Pioneering Precedent: NCLAT’s Inherent Authority to Recall Judgments – Learnings from the Union Bank of India v. Dinkar T. Venkatasubramanian Case
Introduction
In the recent case of Union Bank of India (formerly Corporation Bank) v. Dinkar T. Venkatasubramanian,[1] a bench comprising five members of the National Company Law Appellate Tribunal (NCLAT) issued a significant ruling. They established that NCLAT possesses inherent powers, as outlined in Rule 11 of NCLAT Rules, 2016, enabling them to recall a judgement in cases involving procedural errors.
Facts of the Case
This conclusion was drawn from the case’s context, wherein Union Bank of India filed for a Corporate Insolvency Resolution Process (CIRP) against Amtek Auto Ltd under Section 7 of the Insolvency and Bankruptcy Code (IBC). After that, the Committee of Creditors (CoC) approved a resolution plan presented by a successful applicant.
Subsequently, the Resolution Professional submitted an application for plan approval, and Union Bank of India (UBI) filed another application seeking specific relief. The Tribunal granted the Resolution Professional’s application but dismissed UBI’s plea. In response, UBI appealed the decision, asserting that it was not part of the CoC that endorsed the resolution plan.
The Tribunal partially upheld UBI’s appeal by judgement dated 27.01.2022. Challenging this verdict, the Financial Creditors took the matter to the Supreme Court, which dismissed the appeal while allowing the option to file a Review Application.
Acting upon the Supreme Court’s order, UBI lodged a Review Application before the Tribunal, which the Tribunal dismissed on September 2, 2022. The Tribunal, acknowledging the absence of a provision for review within the Code, emphasized that UBI could explore other legal avenues if dissatisfied with the January 27, 2022 order.
Taking advantage of this legal liberty, UBI filed an Interlocutory Application (I.A.), prompting a three-member bench based on sufficient reasons to refer the case’s intricate questions to the Larger Bench for thorough consideration.Top of Form
Main Issues Involved in the Case
- Whether NCLAT not being vested with any power to review the judgment can entertain an application for recall of judgment on sufficient grounds?
- Whether the judgment of NCLAT in Agarwal Coal Corporation Private Limited v. Sun Paper Mill Limited & Anr. and Rajendra Mulchand Varma & Ors v. K.L.J Resources Ltd. & Anr. lays down the correct law?
Recall v. Review- Petition
Before delving into the tribunal’s stand, it is important to understand the difference between a Recall and a Review petition which was one of the problems before the tribunal. The analysis presented by the Supreme Court in Asit Kumar Kar v. State of West Bengal[2] clarifies the distinction that in a Review Petition, the court takes the merits of the case into account and examines whether there was an error apparent on the face of the record. Whereas in a Recall Petition, the court does not deal with the merits of the case but investigates whether the order passed by the court was passed without allowing a hearing opportunity to any of the aggrieved parties. This differentiation was also meticulously observed and expounded upon by the NCLAT bench while grappling with the issue before them.
Tribunal’s Stand
The tribunal initially delves into subsection (2) of Section 424, concluding that it possesses the same powers as the Civil Court under the Code of Civil Procedure (CPC). This interpretation aligns with the Hon’ble Supreme Court’s ruling in Harinagar Sugar Mills Ltd. v. Shyam Sunder Jhunjhunwala,[3] which asserts that while procedures might differ, the fundamental functions of the Court and Tribunal remain similar. Following this logic, the tribunal asserts that Section 151 of the CPC and Rule 11 of NCLT resemble each other, and both Civil Courts and Tribunals inherently possess these inherent powers to uphold justice for the parties involved.
Subsequently, the tribunal thoroughly examines the distinction between Review and Recall petitions. It determines that while there is a clear contrast between the two, the power to review petitions is not vested in the Tribunal based on the precedent set by the Supreme Court in Kapra Mazdoor Ekta Union v. Birla Cotton Spinning & Weaving Mills Ltd[4] and SERI Infrastructure Finance Ltd. v. Tuff Drilling Pvt. Ltd.[5] However, the tribunal acknowledges its authority to recall judgments, supported by Rule 11 of the NCLAT Rules, 2016. This power doesn’t exist to identify inherent errors in the judgment, but rather to identify procedural mistakes made during the judgment’s delivery. Notably, an example of this is when a court can recall a judgment if it was obtained through fraudulent means.
Referring to the legal principles established by the Hon’ble Supreme Court in cases such as Budhia Swain v. Gopinath Deb,[6] A.R. Antulay v. R.S. Nayak,[7] Indian Bank v. Satyam Fibres India Pvt. Ltd,[8] and Grindlays Bank Ltd. v. Central Government Industrial Tribunal,[9] which affirms the Tribunal’s inherent authority to recall judgments on valid grounds, the tribunal finds fault with the three-member bench judgment in “Agarwal Coal Corporation Private Limited”[10] and “K.L.J Resources Ltd.”[11] that asserts the Tribunal lacks the power to recall. While the observation that the Tribunal lacks power to review remains uncontested, the Tribunal maintains that the judgment denying the power to recall is legally incorrect.
Analysis of the Case
This judgment represents a significant legal development in the realm of procedural rectification within the context of the NCLAT. This landmark judgment not only clarifies the Tribunal’s powers but also contributes to a broader understanding of procedural justice and the balance between maintaining legal finality and correcting procedural errors. The judgment’s significance lies in its recognition of the NCLAT’s inherent powers, as enshrined in Rule 11 of the NCLAT Rules, 2016.
This recognition equips the Tribunals with the authority to rectify procedural errors in judgments through recall, a power that doesn’t pertain to reviewing the merits of a case but rather addressing procedural flaws. This distinction is crucial as it highlights that justice should not only be fair in its substance but also its procedural aspects. The ruling emphasizes that these inherent powers are exercised not to reevaluate the merits of a case but to address procedural errors that may have occurred. The impact of this judgment extends beyond the immediate case. It clarifies the Tribunals’ powers and procedures, thereby guiding future litigants and legal practitioners. Moreover, the judgment’s rationale around inherent powers and procedural fairness could find application in other areas of law, influencing the approach of courts and tribunals toward similar issues.
By allowing the recall of judgments for procedural errors, the Tribunal reinforces the principle of procedural justice. The judgment strikes a balance between the principles of legal finality and the pursuit of justice. It acknowledges the need to respect the finality of judgments while also recognizing that procedural errors can lead to unjust outcomes. By establishing the framework for recall petitions, the Tribunal enables a way to correct such errors without compromising the broader legal principles of res judicata.
Conclusion
The NCLAT judgment, which had bolstered litigants’ trust in the dependability of the legal system, was also affirmed by the Supreme Court in Union Bank of India v. Financial Creditors of M/s. Amtek Auto Ltd. & Ors.[12] The ruling in this case has not only provided litigants with renewed trust but has also facilitated a comprehensive understanding of the distinctions between review and recall petitions. By underlining the vital disparity between these powers, exploring the inherent authority of the Tribunal, and creating a structured pathway for filing recall petitions, the judgment stands as a significant legal milestone.
Within this judgment, the tribunal intricately dissected the nuances of Rule 11 of the NCLAT, effectively broadening the inherent powers of tribunals. By equating the NCLAT’s inherent power with Section 151’s inherent power of civil courts, the tribunal underscored the importance of these provisions in dispensing justice.
However, it’s essential to recognize that contemporary times have seen an increasing misuse of the tribunals’ inherent power through petitions under Rule 11 of the NCLAT Rules. This practice warrants caution, compelling NCLAT and NCLTs to exercise greater diligence when handling such applications. Establishing steadfast guidelines to curb the misapplication of this inherent power becomes imperative to preserve the efficiency of both tribunals and parties involved.
While the true advantages and drawbacks of this ruling might surface over time, presently, the tribunal’s decision has unveiled the latent potential of recall petitions vested in the tribunal under Rule 11.
[1] Union Bank of India v. Dinkar T. Venkatasubramanian, (2023) SCC OnLine NCLAT 283.
[2] Asit Kumar Kar v. State of West Bengal, (2009) 2 SCC 703.
[3] Harinagar Sugar Mills Ltd. v. Shyam Sunder Jhunjhunwala, AIR 1961 SC 1669.
[4] Mazdoor Ekta Union v. Birla Cotton Spinning & Weaving Mills Ltd, (2005) 13 SCC 777.
[5] SERI Infrastructure Finance Ltd. v. Tuff Drilling Pvt. Ltd, (2018) 11 SCC 470.
[6] Budhia Swain v. Gopinath Deb, (1999) 4 SCC 396.
[7] A.R. Antulay v. R.S. Nayak, AIR 1988 SC 1531.
[8] Indian Bank v. Satyam Fibres India Pvt. Ltd, AIR 1996 SC 2592.
[9] Grindlays Bank Ltd. v. Central Government Industrial Tribunal, (1980) Supp SCC 420.
[10] Agarwal Coal Corporation Pvt. Ltd. v. Sun Paper Mill Ltd., (2021) SCC OnLine NCLAT 367.
[11] K.L.J. Resources Ltd. v. Rajendra Mulchand Varma, (2022) SCC OnLine NCLAT 402.
[12] Union Bank of India v. Financial Creditors of M/s. Amtek Auto Ltd. & Ors CIVIL APPEAL NO. 4620/2023.
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