One recurring issue in insolvency litigation is whether parties can, for the first time, introduce new factual grounds or legal challenges before the National Company Law Appellate Tribunal (NCLAT) or the Supreme Court. While the Insolvency and Bankruptcy Code, 2016 (IBC) adopts a flexible, time-bound framework, the appellate mechanism under Sections 61 and 62 is not designed to give parties a second chance to alter or reframe their case in appeal. The Supreme Court has discussed the law on raising new grounds in appeal in earlier judgments such as Garikapati Veerayya v. N. Subbayya Choudhry and Anr., 1963 SCC OnLine SC 304 and B. Leelavathi v. Honnamma & Anr., ((2005) 11 SCC 115, both of which emphasise that a fresh plea of fact cannot be raised for the first time in appellate proceedings. These decisions recognise that an appellate forum examines the correctness of what the lower forum decided on the basis of the record placed before it. It is not a forum where parties can introduce new grounds, new documents or an entirely new factual narrative that was never presented to the Adjudicating Authority.

In the specific context of Section 65 of the IBC, this principle has been reaffirmed by the Supreme Court in Beacon Trusteeship Ltd v. Earthcon Infracon Pvt Ltd and Anr., 2020 SCC OnLine SC 1233. In this particular case the Court was dealing with an allegation that a corporate insolvency resolution process (CIRP) had been initiated in a collusive and fraudulent manner, attracting Section 65 of the Code. The Court held that such a plea of collusion could not be raised for the first time in appeal before the NCLAT or before the Supreme Court, and that allegations of fraud or collusion must be placed before the Adjudicating Authority, which is then obliged to examine them in accordance with law. Subsequent NCLAT decisions considering Section 65 applications have applied this ratio, emphasising that while fraudulent or malicious initiation of Corporate Insolvency Resolution Process (CIRP) can and should be checked, those objections must be properly raised at the National Company Law Appellate Tribunal (NCLT) stage rather than introduced later in appeal.

The NCLAT has in other cases as well consistently held that its role is to examine the legality of the order passed by the NCLT, particularly given the limited powers it holds in an Appeal under Section 61 pf the IBC. As such it is not to act as a court of first instance on issues never pleaded below. What therefore can be understood is that where a party failed to raise a plea before the Adjudicating Authority, the appellate forum would in ordinary course refuse to entertain such submissions.

Insolvency proceedings operate on strict timelines and permitting new pleas at the appellate stage would not only prejudice other stakeholders but also undermine the finality of the process. Allowing parties to withhold objections at the NCLT stage and raise them only after a resolution plan is approved would defeat the entire purpose of time-bound resolution. Moreover, resolution applicants and creditors take commercial decisions on the basis of the record available before the NCLT; permitting a fresh challenge based on new facts at the appellate stage risks unsettling a plan that has already been implemented or partly acted upon. However, questions of law, those that do not require fresh evidence, may still be considered by appellate forums in appropriate cases keeping in mind Section 30 (2) and 61 of the IBC which deal with the NCLAT’s appellate powers. However, even in such cases, the appellate tribunal ought to insist that the issue arises from the material already on record and that no new factual aspects are introduced for the first time which require original adjudication. It ensures the integrity and efficiency of the insolvency process, while ensuring that questions of law can be examined where necessary.