A five-member bench of the National Company Law Appellate Tribunal, Principal Bench, New Delhi (“NCLAT”) in the case of Union Bank of India v. Dinkar T. Venkatasubramanian [Company Appeal (AT) (Ins.) No. 729 of 2020], in its judgment dated May 25, 2023, held that NCLAT can recall its judgments by the virtue of inherent power vested in the NCLAT under Rule 11 (Inherent Powers) of the National Company Law Appellate Tribunal Rules, 2016 (“Rules”) in case of a procedural error while delivering the earlier judgment.

Facts

Corporate Insolvency Resolution Process (“CIRP”) was initiated against Amtek Auto Limited (“Corporate Debtor”) by an application filed by Union Bank of India (“Appellant”) under Section 7 (Initiation of corporate insolvency resolution process by financial creditor) of the Insolvency and Bankruptcy Code, 2016 (“IBC”) and thereafter a resolution plan was approved by the Committee of Creditors (“CoC”) by majority voting share of 70.07% on January 11, 2020 (“Resolution Plan”).

An interlocutory application was filed by the resolution professional seeking the approval of the Resolution Plan. Further, Appellant while praying for modification of the Resolution Plan filed an interlocutory application. The National Company Law Tribunal, Chandigarh (“NCLT”), vide an order dated July 9, 2020 (“Order”), approved the Resolution Plan by allowing the interlocutory application filed by the resolution professional and dismissed interlocutory application filed by Appellant.

Appellant filed an appeal against the Order, wherein the Appellant did not implead the CoC as one of the parties which was partly allowed by NCLAT, vide its judgement dated January 27, 2022 (“NCLAT Order”). Consequently, the financial creditors filed an appeal in the Supreme Court of India (“SC”) against the NCLAT Order, which was dismissed by the SC, vide an order dated April 1, 2022 (“SC Order”), as ‘withdrawn with liberty to file a review application’.

After the SC Order, a review application was filed by the financial creditors which was dismissed by NCLAT vide an order dated September 2, 2022, and it was held that there exists no provision under IBC for a review and thus the application is not maintainable before the NCLAT. The NCLAT also noted that the financial creditors may take recourse to its other remedy in accordance with law against the NCLAT Order. Pursuant to the aforesaid, the present appeal was filed before the NCLAT to recall the NCLAT Order (“Appeal”).

The case was first heard by a three-member bench of the NCLAT, which referred this matter to a five-member special bench. During the proceedings before the three-member bench of NCLAT, the bench relied on the judgement wherein it was held that no jurisdiction lies with NCLT and NCLAT for any review or recall of their judgments.

Issues

Whether NCLAT possesses power to entertain an application for recall of its judgment.

Whether judgment of NCLAT in the case of Agarwal Coal Corporation Private Limited v. Sun Paper Mill Limited and Another [Company Appeal (AT) (Ins.) No. 412 of 2019] (“Agarwal Coal Case”) and Rajendra Mulchand Varma and Others v. K. L. J Resources Limited and Another [Company Appeal (AT) (Ins.) No. 359 of 2020] (“Rajendra Mulchand Case”) can be read to mean that there is no power vested in NCLAT to recall a judgment and thus, lay down the correct law.

Arguments

Contentions of the Appellant:

It was contended by the Appellant that the inherent power of NCLAT is preserved by virtue of Rule 11 of the Rules. Further, NCLAT can use its inherent power to recall a judgment in appropriate case. The Appellant also submitted that a judgment delivered by NCLAT can be recalled wherein the necessary party was earlier not present before the NCLAT. Additionally, it was contended by the Appellant that an order passed without giving an opportunity of hearing to an affected party violates the principles of natural justice and thus, deserves to be recalled.

It was submitted that the judgment of NCLAT in the cases of Agarwal Coal Case and Rajendra Mulchand Case, wherein it was held that NCLAT cannot exercise its jurisdiction to review or recall its judgement, does not lay down the correct law as NCLAT has jurisdiction to recall a judgment on the grounds of being satisfied that there exists a procedural error in delivery of a judgment by the NCLAT.

In order to substantiate its arguments, the Appellant relied upon the following judgements of the SC: (a) A. R. Antulay v. R. S. Nayak and Another [(1988) 2 SCC 602], wherein the SC has put forth various grounds to set-aside judgments: (i) if a party has had no notice and decree is made against him, he can approach the court for setting-aside the decision on proof of the fact that there was no service, (ii) if a judgment was rendered in ignorance of the fact that a necessary party had not been served at all and was shown as served or in ignorance of the fact that a necessary party had died and the estate was not represented, or (iii) a judgment was obtained by fraud; (b) Asit Kumar Kar v. State of West Bengal and Others [(2009) 2 SCC 703], the SC had drawn the distinction between review and recall petition. It was noted by the SC that “…while in a review petition the Court considers on merits where there is an error apparent on the face of the record, in a recall petition the Court does not go into the merits but simply recalls an order which was passed without giving an opportunity of hearing to an affected party…”; (c) Indian Bank v. M/s Satyam Fibres India Private Limited [AIR 1996 SC 2592], wherein it was held that the courts have inherent power to recall and set aside an order if it is obtained by fraud practised upon the court, or when the court is misled by a party, or when the court itself commits a mistake which prejudices a party; (d) Kapra Mazdoor Ekta Union v. Birla Cotton Spinning and Weaving Mills Limited and Another [(2005) 13 SCC 777], the SC noted the nature of power of review and held that the power of court or quasi-judicial authority to review its judgment must be conferred by law expressly; (e) SERI Infrastructure Finance Limited v. Tuff Drilling Private Limited [(2018) 11 SCC 470], wherein it was held that every tribunal has an inherent power of review where such review is sought for a procedural defect.

Contentions of the Respondent:

Mr. Dinkar T. Venkatasubramanian (“Respondent”) submitted that the Respondent was the only party impleaded in the interlocutory application filed by the Appellant before the NCLAT. Therefore, it was contended by the Respondent that when the Order was challenged by Appellant for rejecting the said interlocutory application, Appellant was not required to implead any other party to the Appeal.

It was also contended by the Respondent that the NCLAT Order which the Appellant sought to be recalled contains no error as it was delivered post hearing all the parties to the Appeal.

Observations of the NCLAT

It was observed that power to recall is not to rehear the case to find out any apparent error in the judgment. However, NCLAT while exercising its inherent jurisdiction can entertain an application for recall of judgment based on sufficient grounds of procedural errors. The NCLAT while deciding the present case took into consideration the judgements in Agarwal Coal Case and Rajendra Mulchand Case and observed that the judgments lay down an incorrect law. It was observed that the power to recall a judgment is an inherent power of the NCLAT as enshrined under Rule 11 of the Rules.

Decision of the NCLAT

In the present case, it was held by NCLAT that in case of any procedural errors, NCLAT has the power to recall its judgement.

Further, NCLAT held that the judgments of NCLAT in the Agarwal Coal Case and Rajendra Mulchand Case does not lay down the correct law and therefore, these two judgements were partly set aside by the NCLAT to the extent that NCLAT does not have the power to recall its orders/ judgments and upheld the said judgments in respect to the portion wherein it observed that the NCLAT was not vested with the power of review.

VA View

This is a positive interpretation as it would ultimately reduce litigation on account of procedural errors. The power to recall a judgement was already permitted by Rule 11 of the Rules which has been strengthened by NCLAT in the present case. This judgment would help to reduce the number of appeals filed in NCLT/ NCLAT and put an end to the review applications being filed by fraudulent litigants, masquerading as recall applications.

This judgement strengthens the power of a tribunal (NCLT as well as NCLAT) to recall its judgements.

For any query, please write to Mr. Bomi Daruwala at [email protected]

DOWNLOAD PDF FILE