Adjudicating Authority Can Recall Its Judgement But Has No Power To Review Unless Expressly Required: NCLAT New Delhi

Background of the Case

The Appeal has been filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 against the order of the adjudicating authority by the Aircastle (Ireland) Ltd (Appellant). The Appellant entered into a Lease Agreement of 2 Aircrafts fitted along with their engines and APUs respectively with the Respondent. Due to the default in the payments in accordance to the Lease Agreement of both the Aircrafts, the following aircrafts were de-registered by the DGCA and were re-possessed by the Appellant.

When the Aircrafts were re-possessed by the Appellant, it was found that the Aircraft 1 had different engine and the Aircraft 2 had different APU system installed. Also, by the order dated 20.06.2019, CIRP process was initiated and a moratorium was instituted under Section 14 of the code against the corporate debtor.

One of the original APU systems was sent by the corporate debtor for repairs to a company name Honeywell prior to the initiation of the CIRP. Due to difficulties in the payment of the repairs, the company retained lien on the same and did not hand over to the Corporate Debtor or even to the Appellant. The company decided to auction the system to realise its repair cost and as a result, the appellant executed an agreement with the company to acquire the same.

The Respondent requested the Appellant to return the Engine and the APU stating the replaced parts belong to the lessee and that they are the real owners and demanded for usage charges stating that the same was appropriated by the Respondent for its own use. The Respondent also filed a case before the Adjudicating Authority seeking reliefs of returning engine and APU along with rental charges for the use of the Engine in dispute and the APU in dispute which were in possession of the Appellant.

The Adjudicating Authority ruled in favour of the Respondent resulting in the Appellant filing a case before the NCLAT stating that it is the owner of the disputed engine and the APU and that the Adjudicating Authority has no right to pass fresh order giving new or modified reliefs.

Contention of the Parties

The Appellant aggrieved by the order, stated that the Respondent is not entitled to the ownership of the Engine and the APU stating that the particulars of the lease agreement was not assessed by the Adjudicating Authority properly and also stressed that during the agreement, if the lessee i.e. the corporate debtor shall replace all parts in the Aircraft and upon replacement the Lessor i.e. the Appellant shall become owner of the same. The Appellant also stated that the Respondent is not entitled to file a application to recall the judgement of the Adjudicating authority stating that the tribunal can recall the order in case of factual mistakes but cannot pass fresh order giving new or modified reliefs.

The Respondent requested the Appellant to return the Engine and the APU stating the replaced parts belong to the lessee and that they are the real owners and demanded for usage charges stating that the same was appropriated by the Respondent for its own use. The Respondent also filed a case before the Adjudicating Authority seeking reliefs of returning engine and APU along with rental charges for the use of the Engine in dispute and the APU in dispute which were in possession of the Appellant. The Respondent also stated that the it was necessary for the Tribunal to recall its judgement because it had failed to assess the usage charges as claimed and had also referred SpiceJet as JetLite. The Respondent claimed it to be necessary to cure factual defects ensure justice.

Court's Decision

The Principal Bench dismissed the Appeal filed by the Aircastle upholding the decision of the NCLT, stating that the rectification of the factual errors by the tribunal was not arbitrary. The court also stated that the Respondent was entitled to the ownership of the replaced parts and directed the Appellant to return the same to the Respondent. The court also recognised the usage charges of the Respondent and stated that the Appellant was responsible to pay sum as specified to the respondent.

The Tribunal also dismissed the argument of the Appellant stating that the NCLT had conducted review of its order instead of recalling it. The Tribunal clarified that the NCLT has powers to recall its order if it contains any factual errors and result in any confusion among the parties and that the same does not amount to review because it would require the court to re-examine the merits of the case again and that the same requires a statutory provision for the court to recall its judgement. The court laid down a clear distinction between the process of review and recall by the tribunal.

As a result, the court ruled in favour of the Respondent stating that it was the rightful owner of the replaced parts and that the Appellant had wrongfully used them and was entitled to pay the usage charges to the Appellant.

Case Title: Aircastle (Ireland) Ltd. Vs. Mr. Ashish Chawchharia, RP of Jet Airways (India) Ltd. and Ors

Case Number: Comp. App. (AT) (Ins) No. 1178 of 2024

Tribunal: NCLAT Principal Bench, New Delhi

Coram: Justice Rakesh Kumar Jain (Member Judicial), Mr. Naresh Salecha (Member Technical) and Mr. Indevar Pandey (Member Technical)

For Appellant: Mr. Ankur Mahindro, Mr. Rohan Taneja, Mr. Ajay Kumar, Ms. Aanchal Nanda, Mr. Hetaram Bishnoi & Mr. Aditya Kapur, Advocates.

For Respondent: Mr. Malhar Z., Mr. Raghav Chadha, Mr. Dhiraj Kumar Totala, Ms. Aditi Bhansali, Ms. Vasudha Jain, Mr. Ankit Pal, Mr. Ajay Raj & Mr. Nishant Upadhyay, for R-1.

Date of Judgement: 04^th October, 2024

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