2021 (11) TMI 993 - AT - Insolvency and Bankruptcy

Adjudicating Authority's Jurisdiction Overstepped, Order Set Aside, Case Remanded for Fair Review

The Tribunal found that the Adjudicating Authority exceeded its jurisdiction by reviewing its own order, leading to the impugned order dated 11.06.2021 ... Liquidation of Corporate Debtor - Section 33 of the IBC - review power - Recall power - error apparent on the face of record or not - HELD THAT:- The term ‘Error apparent on the face’ of the proceedings is held to be one based on clear ignorance or disregard of the provisions of Law as per decision of the Hon’ble Supreme Court in LILY THOMAS, ETC. VERSUS UNION OF INDIA & ORS. [2000 (5) TMI 1045 - SUPREME COURT]. Further, in the decision of the Hon’ble Supreme Court in HARI VISHNU KAMATH VERSUS SYED AHMAD ISHAQUE AND OTHERS [1954 (12) TMI 22 - SUPREME COURT] it is held that ‘it is essential that it should be something more than a mere error; it must be one which must be manifest on the face of the record’. Review power - HELD THAT:- In the decision of Hon’ble Supreme Court in Patel Narshi Thakershi V. Pradyumansinghji Arjunsinghji reported in (1971) 3 SCC Page 844, at spl page 847 it is observed and held that ‘the power of review is not an inherent power. It must be conferred by Law either specifically or by necessary implication’. No wonder, the ‘Tribunal’ has no inherent power to review, as per Section 114 and Order 47 of the Civil Procedure Code. Tribunal's Power - HELD THAT:- Mere glance of Section 420(2) of the Companies Act, 2013 unerringly points out that the ‘Tribunal’ has power to rectify its order, if there is any mistake apparent from the record, but it has ‘no power’ of review of its own order. In this regard, this ‘Tribunal’ pertinently points out that Rule 154 of the National Company Law Tribunal Rules, 2016 enjoins the ‘Tribunal’ to rectify its order, if there is any clerical or arithmetical mistake in the order of the Tribunal or any error therein arising out of any accidental slip or omission of its own motion or an application of any party by means of rectification. Recall power - HELD THAT:- It is significantly pointed out by this ‘Tribunal’ that Hon’ble Supreme Court in the decision in SRI BUDHIA SWAIN & ORS. VERSUS. GOPINATH DEB & ORS. [1999 (5) TMI 596 - SUPREME COURT] has prescribed the conditions for recalling an order (i) the proceedings suffer from the inherent lack of jurisdiction and such lack of jurisdiction is patent (ii) There exists fraud or collusion in obtaining the judgement (iii) There has been a mistake of the Court prejudicing a party, or (iv) a judgement rendered in ignorance of the fact that a necessary party has not been served at all or had died and his estate was not represented. In the instant case, on going through the impugned order dated 11.06.2021 in IA No.2034/2021 in (IB) 702(ND)/2018 this Tribunal finds that the ‘Adjudicating Authority’ at para 12 had observed that it has no power to review its own order but traversed beyond its purview and reviewed the order dated 04.07.2019 in CA No.827/2019 by concluding that once a liquidation order was passed there is no scope to recall, which is contrary to the order passed by it on 04.07.2019 where it observed that the pending application will be disposed and then liquidation be directed. The ‘Adjudicating Authority’ (National Company Law Tribunal, New Delhi II) is directed to restore the application to its file and to pass fresh orders on merits, in accordance with law, of course, after providing adequate opportunity of hearing to both sides, by permitting them to raise all factual and legal pleas as expeditiously as possible - application allowed. Issues Involved:1. Review of Order by Adjudicating Authority.2. Appointment of Liquidator.3. Pendency of Applications.4. Jurisdiction and Power of Review.5. Procedural Fairness and Opportunity to be Heard.Detailed Analysis:1. Review of Order by Adjudicating Authority:The primary issue is whether the Adjudicating Authority (National Company Law Tribunal, New Delhi Bench II) exceeded its authority by reviewing its own order dated 04.07.2019. The Appellants argued that the Adjudicating Authority had no power to review its previous order, as it is not conferred by the Insolvency and Bankruptcy Code (IBC) or the Companies Act, 2013. The Tribunal noted that Section 420(2) of the Companies Act allows rectification of orders only for mistakes apparent from the record and does not provide for a review. The Tribunal cited precedents, including the Supreme Court's decision in Patel Narshi Thakershi v. Pradyumansinghji Arjunsinghji, which held that the power of review must be explicitly conferred by law.2. Appointment of Liquidator:The Adjudicating Authority had initially passed an order for liquidation on 14.06.2019 but deferred the appointment of a liquidator. The Tribunal observed that under Section 34 of the IBC, the Resolution Professional (RP) could act as the liquidator unless replaced. The RP had given consent to act as the liquidator, and no decision was taken by the Committee of Creditors (CoC) to replace him. The Tribunal found that the liquidation order was validly passed due to the absence of a resolution plan and the expiry of the CIRP period.3. Pendency of Applications:The Appellants contended that the Adjudicating Authority failed to consider the pending applications, CA 607/2019 and CA 731/2019, which were crucial for deciding the liquidation. The Tribunal noted that the Adjudicating Authority had deferred the liquidation proceedings until the disposal of these applications. The Tribunal emphasized that procedural fairness required the pending applications to be addressed before proceeding with liquidation.4. Jurisdiction and Power of Review:The Tribunal underscored that the Adjudicating Authority had no jurisdiction to review its own orders beyond rectifying apparent mistakes. The impugned order dated 11.06.2021 was found to be beyond the jurisdiction of the Adjudicating Authority as it effectively reviewed and altered the previous order dated 04.07.2019, which had deferred the liquidation.5. Procedural Fairness and Opportunity to be Heard:The Tribunal highlighted that the Appellants were not given an opportunity to be heard regarding the liquidation order passed on 14.06.2019. The lack of notice and hearing rendered the order ex parte, giving the Appellants the right to seek its recall under Rule 49(2) of the NCLT Rules, 2016. The Tribunal found that the Adjudicating Authority failed to appreciate this procedural lapse and did not provide adequate opportunity for the Appellants to present their case.Conclusion:The Tribunal concluded that the Adjudicating Authority had overstepped its jurisdiction by reviewing its own order. The impugned order dated 11.06.2021 was set aside, and the case was remanded to the Adjudicating Authority to restore IA No.2034/2021 and pass fresh orders on merits, ensuring both parties are heard. The appeal was allowed, and the related interim applications were closed.