NCLAT’s Inherent Powers: Understanding Recall and Review of Judgments

[By Ashutosh Anand & Shalini Puri]

The author are students at National University of Study and Research in Law, Ranchi.

 

Introduction

The National Company Law Tribunal (“NCLT”) and National Company Law Appellate Tribunal (“NCLAT”) have transformed the Indian insolvency regime by affording a single platform for resolution, specialised expertise, a creditor-friendly approach, efficient resolution mechanisms such as Corporate Insolvency Resolution Process, time-bound resolution, and an appellate body for review.

However, there is persistence of a grey area regarding the powers of the NCLT and NCLAT in recalling their judgment. The concept of ‘Recall’ refers to a process by which the court, legislature, or administrative organisations withdraw or cancel their previous judgments or actions. On the other hand, ‘Review’ involves the court, legislature, or any other body re-examining their decisions. By using the method of review, the aforementioned bodies try to rectify the error in an act, judgement, or legislation.

The NCLAT’s three-member bench in 2019, in the matter of Agarwal Coal Corporation Private Limited v. Sun Paper Mill Limited & Anr.[1] laid down a strong proposition of law of absence of any power or express provision of review and recall vested with the ‘Adjudicating Authority,’ i.e., the NCLT, and the ‘Appellate Authority’, i.e., the NCLAT, in the Insolvency and Bankruptcy Code, 2016 (“the Code”). Hence, a judgment or an order passed by the same shall neither be reviewed nor recalled.

Subsequently, another three-member bench of the NCLAT in Rajendra Mulchand Varma & Ors. v. K.L.J Resources Ltd. & Anr.[2] vehemently adhered to the ratio in the Agarwal Coal Corporation case. Therefore, it became binding on the NCLT and NCLAT not to recall their judgments or orders.[3] However, the landmark case called UBI v. Dinkar T. Venkatasubramanian & Ors.[4] was heard by a three-member bench of the NCLAT in 2023. The case raised an important legal question about whether the NCLT and NCLAT, despite lacking the power to review judgments under the Code, could consider an application for recalling a judgment if sufficient grounds were presented. To address this issue, the three-member bench referred the matter to a five-member bench for further deliberation. After thorough consideration, the NCLAT ruled in the affirmative.

In light of the same, this piece tries to highlight the rudimentary jurisprudential difference between the definitions of review and recall. Furthermore, by navigating through the legal standing under the scheme of the Code of Criminal Procedure, 1973, (“CrPC”) and a plethora of precedents, the piece tries to find the conceptual distinction between review and recall. Further, it discusses the inherent powers of the Tribunal in relation to Rule 11 of the National Company Law Appellate Tribunal Rules, 2016 (“NCLAT Rules”), and how that inherent power is to be utilised by the Tribunal to recall a decision. The piece also lists out the practical aspects of non-deliverance of justice in case a Court or a Tribunal is not able to recall its decisions.

An Underlined Distinction between Review and Recall

According to Black’s Law Dictionary, the phrase ‘recall a judgment’ means to revoke or reverse a judgment for matters of fact or when a judgment is annulled because of errors of law.[5] On the contrary, the Dictionary says that the word ‘review’ means to examine judicially, a reconsideration, second view or examination, revision, or consideration for purposes of correction. Review is used especially for the examination of a cause by an appellate court and for a second investigation.[6]

In Vijaya Sri v. State of Andhra Pradesh,[7] the Court, after analysing the combined definitions of review and recall from various authoritative dictionaries, concluded that recall necessitates the complete abrogation of a judgment or final order. In contrast, review refers to the continuation of the initial judgment or order with specific modifications, along with a re-examination and reconsideration of the said decision. As a result, the power to recall a judgment differs from the power to review it.[8]

The contentions related to review and recalling have also been persistently seen in the CrPC. Section 362 of the CrPC has been held to be mandatory and puts a complete bar on review, except only to correct arithmetic or clerical errors. Additionally, it has been held that Section 482 of the CrPC cannot be invoked for the purposes of reviewing or altering the judgment.

Nevertheless, it is important to note that recalling is different from reviewing and altering a judgment. Section 482 permits wide enough powers to the court to cover any type of case for the purpose of it being recalled or re-heard, if three conditions mentioned therein so warrant, viz. (a) to implement any order issued under the CrPC; (b) to safeguard against the misuse of the judicial process; and (c) to ensure the achievement of justice.[9]

However, a difficult and complex situation arises when there is  no express provision regarding the recalling of a judgment in the statute. This question was answered by the Apex Court in Grindlays Bank Ltd. vs. Central Government Industrial Tribunal & Ors.,[10] wherein an application was filed to set aside an award given by the Industrial Tribunal. There was no express provision in the Industrial Disputes Act, 1947 or the Rules framed thereunder that provided for setting aside an ex-parte order. However, the Court held that even though there was an absence of an express provision to set aside the award, the Tribunal has jurisdiction to pass the order, which is an ancillary and incidental power to discharge its functions effectively.[11]

The Tussle of Interpretation

Nevertheless, the ratio given in the Agarwal Coal Corporation case and the Rajendra Mulchand Varma case, as mentioned in the introduction, made it impossible for the NCLT or NCLAT to recall their decisions which posed a grave jurisprudential flaw in the justice system. Numerous cases have emerged where the Tribunal discovered that its decisions were influenced by fraudulent practices by the parties involved, or the Tribunal itself made mistakes that unfairly affected one party. Additionally, instances were found where the parties deceived the Tribunal, leading to unjust outcomes. These situations raise concerns about the integrity and fairness of the Tribunal’s judgments. However, despite such instances, the Tribunal had no power to recall that judgment or order.

Therefore, for seeking solutions to the aforementioned complexities, an examination of the nature and extent of the inherent powers of NCLT and NCLAT becomes important. Section 424(2) of the Companies Act, 2013 bestows various powers on the Tribunal that are akin to those vested with the Civil Court under the Code of Civil Procedure, 1908 (“CPC”). Furthermore, it is to be noted that Rule 11 of the NCLT Rules, 2016 and the NCLAT Rules, 2016, is similar to that of Section 151 of the CPC, which prescribes the inherent powers of the Court. Additionally, it is a settled principle that both the Courts and Tribunals exercise the State’s juridical power when they perform adjudicatory functions.

In Harinagar Sugar Mills Ltd. v. Shyam Sunder Jhunjhunwala & Ors.,[12] the Apex Court held that there may exist a difference between the procedures of the Court and the Tribunal, but the functions are not essentially different. Furthermore, in Manohar Lal Chopra v. Rai Bahadur Rao Raja Seth Hiralal,[13] it was held that the inherent powers of the tribunals and courts are powers that are not conferred on them. Rather, those powers are inherent in the tribunals and courts by the strength of their duty to perform justice to parties standing before them.

An extremely important principle was laid down by the Apex Court in Kapra Mazdoor Ekta Union v. Birla Cotton Spinning & Weaving Mills Ltd. & Anr.,[14] wherein the Court considered the nature of the power of review. The rule laid down was that the power of the Court or quasi-judicial authority to review its judgment must be expressly provided by law. However, the judgment vehemently said that procedural review is different in nature and that it is inherent in the Court or Tribunal.

The above judgments of the Hon’ble Supreme Court clearly lay down that there is a distinction between review and recall. The power to review is not conferred upon this Tribunal, rather the power to recall its judgment is inherent in the NCLT and NCLAT since inherent powers are preserved by virtue of the declaration made in Rule 11 of the NCLT Rules, 2016 and NCLAT Rules, 2016.

Adhering to the aforesaid legal principles, the five-member bench in UBI v. Dinkar T. Venkatasubramanian & Ors. held that power to recall a judgment would not mean that the NCLT or NCLAT can rehear a matter with an aim to find out any apparent error in the judgment, as this would amount to the review of a judgment. The Tribunal does not have the power to review its judgment. Nevertheless, the Tribunal held that it had an inherent power under Rule 11 of the NCLAT Rules, 2016, to recall a judgment, but this power could only be exercised when any procedural error was made while delivering the earlier judgment. For instance,, in cases wherein the necessary party is not served, when the necessary party is absent when the judgment was delivered and would adversely affect the rights of that necessary party, or if the judgment was obtained by means of fraud played on the court, in these instances, the earlier judgments can be recalled.

Conclusion

It is a settled principle of jurisprudence that the powers to carry out the case must flow from the statute itself. This means that anything not expressly stated in the statute is not law. However, in the case of recall of judgments, the NCLAT in the UBI case has laid down a correct law, considering the fact that recall enables an individual to ensure that his right is not violated by an error of any court or tribunal. The primary purpose of recall of judgments is to safeguard the rights of individuals, recognising that the judgments of the courts, while generally reliable, can occasionally be prone to errors.

In light of these contentions, the NCLAT’s approach strikes a balance between the requirement for finality in judgments and the essentiality of rectifying procedural errors or fraudulent practices, ensuring the fair and just administration of justice within the National Company Law Tribunal framework.

 

[1] Agarwal Coal Corporation Private Limited v. Sun Paper Mill Limited & Anr., I.A. No. 265 of 2020 in Company Appeal (AT) (Ins.) No. 412 of 2019.

[2] Rajendra Mulchand Varma & Ors. v. K.L.J Resources Ltd. & Anr., I.A. No. 3303/2022 in Company Appeal (AT) (Ins.) No. 359 of 2020.

[3] Id. at para 8, 13.

[4] Union Bank of India (Erstwhile Corporation Bank) v. Dinkar T. Venkatasubramanian & Ors., I.A. No. 3961 of 2022 in Company Appeal (AT) (Ins.) No. 729 of 2020.

[5] Henry Campbell Black, Black’s Law Dictionary 1433 (West Publishing Co. 4th ed. 1968).

[6] Id. at pg. 1483.

[7] Vijaya Sri v. State of Andhra Pradesh, 2006 SCC OnLine AP 957.

[8] Id. at para 10, 11.

[9] Habu v. State(FB), AIR 1987 Raj. 83, para 39.

[10] Grindlays Bank Ltd. vs. Central Government Industrial Tribunal & Ors., 1980 (Supp) SCC 420.

[11] Id. at para 6.

[12] Harinagar Sugar Mills Ltd. v. Shyam Sunder Jhunjhunwala & Ors., AIR 1961 SC 1669.

[13] Manohar Lal Chopra v. Rai Bahadur Rao Raja Seth Hiralal, AIR 1962 SC 527.

[14] Kapra Mazdoor Ekta Union v. Birla Cotton Spinning & Weaving Mills Ltd. & Anr., (2005) 13 SCC 777.

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