Order cannot be recalled on basis of overruling of earlier Judgment: NCLAT

Raghavendra G. Kundangar Vs Shashi Agarwal (NCLAT Delhi)

Conclusion: In present facts of the case, the Hon’ble NCLAT held that Order passed by the Adjudicating Authority cannot be recalled on basis of overruling of the earlier Judgment. Otherwise, the litigation would never come to an end.

Facts: In present facts of the case, the Appeal was filed against the Order of the NCLT, Kolkata, wherein the Appellants preferred this Appeal who were claiming to be the shareholders of the Corporate Debtor. The Respondent No. 2 claiming to be Financial Creditor filed an Application under Section 7 of Insolvency and Bankruptcy Code, 2016 (hereinafter will be referred as ‘IBC’) claiming that there is subsisting financial debt regarding supply of material to the Corporate Debtor under the Agreement. However, the Appellants preferred an appeal before this Tribunal which ended in dismissal. The Appellants preferred appeal before the Hon’ble Apex Court under Section 62 of IBC which was dismissed in-limine. In all these proceedings, the debt of the Respondents was declared as Financial Debt. Along with this appeal another batch of appeals in “Arun Kumar Jagatramka Versus Jindal Steel & Power Limited & Anr.”,¹ “Suraksha Asset Reconstruction Limited Vs. Jindal Steel & Power Limited & Anr.”². was dismissed by the Hon’ble Supreme Court by an order dated 16.08.2019 and attained finality. However, in “Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited Vs. Axis Bank Limited”³ held that the person who supplied material under contract to the Corporate Debtor is not Financial Creditor but only Operational Creditor. Based on the judgment in Anuj Jain case, referred above, the Appellants filed an Application in I.A. No. 1340 of 2020 under Rule 11 of NCLT Rules, to recall the order dated 11.03.2019 passed by the Adjudicating Authority in C.P.(IB) No. 1340 of 2018, initiating Corporate Insolvency Resolution Process (hereinafter referred to as ‘CIRP’) under Section 7 of IBC on this ground.

The main contention of the Appellants was that once the decision of the NCLAT, which was confirmed by Hon’ble Apex Court is overruled in the subsequent judgment, the order passed by the Adjudicating Authority in C.P.(IB) No. 1340 of 2018 is bad in law and consequently, the Respondent No. 2 is incompetent to initiate a proceeding under Section 7 of IBC, claiming to be a Financial Creditor and recall the order.

The Hon’ble NCLAT considered the point which needed to be answered was as under:

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