Power Of Recall Limited To Procedural Errors, Not Rehearing For Judgment Review: NCLAT Principal Bench

The bench held that the power of recall can only be exercised when a procedural error has been made in delivering the original judgment.

Brief Facts:

The matter pertained to an appeal filed by Kalpana Jain (Appellant) under Section 421 of the Companies Act, 2013, challenging the order, passed by the NCLT, Mumbai Bench. The Appellant originally filed a company petition before the NCLT alleging various acts of oppression and mismanagement committed by Sandeep Kantilal Jain (Respondent No. 2) and Yogita Sandeep Jain (Respondent No. 3). These acts were detailed in the original company petition and the appeal. Despite the NCLT having heard the matter on merits on multiple issues, it dismissed the petition on the grounds that it was incomplete due to the Appellant's failure to provide certain necessary documents. The Appellant, who is 80 years old, was unable to supply the required information due to her ongoing poor health.

Subsequently, the appellant filed Restoration/Recall Application before the NCLT and sought the restoration of the company petition and recall of the order. However, this application was also dismissed as it was without any proper reasoning on the merits of the case. Feeling aggrieved, the Appellant approached the NCLAT.

Observations by the NCLAT:

The NCLAT noted that the appeal pertained to the maintainability of an appeal against an order dated 20th December 2023 passed by the NCLT. It noted that this order was appealable; however, it noted the Appellant did not file an appeal. Instead, it filed a recall application. The NCLAT noted that such a recall application was not maintainable under the law.

The NCLAT referred to its previous decision in Union Bank of India (erstwhile Corporation Bank) vs. Dinkar T. Venkatasubramanian. In this case, the NCLAT clarified the distinction between review and recall. It held that the NCLAT has no power to review its judgments, as the power to review is not vested in the Tribunal. However, the NCLAT does have inherent powers to recall its judgments as preserved by Rule 11 of the NCLAT Rules, 2016. It held that the scope of the power to recall is limited and cannot be used as a mechanism to rehear the case or identify errors in the judgment, which is the domain of a review application. Instead, the power of recall is reserved for instances where procedural errors were committed, such as when a necessary party was not served or was not present during the hearing or if the judgment was obtained through fraud.

The NCLAT also referred to the Supreme Court's decision in Budhia Swain and others vs. Gopinath Deb and others (1999 4 SCC 396). In this case, the Supreme Court laid down the conditions under which a court or tribunal could recall its order. These conditions included a lack of jurisdiction, fraud or collusion, mistakes made by the court that prejudiced a party, or the absence of a necessary party due to lack of service or death. However, the Supreme Court held that a recall application cannot be used if the grounds for reopening the case could have been raised in the original action or where proper remedies, such as an appeal or revision, were available but not availed.

Therefore, the NCLAT observed that the order dated 20th December 2023 did not fall within any of the conditions outlined in Budhia Swain. The Appellant, instead of appealing the order, filed a recall application, which was not permissible under Rule 11 of the NCLT Rules. Given that none of the necessary conditions for recall were met, the recall application was found to be unsustainable.

Case Title: Ms Kalpana Jain vs Universal Oil Seals Mfg Co Pvt Ltd and ors

Case Number: COMPANY APPEAL (AT) NO. 196/2024

For Appellant:Mr Sandeep Bajaj and Mr. Mayank Biyani, Advocates.

For Respondent:Mr. Tapesh Kumar Singh, Sr. Advocate with Mr. Prabhat Ranjan Raj and Mr. Amarjeet Gupta, Advocates.

Date of Judgment: 06-09-2024

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