[Basil Gupta is a 4th year B.A., LL.B. (Hons.) student at National Law University, Jodhpur]
The National Company Law Appellate Tribunal (NCLAT) has clarified that it possesses the power to recall its judgments, asserting its inherent authority under Rule 11 of the NCLAT Rules, 2016. In a significant decision, a five-member bench of the NCLAT in Union Bank of India (Erstwhile Corporation Bank) v. Dinkar T. Venkatasubramanian reversed its earlier judgments of three-member benches that denied the tribunal’s power to review or recall its judgments. The five-member bench emphasized that while the NCLAT lacks the power to review judgments, it does possess the authority to recall them if any procedural errors were committed during their delivery.
In this landmark ruling, the NCLAT reaffirmed its authority to recall judgments in cases of procedural errors. This decision clarifies the tribunal’s powers and reinforces its ability to rectify mistakes made during the delivery of judgments, ensuring procedural fairness and justice in its proceedings.
Brief Facts of the Case
In the present case, the corporate insolvency resolution process (CIRP) was initiated upon an application by the Union Bank of India under section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) against Amtek Auto Ltd. (the corporate debtor). The committee of creditors (CoC), through a majority vote, approved a resolution plan submitted by a successful resolution applicant. However, the Union Bank of India, as a financial creditor, expressed its dissent towards the resolution plan and filed an interlocutory application seeking specific reliefs and modifications to the plan.
The National Company Law Tribunal (NCLT) approved the resolution plan while rejecting the application of the Union Bank of India. Consequently, the bank appealed the decision to the NCLAT without including the CoC as a party. The NCLAT partially allowed the appeal. Dissatisfied with the order, the financial creditors led by the State Bank of India (being the appellant) challenged it through an appeal before the Supreme Court. The Supreme Court dismissed the appeal but granted the liberty to file a review application before the NCLAT.
The State Bank of India filed a review application with the NCLAT, which was dismissed on the grounds that the IBC does not encompass any provisions for review. Nonetheless, the NCLAT provided the liberty to seek other remedies in accordance with the law. Subsequently, the State Bank of India submitted an application to recall the order, which underwent deliberation by a three-member bench of the NCLAT. The bench referred the matter to a larger bench to determine whether the NCLAT possesses inherent jurisdiction to consider applications for the recall of judgments based on sufficient grounds.
The NCLAT initiated its analysis by comparing rule 11 of the NCLAT Rules, 2016 with section 151 of the Code of Civil Procedure, 1908 (CPC), and took into account certain judgments of the Supreme Court. The NCLAT noted that although courts and tribunals may differ in procedures, their fundamental functions are essentially the same. It observed that the inherent powers of a court or tribunal are not explicitly conferred but derived from the inherent duty to uphold justice for the parties involved.
The NCLAT then examined the Supreme Court judgment in A.R Antulay v. R.S Nayak, which held that in cases where no notice is served on a party against whom a decree has been passed, and there is a clear violation of the principles of natural justice, the affected party has the right to approach the court that issued the decree. Furthermore, the NCLAT considered a series of Supreme Court judgments to distinguish between the powers of review and recall of a court or tribunal. The NCLAT clarified that it should not be misunderstood as an opportunity to reexamine a case or scrutinize the judgment for apparent errors, which falls under the review process. Instead, the power of recall can be used by the tribunal in cases where procedural errors occurred during the delivery of the initial judgment. These errors may include situations such as failure to serve necessary parties or the absence of a crucial party during the issuance of an unfavourable judgment. The NCLAT also acknowledged the well-established principle that a judgment can be recalled based on fraud committed to obtain it, which is a recognized reason for exercising the power of recall in legal proceedings.
Based on this analysis, the NCLAT reviewed the orders in the cases of Agarwal Coal Corporation Private Limited v. Sun Paper Mill Limited, and Rajendra Mulchand Varma v. K.L.J Resources Limited. It partially overturned these judgments to the extent they held that the NCLAT lacks the power to recall its orders or judgments. However, it upheld the part of the judgments stating that the NCLAT does not possess the power of review.
The NCLAT conducted an extensive analysis of the authority granted to tribunals under section 424(2) of the Companies Act, 2013. It noted that these powers closely resemble those given to civil courts under the CPC. Additionally, rule 11 of the NCLAT Rules, 2016, which deals with inherent power, is similar to section 151 of the CPC. The NCLAT also emphasized the Supreme Court’s decision in Harinagar Sugar Mills Ltd. v. Shyam Sunder Jhunjhunwala, which affirmed that while the procedures of courts and tribunals may differ, their fundamental functions remain essentially the same. It stressed that the inherent power of both courts and tribunals is not explicitly conferred but arises from their duty to provide justice to the parties involved. Furthermore, the NCLAT cited the Supreme Court’s observation in Manohar Lal Chopra v. Rai Bahadur Rao Raja Seth Hiralal stating that courts and tribunals can exercise inherent power to ensure justice between the parties, as long as it does not contradict any explicit statutory provisions.
The present judgment has definitively addressed the power of review and recall, not only for courts but also for the NCLAT and NCLT. This significant development aims to streamline the resolution of clerical and procedural errors by minimizing unnecessary appeals. However, a valid concern arises regarding potential abuse of this ruling, as litigants may attempt to exploit it by filing review applications disguised as recall applications. This exploitation could undermine the effectiveness of the IBC’s mechanisms for banks and financial institutions, allowing parties to seek the reversal of unfavourable 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 maintained in spirit.
Additionally, it has become common practice to invoke rule 11 when specific provisions are absent under the Companies Act or the NCLT rules. This practice highlights the need for the NCLT to more confidently exercise its inherent powers and address matters falling within its jurisdiction. Currently, the hesitancy or reluctance to invoke these inherent powers results in aggrieved parties resorting to the NCLAT and other forums, leading to substantial waste of valuable time for all parties involved.
In conclusion, while the recent clarification of the NCLAT’s power of review and recall provides much-needed clarity, precautions must be taken to prevent misuse of this ruling. Moreover, the NCLT should adopt a more assertive approach in utilizing its inherent powers, reducing the burden on appellate authorities, and ensuring efficient and timely resolution of cases.
– Basil Gupta