Recall plea against earlier order in Section 7 IBC case dismissed; review label corrected without stopping proceedings

NCLAT permitted correction of the nomenclature of the pending "review application" to a "recall application," noting that the body of the application already described it as such, and found no necessity to direct NCLT to halt proceedings in the respondent's Section 7 IBC application, as both matters were listed imminently. On consideration of the recall prayer seeking to set aside NCLAT's earlier order and restore NCLT's dismissal of the Section 7 application, NCLAT held that the applicant was impermissibly attempting to re-open and scrutinize the judgment as if in appeal, particularly after having approached SC and then not pressing the appeal there. The recall application was dismissed on merits.

---

---

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the applicant could correct the nomenclature of the pending "review application" to a "recall application".

1.2 Whether any interim direction was required to restrain the adjudicating authority from proceeding with the application under Section 7 of the Insolvency and Bankruptcy Code pending disposal of the recall application.

1.3 Whether the alleged incorrect observations in the appellate judgment regarding limitation and Section 25(3) of the Indian Contract Act warranted recall of that judgment.

1.4 Whether a recall application before the Appellate Tribunal was maintainable after the applicant had already challenged the same appellate judgment before the Supreme Court and the civil appeal was dismissed as "not pressed".

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Nomenclature correction: review application to recall application

Interpretation and reasoning

2.1.1 The application had been titled as a "review application", but within its body, it was described and prayed for as a "recall application".

2.1.2 The Court noted this internal description and treated the substance and nature of the relief sought as determinative, rather than the mere title of the application.

Conclusions

2.1.3 The applicant was permitted to correct the nomenclature of the application and treat it as a recall application.

2.2 Need for interim restraint on the adjudicating authority in the Section 7 proceedings

Interpretation and reasoning

2.2.1 The applicant sought a direction to the adjudicating authority not to proceed with the Section 7 application during pendency of the recall application before the Appellate Tribunal.

2.2.2 The Court was informed that the Section 7 matter had already been adjourned by the adjudicating authority for the next day and that the recall application itself was being heard immediately.

2.2.3 In view of these facts, the Court considered that no effective purpose would be served by issuing any direction to restrain the adjudicating authority.

Conclusions

2.2.4 The request for a direction to the adjudicating authority not to proceed with the Section 7 application was declined as unnecessary.

2.3 Alleged incorrect observations on limitation and Section 25(3) of the Contract Act as ground for recall

Legal framework as discussed

2.3.1 The recall application was founded on the assertion that: (a) the appellate judgment had wrongly recorded, in paragraph 25, that a Supreme Court judgment held that Section 25(3) of the Contract Act enables a financial creditor to continue with the same pending Section 7 application, whereas, according to the applicant, the Supreme Court had held the opposite; and (b) paragraph 12 incorrectly stated that the Section 7 application was considered to be within limitation by the adjudicating authority.

Interpretation and reasoning

2.3.2 The Court examined paragraph 11 of its earlier judgment, where extracts from the adjudicating authority's order had been reproduced, and held that paragraph 12 must be read consequentially as a narration of those facts.

2.3.3 It was expressly noted that paragraph 12 did not contain any independent finding of the Appellate Tribunal; it was only a recital of facts, while the actual findings and reasoning began from paragraph 23 onwards.

2.3.4 The Court therefore held that the statements highlighted in paragraph 12 had no bearing on the final outcome of the appeal and could not be a basis to recall the judgment.

2.3.5 As to the contention regarding Section 25(3) of the Contract Act and the Supreme Court decision, the Court observed that, from paragraph 24 onwards of the earlier appellate judgment, emphasis had been laid on the conduct of the applicant, including: (a) the one-time settlement between the parties dated 20.12.2018, by which the entire amount was agreed to be paid by 31.12.2018; and (b) the earlier issuance of 10 cheques for Rs. 19,34,00,000/- in response to a recall notice, which were dishonoured.

2.3.6 The Court noted that these factual narrations in paragraph 24 of the earlier judgment were not disputed by either party during submissions.

2.3.7 The Court further recorded the respondent's contention that limitation had, in any event, been extended by the issuance of 10 cheques on 02.09.2016 within three years of the relevant period, and that the appeal had been decided essentially on the basis of the OTS and conduct of the parties, not on the contested interpretation of Section 25(3).

2.3.8 In this backdrop, the Court concluded that the alleged errors pointed out by the applicant did not vitiate the reasoning on which the appellate judgment was based and did not justify recall.

Conclusions

2.3.9 The Court held that the statements in paragraph 12 of the earlier judgment were merely narrative and had no impact on the decision, and that the judgment was substantially based on the parties' conduct, including the OTS and dishonoured cheques.

2.3.10 Alleged misstatements on limitation and Section 25(3) of the Contract Act did not constitute a valid ground for recalling the appellate judgment.

2.4 Maintainability of recall application after dismissal of Supreme Court appeal as "not pressed"

Interpretation and reasoning

2.4.1 It was undisputed that the applicant had already challenged the same appellate judgment before the Supreme Court by filing a civil appeal (registered upon diary number), and that the Supreme Court, after hearing learned senior counsel for both sides at length, recorded that the applicant's counsel, on instructions, did not press the appeal.

2.4.2 The Supreme Court accordingly dismissed the civil appeal as "not pressed". The relevant order of the Supreme Court was reproduced in full by the Court.

2.4.3 The Court inferred from this that the applicant had already invoked and exhausted the appellate remedy before the Supreme Court in respect of the same judgment.

2.4.4 The Court observed that, in the guise of a recall application, the applicant was effectively inviting the Appellate Tribunal to sit in appeal over its own final judgment, notwithstanding that the matter had already travelled to the Supreme Court and was argued at length before being dismissed as not pressed.

2.4.5 The Court considered such an attempt impermissible and beyond the legitimate scope of a recall jurisdiction.

Conclusions

2.4.6 In view of the prior proceedings and order of the Supreme Court, the recall application was held to be not maintainable as a means to re-open or re-argue the appellate judgment.

2.4.7 Finding no merit in the grounds urged and treating the application as an impermissible attempt to secure appellate review under the label of recall, the Court dismissed the recall application.

---