Introduction:

The National Company Law Appellate Tribunal (“NCLAT”) is a quasi-judicial body constituted under Section 410 of Companies Act 2013 to hear appeals against the orders of National Company Law Tribunal(s) (“NCLT”).

This article provides an overview of a full Bench judgement of NCLAT wherein the NCLAT while adjudicating on a reference made by three Member Bench of the same Tribunal held that NCLAT has inherent power to recall its judgement by virtue of Rule 11 of the National Company Law Appellate Tribunal Rules, 2016 (“NCLAT Rules, 2016”).

Brief facts of the matter:

    1. By an order dated 27th July 2017[1] the NCLT, Chandigarh Bench initiated Corporate Insolvency Resolution Process against the Corporate Debtor (Amtek Auto Limited).
    2. The Financial Creditor had filed an Interlocutory Application (“A”) No. 222 of 2020 seeking modification of the resolution plan approved by the Committee of Creditors (CoC) and the Resolution Professional (“RP”) had filed an application seeking approval of the Resolution Plan.
    3. On 9th July 2020[2], the Hon’ble NCLT approved the Resolution Plan and rejected the application filed by the Financial Creditor. Being aggrieved, the Financial Creditor filed Company Appeal (AT) (Ins.) No. 729 of 2020 before the NCLAT. However, the Financial Creditor did not implead CoC as a party thereto.
    4. On 27th January 2022[3], the NCLAT partly allowed the above Appeal.
    5. Being dissatisfied with the aforesaid order dated 27th January 2022, the CoC filed Civil Appeal No. 2663 of 2022 before the Supreme Court of India.
    6. The CoC on 1st April 2022[4] withdrew the Appeal filed before the Supreme Court of India with the liberty to file a review application before the NCLAT.
    7. The CoC filed a Review Application No. 1 of 2022 in Company Appeal No. 729 of 2020 before the NCLAT. However, the Review Application was dismissed vide order dated 2nd September 2022[5] on the ground that the IBC does not contain any provision of Review and liberty was granted to the CoC to take recourse to other remedy in accordance with law.
    8. Accordingly, the CoC then filed an I.A. No. 3961 of 2022 before the NCLAT in Appeal No. 729 of 2020 for recall of order dated 27th January 2022, which was heard by a three Member Bench of NCLAT. The Respondents opposed the above I.A. on the premise that NCLAT does not have any power to recall its judgment.

Questions of reference:

    1. Whether the NCLAT not being vested with any power to review a judgement can entertain an application for recall of judgment on sufficient grounds
    2. Whether the Agarwal Judgement and Rajendra Varma Judgement can be read to mean that there is no power vested in this Tribunal to recall a judgement
    3. Whether the Agarwal Judgement and Rajendra Varma Judgement lay down the correct law?

 Observation of three Member Bench of NCLAT while deciding the I.A. for recall:

During the hearing of I.A., the Respondents while opposing the Application filed by the CoC placed reliance on the judgement passed by the three Member Bench of  NCLAT in Agarwal Coal Corporation Private Limited v Sun Paper Mill Limited & Anr[6]., (“Agarwal Judgement”), wherein it was held that the NCLT and NCLAT has no jurisdiction to review or recall their judgments and reliance was also placed on the judgment of  NCLAT in the matter of Rajendra Mulchand Varma & Ors. v K.L.J Resources Ltd & Anr.[7] (“Rajendra Varma Judgement”), which followed the Agarwal Judgement and held that the NCLAT has no jurisdiction to review or recall their judgments.

The three Member Bench of NCLAT while passing the judgement has beautifully explained the distinction between a review petition and a recall petition:

    1. Power of review has to be expressly conferred by a Statute.
    2. Power to recall does not require an express provision in a Statute.
    3. To recall is an inherent power whereas to review its judgement is not.
    4. In a review petition, the Court considers the error apparent on the face of record on its merits.
    5. 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 review.
    6. Power of recall of a judgment can be exercised by the 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. One of the well-known grounds for recall is the ground for fraud.
    7. Where an application is styled as recall but in essence is review application, the same cannot be entertained.
    8. Power to recall can be exercised under Rule 11 of NCLAT Rules, 2016

Power to recall can be exercised in the following circumstances:

    1. To do justice between the parties, which exercise, however, in no manner should contravene any express provision of the statute.
    2. When there is a procedural infirmity for example, order passed without adding/hearing necessary or affected party.

Observations of the full Bench:

    1. Under section 424(2) of the Companies Act, 2013, the Tribunal has also been vested with various powers as are vested with the Civil Court under Code of Civil Procedure, 1908.
    2. Rule 11 is akin to section 151 of the Code of Civil Procedure, 1908. The Court as well as Tribunals exercise juridical power of the State while performing adjudicatory functions.
    3. The full Bench further referred to the judgements passed by Hon’ble Supreme Court of India relied upon by the Applicant:
    1. R. Antulay vs. R.S. Nayak & Another[8] wherein it was held that where a party has had no notice and decree is made against him, he can approach the court for setting-aside the decision in a recall petition;
    2. Asit Kumar Kar vs. State of West Bengal & Ors.[9], wherein the Hon’ble Supreme Court of India has noticed the distinction between review and recall petition;
    3. Budhia Swain & Ors. vs. Gopinath Deb & Ors.[10], wherein the Hon’ble Supreme Court of India has dealt with power to recall;
    4. Grindlays Bank Ltd. vs. Central Government Industrial Tribunal & Ors.[11], wherein it was held that even though there was no express provision to set aside the award, the Tribunal has jurisdiction to pass the order, which is ancillary and incidental power to discharge its functions effectively.
    5. Kapra Mazdoor Ekta Union vs. Birla Cotton Spinning & Weaving Mills Ltd. & Anr[12], wherein it was held that power of Court or Quasi-judicial Authority to review its judgment must be conferred by law expressly whereas procedural review is different which is inherent in the Court or Tribunal.
    6. SERI Infrastructure Finance Ltd. vs. Tuff Drilling Pvt. Ltd.[13], wherein it was observed that power of review has to be expressly conferred by a statute and word review is used in two distinct senses. It was held that when a review is sought due to a procedural defect, such power inheres in every tribunal.

Ratio:

    1. Full Bench concluded that the aforesaid judgements of Hon’ble Supreme Court of India clearly lay down that there is a distinction between review and recall. The power to review is not conferred upon this Tribunal but power to recall its judgement is inherent in this Tribunal since inherent power of the Tribunal is preserved, by virtue of Rule 11 of the NCLAT Rules, 2016.
    2. It was observed that power of recall is not the power of the Tribunal to rehear the case to find out any apparent error in the judgement.
    3. It was concluded that power of recall of judgement can be exercised by this Tribunal when any procedural error is committed in delivering the earlier judgement, for example, necessary party has not been served or necessary party was not before the Tribunal when judgement was delivered adverse to a party.
    4. It was also observed that there may be other grounds for recall of a judgement and one well known ground for recall of judgement is ground of fraud played on the Court in obtaining judgement from the Court.

Findings:

    1. The full Bench referring to Agarwal Judgment, observed that observations made in para 27 in Agarwal Judgment were made in wide terms that the Adjudicating Authority and Appellate Tribunal has no power to review or recall and the Agarwal Judgment cannot be held to be laying down correct law and concluded that power to recall a judgment is an inherent power which is in the Tribunal as has been so declared by Rule 11.
    2. The full Bench further referred to the next judgement under reference i.e Rajendra Varma Judgement and observed that Rajendra Varma Judgment only followed the Agarwal judgment for which finding is already given as above.
    3. The full Bench concluded that in view of the law laid by Supreme Court of India which holds that the Tribunal has inherent power to recall its judgment on appropriate grounds, the Agarwal Judgement and Rajendra Varma Judgement does not lay down correct law and gave its finding to the reference made as below: –
      1. The Tribunal is not vested with any power to review the judgment, however, in exercise of its inherent jurisdiction this Tribunal can entertain an application for recall of judgment on sufficient grounds.
      2. The judgment of NCLAT in Agarwal Coal Corporation Private Limited v Sun Paper Mill Limited & Anr and in Rajendra Mulchand Varma & Ors. v K.L.J Resources Ltd & Anr observing that this Tribunal cannot recall its judgment does not lay down the correct law.

The above full bench judgement of NCLAT was subsequently confirmed by the Supreme Court of India on 31st July 2023[14].

 Author’s view:

The power to recall a judgment is inherent in NCLAT as a judicial body by virtue of Rule 11 of NCLAT Rules, 2016. It recognizes that judgments can be subject to errors, omissions, or oversights. The power to recall a judgment allows the NCLAT to rectify such errors or revisit a decision without having to go into the merits of the error apparent on the face of record, ensuring that justice is served.

The NCLAT may exercise its power to recall a judgment based on various grounds, including any procedural error is committed in delivering the earlier judgement and/or on the ground of fraud played on the Court in obtaining judgement from the Court or violation of principles of natural justice.

The power of the NCLAT to recall a judgment is a significant safeguard to rectify errors, ensure fairness, and uphold the principles of justice. It ensures that parties appearing before the NCLAT have a mechanism to seek redressal if they believe that an error has been committed, leading to an unjust outcome. However, the power to recall a judgment is not an unrestricted right and must be exercised judiciously, considering the circumstances and the principles of natural justice.

Footnotes

1 Order dated 27.07.2017 of NCLT, Chandigarh Bench in Company Petition (IB) No.42/Chd./Hry./2017.

[2] Order dated 09.07.2020 of NCLT, Chandigarh Bench in CA No.293/2018, IA Nos. 7/2020, 62/2020, 222/2020 and

237/2020 in CP (IB) No.42/Chd/Hry/2017.

[3] Order dated 27.01.2020 in Company Appeal (AT) (Ins) No. 729 of 2020, NCLAT.

[4] Order dated 01.04.2022 in Civil Appeal No. 2663 of 2022, Supreme Court of India.

[5] Order dated 02.09.2022 in Review Application No. 1 of 2022 in Company Appeal No. 729 of 2020, NCLAT.

[6] I.A. No. 265 of 2020 in Company Appeal (AT) (Ins.) No. 412 of 2019, NCLAT.

[7] I.A. No. 3303 of 2022 in Company Appeal (AT) (Ins.) No. 359 of 2020, NCLAT

[8] (1988) 2 SCC 602

[9] (2009) 2 SCC 703

[10] (1999) 4 SCC 396

[11] 1980 (Supp) SCC 420

[12] (2005) 13 SCC 777

[13] (2018) 11 SCC 470

[14] Civil Appeal No.4620 of 2023 (Union Bank of India vs. Financial Creditors of M/s Amtek Auto Limited & Ors), Supreme Court of India

More from Dhaval Vussonji & Partners