Principle Of Stare Decisis Applies To NCLT As Well As NCLAT. NCLAT

Factual Background-

The Appellant challenged the order of the NCLT, Mumbai Bench which admitted the Section 7 application under the Insolvency and Bankruptcy Code, 2016 filed by the Respondent who is a Financial Creditor of the Appellant, on the ground that the Tribunal did not follow the principle of stare decisis, deviating from its earlier judgment in Beacon Trusteeship Limited.

It was also challenged on the ground that the amount advanced by the Respondent was secured and assets mortgaged were of more value than the amount due. The Appellant ought to have realised its amount from the security as per the mortgage deed and the Application under Section 7 was thus, not maintainable.

Senior Advocate Arun Kathpalia, appearing for the Appellant contended that the Adjudicating Authority- NCLT Mumbai Bench did not follow the judgment of a co-ordinate Bench in Beacon Trusteeship Limited vs. Neptune Ventures and Developers Private Limited in which the Adjudicating Authority had rejected a Section 7 application on similar facts, holding that the Appellant had the remedy to realise the amount from security.

Senior Advocate Amit Sibal, appearing for the Respondent, on the other hand contended that the terms of mortgage deed did not bar the Respondent from taking recourse of Section 7 of the Code to recover his dues.

Judgment of NCLAT-

Section 238, IBC-

Referring to Section 238 of the Code, which states that the provisions of IBC will have effect, notwithstanding anything contained in any other law or instrument for the time being in force, the Tribunal held that since a mortgage deed is an instrument, the IBC will have an overriding effect over it, and thus the application of the Appellant is maintainable.

Stare Decisis-

The order of the Adjudicating Authority admitting the application clarifies that it is not following the judgment of a co-ordinate Bench in Beacon Trusteeship Limited vs. Neptune Ventures and Developers Private Limited, because the same judicial member has taken a contrary view in another matter- IDBI Trusteeship Services Ltd. V. Ornate Spaces Pvt. Ltd.

Regarding stare decisis, the Tribunal observed-

"Doctrine of stare decisis means to stand by decided cases. The principle behind the doctrine is that men who are governed by law should be fixed definite and known and when a law is declared by Court of Competent Jurisdiction in absence of any palpable mistake or error, it is required to be followed. Doctrine of stare decisis is wholesome doctrine which gives certainty to law and guide the people to mould their affairs in future. The doctrine is fully attracted on the statutory Tribunal which is well settled."

Applicability of the principle of Stare Decisis to Tribunals-

In this regard, the Tribunal referred to the Supreme Court's judgment in Sub-Inspector Rooplal and Anr. Vs. Lt. Governor Through Chief Secretary, Delhi and Others, wherein, in the context of Central Administrative Tribunal, it was held that the Tribunal was bound by a decision of a co-ordinate bench.

The same principle was reiterated by the Supreme Court in Collector of Central Excise, Kanpur vs. Matador Foam and Others.

The Tribunal held that no doubt, the principle of stare decisis is fully applicable to judgments delivered by the NCLT as well as the NCLAT, but also noted that what is binding as a precedent on Company Law Tribunal is the judgment of jurisdictional Tribunal. In other NCLT Benches, it will have only a persuasive value.

Beacon Trusteeship Limited- Per Incuriam

The NCLAT held the judgement delivered in Beacon Trusteeship Limited is per incuriam because in that case, the Tribunal did not advert to Section 238 of the Code. Incuriam means carelessness. When a judgment is rendered in ignorance of a binding statute or binding authority, it is said to be per incuriam.

The Tribunal also referred to the Supreme Court judgment in Gujarat Urja Vikas Nigam Limited vs. Amit Gupta and Others, wherein the Supreme Court held that in view of the non-obstante clause contained in Section 238 of the IBC, the conditions of the Power Purchase Agreement shall be overridden.

Dismissing the appeal, the Tribunal held that since the judgment in Beacon Trusteeship Limited was not in consonance with Section 7 read with Section 238 of the Code, it was not a binding precedent to be followed by any other coordinate Bench.

Case Title:Rajeev R. Jain, Director (Suspended) v. AASAN Corporate Solutions Pvt. Ltd.

Counsel for Appellant: Mr. Arun Kathpalia, Senior Advocate with Mr. Ashok Paranjpe, Mr. Kunal Vajani, Mr. Shreyas Lele, Mr. Kunal Mimani, Advocates.

Counsel for Respondents: Mr. Amit Sibal, Senior Advocate with Mr. Denzil Arambhan, Ms. Amisha Patel, Ms. Priyakshi Bhatnagar, Mr. Kaustubh Prakash, Mr. Vinamra Kaporiha, Advocates for R1.

Mr. Pranaya Goyal, Mr. Aman Gandhi, Mr. Vardaan Bajaj, Ms. Nanki Grewal, Advocates for Caveator (R1)

Mr. Karan Grover, Mr. IPS Oberoi, Advocates for R2.

Click here to read /download Order