NCLAT Holds that the Tribunal Has the Power to Recall but Not to Review Its Own Judgment

Introduction

The Hon’ble National Company Law Appellate Tribunal, New Delhi (‘NCLAT’) in the case of Adisri Commercial Pvt. Ltd. v. RBI & Ors[i], upheld the decision of Hon’ble National Company Law Tribunal, Kolkata (‘NCLT’) wherein it was held that it has the power to recall its decision in certain circumstances but do not have the power of review.

Brief Facts

• SREI Infrastructure Finance Limited (‘SIFL’) and SREI Equipment Finance Limited (‘SEFL’) are the financial service providers (‘FSPs’) being the corporate debtors (‘CDs’) registered with the Reserve Bank of India (‘RBI’). RBI under s. 45-IE of the RBI Act, 1934 vide an order superseded the board of directors of the CDs and appointed an administrator.

• The RBI then filed an application against the CDs under s. 227 of the Insolvency and Bankruptcy Code, 2016 (‘IBC’) before the NCLT which was admitted vide an order dated 08.10.2021 initiating the corporate insolvency resolution process (‘CIRP’) under IBC against the CDs.

• Subsequently, Adisri Commercial Pvt. Ltd. (‘Appellant’), a shareholder of CDs challenged the NCLT’s decision before the NCLAT. The appeal, although initially filed within time, was refiled after a delay of 321 days due to certain defects, along with an application for condonation of the delay. However, this appeal was rejected vide an order dated 21.12.2022 and the delay was not condoned. Aggrieved, the Appellant filed a civil appeal before the Hon’ble Supreme Court (‘SC’) on 30.01.2023, which was also dismissed and NCLAT’s order was upheld.

• On 14.02.2023, the Appellant filed applications in the NCLT seeking to recall its order dated 08.10.2021 regarding the initiation of the CIRP against the CDs. These applications were also rejected by the NCLT. Aggrieved by this rejection, the Appellant approached the NCLAT.

Contentions of the Appellant

• The Appellant contended that the default occurred during the period covered under s. 10A of the IBC, thus, the NCLT committed an error in admitting the application under s. 227 of the IBC.

• The Appellant also argued that the issues raised before the SC and the NCLT were not decided on merits. They further contended that the observation by the NCLT, stating that the Appellant cannot be allowed to re-agitate the same grounds, was erroneous, as the principle of *res judicata *was not applicable in this case.

• The Appellant claimed that the order passed by the NCLT was arbitrary in nature and infringed the principle of natural justice and, thus, deserved to be recalled. The Appellant argued that the NCLT lacked the jurisdiction to admit the application.

Contentions of the RBI

• The RBI refuted the Appellant’s submissions, contending that the Appellant had failed in the appeals up to the SC and therefore could not file a recall application before the NCLT after 17 months of initiation of CIRP.

• The RBI contended the recall application filed by the Appellant is nothing but a review application seeking to urge issues on the merits of the case. The RBI also contended that the default of the CDs was a continuing default and therefore the NCLT had the jurisdiction to admit the application filed by the RBI.

• Additionally, the RBI also argued that s. 10A of the IBC does not apply to applications filed under s. 227 of the IBC.

Findings of the NCLAT

The NCLAT dismissed the appeal of the Appellant, upholding the NCLT’s order. It observed as under:

• Firstly, the NCLAT held that the CDs had continued to default, thus, the NCLT had rightly admitted the CIRP application under s. 227 of the IBC.

• Secondly, the NCLAT relied upon its own decision of a five-member bench in the case of Union of India v. Dinkar T. Venkatasubramanian[ii], observing that the tribunal is not conferred with the power to review, but it has an inherent power to recall its own judgement which is limited to circumstances such as procedural errors or if the order was obtained by fraud.

• The NCLAT held that the recall applications filed by the Appellant were merely attempts to review the judgment on its merits, which the tribunal was not empowered to, as there was no procedural error or infirmity in the order passed by the NCLT. Therefore, the NCLAT did not consider the s. 10A of the IBC argument advanced by the Appellant.

• The NCLT also held that there was no violation of the principles of natural justice as the administrator of the CDs was present during the proceedings before the NCLT.

• Lastly, the NCLAT further observed that the application filed by the RBI was proper and that the NCLT was within its jurisdiction to initiate CIRP against the CDs. Top of Form

Our Analysis

The decision of NCLAT assumes significance as it reiterated an important principle of law that Tribunals have the power to recall their own judgments in very limited and exceptional circumstances, especially when procedural errors or fraud have been perpetrated on the Court. The NCLAT decision further clarified that Tribunals do not have the power of review and that review applications masquerading as recall applications cannot be maintained.

End Notes

[i] 2024 SCC OnLine NCLAT 455; Company Appeal (AT) (Insolvency) No. 1074 of 2023 and I.A. No. 4628 of 2023.

[ii] 2023 SCC OnLine NCLAT 2191

Authored by Purvi Garg, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.