IBC: NCLAT Five Member Bench Lays Down Grounds For Recall Of Judgment

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Justice Rakesh Kumar (Judicial Member), Justice Rakesh Kumar Jain (Judicial Member), Dr. Alok Srivastava (Technical Member) and Mr. Barun Mitra (Technical Member) while adjudicating an appeal filed in Union Bank of India (Erstwhile Corporation Bank) Vs. Dinkar T. Venkatasubramanian & Ors., has held that NCLAT has the power to recall its judgment by invoking inherent powers under Rule 11 of the NCLAT Rules, 2016. However, the power of recall does not include re-hearing of a case to find out any apparent error in the judgment.

“Power of recall of a judgment can be exercised by this Tribunal when any procedural error is committed in delivering the earlier judgment; for example; necessary party has not been served or necessary party was not before the Tribunal when judgment was delivered adverse to a party. There may be other grounds for recall of a judgment. Well known ground on which a judgment can always be recalled by a Court is ground of fraud played on the Court in obtaining judgment from the Court”, the Bench held.

BACKGROUND FACTS

The Union Bank of India (“Financial Creditor”) had filed a petition under Section 7 of the Insolvency and Bankruptcy Act, 2016 (“IBC”), seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against Amtek Auto Ltd. (“Corporate Debtor”). The NCLT initiated CIRP against the Corporate Debtor. Mr. Himanshu Gupta and Deccan Value Investors L.P. (“Successful Resolution Applicants/SRA”) submitted a Resolution Plan for the Corporate Debtor, which was approved by the Committee of Creditors (“CoC”) with majority vote. The Financial Creditor had filed an interlocutory application seeking certain reliefs.

On 09.07.2020, the NCLT approved the Resolution Plan and rejected the application filed by the Financial Creditor. Consequently, the Financial Creditor filed an appeal before the NCLAT against the order dated 09.07.2020. The CoC was not impleaded as a party in the appeal.

On 27.01.2022, the NCLAT partly allowed the appeal. Being dissatisfied with the NCLAT order, the Financial Creditor filed an appeal before the Supreme Court. The said appeal was dismissed as withdrawn, with the liberty to file a review application before the NCLAT.

When the Financial Creditor filed a review application before the NCLAT, the same was dismissed on the ground that the IBC does not contain any provision of review. Liberty was granted to the Financial Creditor to take recourse to other remedy in accordance with law.

The Financial Creditor then filed an application for recall of order dated 27.01.2022, which was heard by a three Member Bench of NCLAT. The Respondents opposed the application on the premise that NCLAT does not have any power to review or recall its judgment.

Reliance was placed on NCLAT three judge bench judgment in Agarwal Coal Corporation Private Limited v Sun Paper Mill Limited & Anr., Company Appeal (AT) (Ins.) No. 412 of 2019, and Rajendra Mulchand Varma & Ors. v K.L.J Resources Ltd & Anr., Company Appeal (AT) (Ins.) No. 359 of 2020, wherein it was held that NCLT and NCLAT have no jurisdiction to review or recall their judgments.

QUESTIONS REFERRED TO LARGER BENCH

A reference was made by the three Member Bench to a larger Bench on the following points:

1. Whether this Tribunal not being vested with any power to review the judgment can entertain an application for recall of judgment on sufficient grounds?
2. Whether NCLAT judgment in Agarwal Coal Corporation Private Limited Vs Sun Paper Mill Limited & Anr., C.A. (AT) (Ins.) No. 412 of 2019 and Rajendra Mulchand Varma & Ors Vs K.L.J Resources Ltd & Anr., C.A. (AT) (Ins.) No. 359 of 2020, can be read to mean that there is no power vested in this Tribunal to recall a judgment?
3. Whether the judgment of this Tribunal in Agarwal Coal Corporation Private Limited Vs Sun Paper Mill Limited & Anr. and Rajendra Mulchand Varma & Ors Vs K.L.J Resources Ltd. & Anr. lays down the correct law?

NCLAT VERDICT

The Five Member Bench of NCLAT held that power of review has not been conferred upon the NCLT or NCLAT. However, the power to recall its judgment is inherent in NCLAT by virtue of inherent powers under Rule 11 of NCLAT Rules, 2016.

On the issue of what would come within the ambit of Power of recall, the Bench held as under:

“Power of recall is not power of the Tribunal to rehear the case to find out any apparent error in the judgment which is the scope of a review of a judgment. Power of recall of a judgment can be exercised by this Tribunal when any procedural error is committed in delivering the earlier judgment; for example; necessary party has not been served or necessary party was not before the Tribunal when judgment was delivered adverse to a party. There may be other grounds for recall of a judgment. Well known ground on which a judgment can always be recalled by a Court is ground of fraud played on the Court in obtaining judgment from the Court. We, for the purpose of answering the questions referred to us, need not further elaborate the circumstances where power of recall can be exercised.”

Thus, power of recall can be exercised when a procedural error occurs while delivering the judgment. Such as service not been done to necessary party or absence of necessary party while adverse order was passed. Judgment can also be recalled if the same is obtained by fraud.

On the remaining two points of reference, the five Member Bench held that the judgment in Agarwal Coal Corporation Private Limited vs Sun Paper Mill Limited & Anr. and Rajendra Mulchand Varma & Ors vs K.L.J Resources Ltd & Anr., which observes that NCLAT cannot recall its judgment, does not lay down the correct law.

Case Title: Union Bank of India (Erstwhile Corporation Bank) Vs. Dinkar T. Venkatasubramanian & Ors.

Case No.: CA (AT) (Ins.) No. 729 of 2020

Counsel For Applicant: Mr. N. Venkataraman, ASG with Mr. Sanjay Kapoor, Ms. Megha Karnwal, Mr. Surya Prakash, Mr. Arjun Bhatia, Mr. Devesh Dubey, Mr. V. Chandrashekhar Bharathi, Ms. Amrita Chandramouli, Ms. Shruthi Shivkumar, Mr. Rahul Vijay Kumar, Advocates for Applicant in I.A. No. 3961 of 2022.

Counsel For Respondents: Mr. R. Venkata Ramani, AG, Mr. Alok Kumar, Mr. Abhinav Shukla, Mr. Kunal Arora, Mr. Raman Yadav, Mr. Abhishek Pandey, Advocates for R1/UBI. Mr. Sumant Batra, Mr. Sanjay Bhatt, Ms. Ruchi Goyal, Advocates for R-2 (RP).

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