraphs 5 and 14 to 17 of the NCLT order. It also clarified that Union Bank of India would not be required to deposit the ₹1 lakh cost imposed by the tribunal.

For Petitioner: Advocates ASP Kurup and Sadchith P Kurup

For Respondent: R. Rajmohan, Resolution Professional