Previous three-member decision recalled for failing to hear financial creditors before blocking Rs34 crore deduction against CoC's choice

NCLAT, PB, New Delhi recalled a prior three-member bench order because the financial creditors comprising the CoC were not heard when that bench directed the resolution professional not to deduct Rs.34 crores, producing a decision at variance with the CoC's commercial choice. The Tribunal held that affected financial creditors should have been heard (audi alteram partem), therefore the earlier three-member judgment was recalled and the recall application disposed of.

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Issues Involved:
1. Whether the NCLAT has the inherent jurisdiction to recall its judgment.
2. Whether the commercial decision of the CoC regarding the amount of Rs. 34 crores should be varied without hearing the affected party.
3. Whether the Resolution Professional had the authority to decide on the issue of 'interim finance' during the CIRP.

Summary:
Issue 1: Inherent Jurisdiction to Recall Judgment
The five-member bench of NCLAT, in its order dated 25.5.2023, clarified that the Tribunal has the inherent jurisdiction to entertain an application for recall of its judgment on sufficient grounds. It held that the judgment in "Agarwal Coal Corporation Private Limited vs. Sun Paper Mill Limited & Anr." did not lay down the correct law by stating that the Tribunal has no power to recall its judgment. The Supreme Court upheld this view, thus granting finality to the order.

Issue 2: Commercial Decision of CoC and Hearing of Affected Parties
The Tribunal noted that the Financial Creditors of M/s Amtek Auto Limited were not heard when the judgment dated 27.1.2022 was passed, which directed the Resolution Professional not to deduct Rs. 34 crores from the share of Union Bank of India. This was against the principle of natural justice. The Tribunal emphasized that the commercial decision of the CoC, which included the treatment of Rs. 34 crores, should not be varied without hearing the affected parties. Consequently, the judgment dated 27.1.2022 was recalled, and the Financial Creditors were to be impleaded as a party in the rehearing of the case.

Issue 3: Authority of Resolution Professional on 'Interim Finance'
The Tribunal discussed the arguments related to the Resolution Professional's authority to decide on 'interim finance' during the CIRP. The Learned ASG argued that the Resolution Professional did not have the authority to treat the amount debited by the Corporation Bank as 'interim finance' without CoC's approval. The Tribunal noted that this issue was part of the commercial decision made by the CoC, which should be respected unless there is a procedural error or denial of natural justice.

Conclusion:
The NCLAT, while recalling its judgment dated 27.1.2022, directed that the Financial Creditors of M/s Amtek Auto Limited be heard in the rehearing of CA(AT)(Insolvency) No. 729 of 2020. The Tribunal emphasized the importance of adhering to the principles of natural justice and respecting the commercial decisions of the CoC. The inherent jurisdiction to recall a judgment was affirmed, distinguishing it from the power to review.

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