Status as on: 19/06/2023
What is NCLAT?
As of June 1st, 2016, the National Company Law Appellate Tribunal (NCLAT) was established to hear appeals from decisions made by the National Company Law Tribunals (NCLTs) pursuant to Section 410 of the Companies Act, 2013.
- Since December 1st, 2016, the NCLAT has not only been the Appellate Tribunal for hearing appeals against orders passed by NCLT(s) under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC), but also the Appellate Tribunal for hearing appeals against orders passed by the Insolvency and Bankruptcy Board of India under Section 202 and Section 211 of IBC.
- With the passage of the Finance Act of 2017, Section 172 amended Section 410 of the Companies Act of 2013 to make the National Company Law Appellate Tribunal (NCLAT) the appropriate body to hear and decide appeals from the CCI’s directions, decisions, and orders as of May 26, 2017. Furthermore, this body also hears and decides Appeals against decisions made by the National Financial Reporting Authority.
The meaning of the word “review”
When a court reviews its own rulings, examines a piece of legislation, or reviews an action taken by an administrative body, it is correcting an error in the original judgment, legislation, or action. The reviewing court can reverse the original decision or amend it as needed. With the passing of time, the judiciary has been paving the way for clearing the doubt regarding the power to review and recall. One such case is:
Union Bank of India (Erstwhile Corporation Bank) Vs. Dinkar T. Venkatasubramanian & Ors
Amtek Auto Ltd. (“Corporate Debtor”) was the subject of a petition filed by Union Bank of India (“Financial Creditor”) under Section 7 of the Insolvency and Bankruptcy Act, 2016 (“IBC”), requesting the commencement of the Corporate Insolvency Resolution Process (“CIRP”). CIRP proceedings against the Corporate Debtor were commenced by the NCLT. Resolution Plan for the Corporate Debtor filed by Mr. Himanshu Gupta and Deccan Value Investors L.P. (“Successful Resolution Applicants/SRA”) and approved by the Committee of Creditors (“CoC”) with a majority vote. The Financial Creditor had made a request for temporary relief in the form of an interlocutory application.
The Resolution Plan was authorized by the NCLT and the Financial Creditor’s application was denied on 09.07.2020. As a result, the Financial Creditor appealed the order dated 09.07.2020 to the NCLAT. The CoC was not added to the appeal as a party.
The appeal was partially granted by the NCLAT on January 27th, 2022. The Financial Creditor appealed the NCLAT’s decision to the Supreme Court. The appeal was deemed withdrawn, although the appellant retains the right to seek review at the NCLAT.
The NCLAT rejected the Financial Creditor’s plea for review on the grounds that review was not provided for in the IBC. The Financial Creditor is free to pursue any other legal procedure available to them.
A three-person bench of the NCLAT considered the financial creditor’s plea to vacate the court’s ruling from January 27. The Respondents argued that NCLAT has the authority to review or recall its judgment, thus they filed an opposition to the motion.
Agarwal Coal Corporation Private Limited v. Sun Paper Mill Limited & Anr., Company Appeal (AT) (Ins.) No. 412 of 2019, and Rajendra Mulchand Varma & Ors. v. K.L.J Resources Ltd & Anr., Company Appeal (AT) (Ins.) No. 359 of 2020, both of which were relied upon, held that neither NCLT nor NCLAT has jurisdiction to review or recall their orders.
QUESTIONS REFERRED TO LARGER BENCH
The three-member bench referred the following matters to a bigger bench for further consideration:
- Whether this Tribunal not being vested with any power to review the judgment can entertain an application for recall of judgment on sufficient grounds?
- Whether NCLAT judgment in Agarwal Coal Corporation Private Limited Vs Sun Paper Mill Limited & Anr and Rajendra Mulchand Varma & Ors Vs K.L.J Resources Ltd & Anr. of 2020, can be read to mean that there is no power vested in this Tribunal to recall a judgment?
- Whether the judgment of this Tribunal in Agarwal Coal Corporation Private Limited Vs Sun Paper Mill Limited & Anr. and Rajendra Mulchand Varma & Ors Vs K.L.J Resources Ltd. & Anr. lays down the correct law?
VERDICT OF NCLT
The Appellate Bench in Union Bank of India (Former Corporation Bank) Vs. Dinkar T. Venkatasubramanian & Ors. held that the NCLAT does not have review authority. Rule 11 of the NCLAT Rules, 2016, however, gives the NCLAT the authority to recall a previous ruling if it so chooses. NCLAT has been given no authority to conduct reviews.
The Bench cited the decision in SREI Infrastructure Finance Ltd. vs. Tuff Drilling Pvt. Ltd., in which the Supreme Court while defining the difference between review and recall, stated that the power to conduct a review must be granted by a statute.
The NCLAT has not been granted review authority, according to the Five Member Bench. Rule 11 of the NCLAT Rules, 2016, however, grants the court the inherent ability to recall a previous ruling.
According to the Bench’s interpretation of Rule 11 of the NCLAT Rules, 2016, the power to review is not conferred upon this Tribunal, but the power to recall its judgment is inherent in this Tribunal, powers which are inherent in the Tribunal, as has been declared by Rule 11 of the NCLAT Rules, 2016.
In the cases of Agarwal Coal Corporation Private Limited vs. Sun Paper Mill Limited and Rajendra Mulchand Varma & Ors vs. K.L.J Resources Ltd. and Anr., the NCLAT somehow reached the incorrect conclusions of laws.
There can be no appeal from the part of the three-judge panel decisions that the Tribunal does not have jurisdiction to review. However, we find that the ruling that this Tribunal lacks the authority to recall the ruling is incorrect. The Bench ruled that while the Tribunal lacked the authority to conduct a judicial review, it did have the inherent jurisdiction to hear a motion for recall of judgment based on adequate grounds.
Disclaimer: The above article is based on the personal interpretation of the related orders and laws. The readers are expected to take expert opinions before relying upon the article. For more information, please contact us