2021 (10) TMI 1039 - AT - Insolvency and Bankruptcy

Application to Recall Judgment Dismissed, Applicant Advised to Approach Supreme Court for Challenge

The Tribunal dismissed the Applicant/Appellant's request to recall the judgment, advising them to approach the Supreme Court of India for any challenge. ... Admissibility of application - monetary amount involved in the appeal - power of tribunal to review application - Fraudulent acts of the Respondents - pivotal submission is that ‘Fraud’ vitiates the ‘entire judicial proceedings’ and that if such fraudulent acts of the Respondents are permitted and the order passed by this Appellate Tribunal is not recalled - HELD THAT:- Resting upon ‘Review’ the ‘’Tribunal’’ would not rehear the parties on ‘Facts’ and ‘Law. No wonder, a re-appraisal of evidence on record for unearthing an error will amount to an exercise of ‘Appellate Jurisdiction” which is not permitted in Law. A ‘’Review’’ is not to be sought for a ‘Fresh Hearing’ or ‘Arguments’ or ‘Correction of an erroneous view’ taken earlier. It is the well laid down proposition of law that ‘in the absence of any power of ‘Review’ or ‘Recall’ vested with the ‘Adjudicating Authority’ – ‘Appellate Authority’, an order/ judgment passed by it cannot be either Reviewed or Recall as opined by this Tribunal - It cannot be gainsaid that there is no express provision for ‘’Review’’ under the National Company Law Appellate Tribunal Rules, 2016. Moreover, the Applicant/Appellant cannot fall back upon Rule 11 of the NCLAT Rules, 2016 which provides for “inherent powers’’. In fact, Rule 11 of NCLAT Rules, 2016 is not a substantive Rule which showers any power or jurisdiction upon the ‘’Tribunal’’. Undoubtedly, the ‘Tribunal’’ has no power to perform an act which is prohibited by Law. This Tribunal taking note of the prime fact that the Applicant/Appellant has sought for “recalling” the judgement passed by this Appellate Tribunal is impermissible in Law - application dismissed. Issues Involved:1. Admission of Section 9 Application.2. Allegations of fraudulent acts by Respondents.3. Validity of the Chartered Accountant's Report.4. Manipulation of Books of Accounts.5. Conduct of Corporate Insolvency Resolution Process (CIRP).6. Actions taken by the Suspended Board of Directors during CIRP.7. Power of Review and Recall by the Tribunal.8. Applicability of Rule 11 of NCLAT Rules, 2016.Issue-wise Detailed Analysis:1. Admission of Section 9 Application:The Tribunal had previously observed that the only question was how the Section 9 application was admitted if the amount was found to be Rs. 2,173, which is less than Rs. 1 lakh. It was noted that at the admission stage, the Adjudicating Authority needs to check if the record is complete and if there is a 'debt' and 'default'. The Tribunal referred to the Supreme Court's decision in 'Innoventive Industries Ltd. v. ICICI Bank' which stated that even if the claim amount is disputed but more than Rs. 1 lakh, it should be admitted.2. Allegations of Fraudulent Acts by Respondents:The Applicant/Appellant alleged that the Respondents engaged in fraudulent acts, including submitting frivolous 'Debit Notes' and manipulating 'Books of Accounts'. The Applicant claimed that the Respondents' actions were intended to secure a favorable order through fraud. The Applicant also alleged that the Respondents ignored financial statements available with the Ministry of Corporate Affairs.3. Validity of the Chartered Accountant's Report:The Applicant/Appellant contended that the Chartered Accountant's Report, which verified the claim amount, was erroneous. The report stated that all invoices for 2013-2014 were paid except for Rs. 2,173, and mentioned withheld payments for 2012-2013 invoices. The Applicant argued that the Chartered Accountant did not examine the validity of the 'Debit Notes' or the letter dated 06.07.2013.4. Manipulation of Books of Accounts:The Applicant/Appellant accused the 1st Respondent of manipulating 'Books of Accounts' through fraudulent practices. It was alleged that the custom duty obligation, which led to the issuance of 'Debit Notes', was not reported as a contingent liability in the audited financial accounts submitted to the Ministry of Corporate Affairs.5. Conduct of Corporate Insolvency Resolution Process (CIRP):The Applicant/Appellant suspected that the CIRP was not conducted properly and that the 2nd Respondent created an illusion of conducting CIRP. It was alleged that during the moratorium period, the Suspended Board mortgaged the company's assets to obtain a loan of Rs. 1,01,05,00,000, violating the moratorium imposed under the I&B Code.6. Actions Taken by the Suspended Board of Directors During CIRP:The Applicant/Appellant claimed that the Suspended Board of Directors continued to manage the company and made decisions during the CIRP, including holding board meetings and executing a mortgage deed. The Applicant argued that these actions were illegal and taken in violation of the law.7. Power of Review and Recall by the Tribunal:The Tribunal noted that the power of review is a creature of statute and not an inherent power. The Tribunal referred to the Supreme Court's decision in Lily Thomas v. Union of India, which stated that 'Review' is not an 'Appeal' in disguise. The Tribunal emphasized that it cannot rehear the parties on facts and law under the guise of a review petition.8. Applicability of Rule 11 of NCLAT Rules, 2016:The Tribunal highlighted that Rule 11 of NCLAT Rules, 2016, which provides for inherent powers, is not a substantive rule conferring any power or jurisdiction upon the Tribunal. The Tribunal stated that it cannot perform an act prohibited by law and that there is no express provision for review under the NCLAT Rules, 2016.Conclusion:The Tribunal concluded that the Applicant/Appellant's request to recall the judgment dated 16.10.2019 was impermissible in law. The Tribunal advised the Applicant/Appellant to approach the Supreme Court of India if it desired to challenge the judgment. Consequently, IA No.265/2019 in Comp App (AT)(Ins) No.412/2019 was dismissed without any order as to costs.