1. INTRODUCTION

On 25 May 2023, a five-member special bench of the National Company Law Appellate Tribunal, New Delhi Bench ("NCLAT"), in a reference from a three-member bench in Union Bank of India vs. Dinkar T. Venkatasubramanian & Ors.,1 while partly setting aside two judgments of coordinate three-member benches of the NCLAT, held that the NCLAT has the inherent power to recall a judgment passed by it on sufficient grounds.

2. BACKGROUND

In the ongoing corporate insolvency resolution process ("CIRP") of Amtek Auto Limited (Corporate Debtor), a resolution plan submitted by DVI PE (Mauritius) Limited and Deccan Value Investors L.P. was approved by the National Company Law Tribunal, Chandigarh Bench ("NCLT") vide order dated 9 July 2020. By the same order, the NCLT also dismissed an interlocutory application filed by Union Bank of India ("UBI") in which the bank had prayed for modification of the resolution plan. Aggrieved by the order of the NCLT, UBI filed an appeal2 before the NCLAT, which was partly allowed by way of an order dated 27 January 2022 ("Order"). However, since UBI had not impleaded the committee of creditors ("CoC") of the Corporate Debtor as a party to the appeal, the financial creditors ("FCs") of the Corporate Debtor filed a civil appeal3 before the Supreme Court of India ("Supreme Court") challenging the the Order, which was withdrawn with liberty to file a review application.

In pursuance of the above, a review application4 was filed by the FCs before the NCLAT against the Order, which was dismissed by the NCLAT on 2 September 2022 on the ground that there is no provision of review in the Insolvency and Bankruptcy Code, 2016 ("Code"), with liberty granted to the FCs to 'take recourse to its other remedy in accordance with law'. On the basis of this liberty granted, the FCs filed an interlocutory application in the appeal filed by UBI before the NCLAT, praying for recall of the Order. As a preliminary question on the maintainability of the aforesaid recall application was raised by UBI by relying on the judgments of the coordinate three-member benches of the NCLAT in Agarwal Coal Corporation Private Limited vs. Sun Paper Mill Limited & Anr.5 and Rajendra Mulchand Varma & Ors. vs. K.L.J Resources Limited & Anr,6 this recall application was referred to a five-member special bench of the NCLAT with the following questions:

  1. Whether the NCLAT, not being vested with any power to review the judgment, can entertain an application for recall of judgment on sufficient grounds?
  2. Whether judgments of the NCLAT in Agarwal Coal Corporation Private Limited (supra) and K.L.J Resources Limited (supra) can be read to mean that there is no power vested in the NCLAT to recall a judgment?
  3. Whether the judgments of the NCLAT in Agarwal Coal Corporation Private Limited (supra) and K.L.J Resources Limited (supra) lay down the correct law?

3. ANALYSIS AND DECISION OF THE NCLAT

The NCLAT commenced its analysis by comparing Rule 11 of the National Company Law Appellate Tribunal Rules, 2016 ("Rules") with Section 151 of the Code of Civil Procedure, 1908, and also considered certain judgments of the Supreme Court to observe that while the procedures of courts and tribunals might differ, their functions are not essentially different7 and that the inherent powers of court were not conferred upon it explicitly but rather inherently derived from its duty to uphold justice for the parties involved8.

The NCLAT then examined the judgment of the Supreme Court in A.R Antulay vs. R.S Nayak & Anr.,9 in which it was held that in cases where no notice is served on a party against whom a decree has been passed and there is an obvious infringement of the principles of natural justice, the said party can agitate their grievance before the court which passed the decree. The NCLAT further considered a catena of Supreme Court judgments to draw a distinction between the powers of review and recall of a court/tribunal. After considering such judgments, it was observed that while in its review jurisdiction, the court considers on merits whether there is an error apparent on the face of the record, while exercising the power to recall, the court or tribunal evaluates any procedural infirmity in its order such as an order that was passed without giving an opportunity to the affected party10 or if fraud is played on the court or tribunal in obtaining the order.

On the basis of the above analysis, the NCLAT examined the orders in Agarwal Coal Corporation Private Limited (supra) and K.L.J Resources Limited (supra). As both the aforementioned judgments held that the NCLAT does not have any power of review or recall, these judgments were partly overruled to the extent that they held that the NCLAT does not have the power to recall its orders/judgments. Pertinently, the part of the aforesaid judgments which held that there is no power of review vested in the NCLAT was upheld.

4. INDUSLAW VIEW

While the position of law regarding the power of review and recall has been firmly established since many years in relation to courts, this judgment has now definitively established the same for the NCLAT and NCLT as well, which will go a long way in minimizing unnecessary appeals, at least for resolution of clerical and procedural errors expeditiously. Having said this, unscrupulous litigants may seek to exploit this by filing review applications in the guise of recall applications. Given the importance of the Code's regime and the seminal significance of NCLT as a tribunal, having wide economical and financial ramifications, the efficacy of the Code's mechanism for banks and financial institutions may be severely undermined, as parties might exploit this avenue to pursue the reversal of unfavorable outcomes and stall further proceedings. Only time will reveal the true extent to which the delicate balance between the power of review and recall will be upheld in spirit.

Footnotes

1. I.A. No. 3961 in Company Appeal (AT) (Ins.) No. 729 of 2022.

2. Company Appeal (AT) (Ins.) No. 729 of 2022.

3. Civil Appeal Diary Number 5609/2022.

4. Review Application No. 01 of 2022.

5. Judgment dated 25 October 2021 in I.A. No.265 of 2019 in Company Appeal (AT) (Ins.) No.412 of 2019.

6. Judgment dated 11 October 2022 in I.A. No.3303 of 2022 in Company Appeal (AT) (Ins.) No. 359 of 2020.

7. Harinagar Sugar Mills Ltd. vs. Shyam Sunder Jhunjhunwala & Ors. (AIR 1961 SC 1669).

8. Manohar Lal Chopra vs. Rai Bahadur Rao Raja Seth Hiralal (AIR 1962 SC 527).

9. (1988) 2 SCC 602.

10. Asit Kumar Kar vs. State of West Bengal & Ors. ((2009) 2 SCC 703); Budhia Swain & Ors. vs. Gopinath Deb & Ors. ((1999) 4 SCC 396); SERI Infrastructure Finance Limited vs. Tuff Drilling Private Limited ((2018) 11 SCC 470) .

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