TaxTMI 
TaxTMI 
2024 (10) TMI 333
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....nsolvency & Bankruptcy Code, 2016 ('Code') against the Impugned Order dated 09.05.2024 passed by National Company Law Tribunal, Mumbai Bench-I ('Adjudicating Authority') in application being IA No. 1011/2024 in Company Petition (IB) No. 2205/MB/2019. Mr. Ashish Chawchharia is the Respondent No. 1 who is the Resolution Professional of Jet Airways (India) Limited ('Corporate Debtor') Spicejet Limited is the Respondent No. 2, Union of India (through Directorate General of Civil Aviation) is the Respondent No. 3 and Commissioner of Customs (import) is the Respondent No. 4. 2. Heard the Counsel for the Parties and perused the records made available including the cited judgements. 3. The Appellant submitted that its earlier name Klaatu Aircraft Leasing (Ireland) Ltd. was changed to Aircastle (Ireland) Ltd. on 23.12.2021. 4. The Appellant submitted that he has entered into a Lease Agreement of aircraft on 25.06.2015 bearing Manufacturer's Serial Number ('MSN') 34799 (hereinafter called as Aircraft No. 1) fitted with Engine Serial Numbers ('ESN') 894166 and 894175 along with Auxiliary Power Unit ('APU') No. 7243. The Appellant submitted that similarly on 22.12.2016. he enter....
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....from the Appellant notwithstanding that the engine in dispute was never utilised by the Appellant. The Appellant stated that since, he acquired APU in dispute through a separate independent transaction by paying to Honeywell, this APU belongs to him and therefore did not return the same to the Corporate Debtor. 13. The Appellant brought out that the Respondent No. 1 filed an IA No. 615/2021 before the Adjudicating Authority seeking reliefs of returning the engine and APU in disputes along with claiming rental charges for the use of the Engine in dispute and APU in dispute which were in possession of the Appellant. 14. It is the case of the Appellant that there was a clear understanding between the Appellant and the Corporate Debtor in terms of Lease Agreement that if APU or engine was removed from any of the aircrafts and replaced, the replaced APU and/or engine would become property/ assets of the Appellant. The Appellant cited the terms of the Lease Agreement, specifically Clause 10.4 and Clause 1.3 of Schedule in support of his claims. The Appellant stated that since these are properties of the Appellant, there is no merit in the arguments of Respondent No. 1 claiming r....
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....ct that the IA No. 615/2021 had been filed when the CIRP was in play, however, during the pendency of IA No. 615/2021, the Resolution Plan had been approved on 22.06.2021 and the CIRP stood concluded. Therefore, the Resolution Professional became functus officio. The Appellant elaborated and submitted that the CIRP commenced on 20.06.2019; Original Application was filed on 24.02.2021; Resolution Plan was approved on 22.06.2021; First Judgment was delivered on 04.12.2023; Recall application was filed on 23.12.2023 and the Impugned Order was passed 09.05.2024. The Appellant stated in background of these date and events, as per Section 23 and 31 of the Code, the Respondent No. 1 could have continued only till approval of Resolution Plan, therefore, the Respondent No. 1 became functus officio. 21. The Appellant submitted that Engine in dispute and APU in dispute were acquired prior to CIRP. The Appellant stated that in Neesa Leisure Ltd. v. RSIIC this Appellate Tribunal held that property taken prior to commencement of CIRP cannot be covered by the Resolution Plan under the Code. 22. The Appellant argued that reliance placed in a judgment passed by Hon'ble Delhi High Court in the....
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....pondent submitted that under the agreements, the Corporate Debtor was required to replace the parts, excluding engine that was worn out, beyond repair or permanently rendered unfit for use and title of such repaired part was to vest with Respondent No. 1 free and clear of all claims. In this connection, the Respondent No. 1 cited Clause 1.3 of Schedule 3 of the Agreements (Part A of Schedule 2) and Clause 1.3.2 of the Lease Agreements. 31. The Respondent No. 1 submitted that during the normal course of operations, the Corporate Debtor routinely interchanges engines and other parts between its various aircrafts taken on lease for the purposes of repairs and maintenance. The Respondent No. 1 submitted that the APU Nos. 7440 was fitted on Aircraft 2 in replacement of then existing APU, and later, an APU being APU P-5121 belonging to the Corporate Debtor was fitted on the Aircraft 2 in replacement thereof. The Respondent No. 1 stated that Engine No. ESN 962829 was removed and Engine No. ESN 803473 belonging to the Corporate Debtor was installed in the Aircraft 1 instead. The Respondent No. 1 emphasized that the said engine installed by the Corporate Debtor on the aircraft does no....
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....) with Appellant's Engine (that was in the Corporate Debtor's possession), the Appellant failed to return the Corporate Debtor Engine and either of the APUs to the Corporate Debtor. The Respondent No. 1 alleged that the Appellant and has continued to monetise not only the Corporate Debtor Engine, but also both the Corporate Debtor's APU as well as Appellant Original APU, thereby unjustly enriching the Appellant to the detriment of the Corporate Debtor. 36. The Respondent No. 1 further submitted that on 04.12.2023, the Adjudicating Authority passed the Impugned Order containing certain inadvertent errors which caused grave prejudice to the Respondent No. 1 and therefore the Respondent No. 1 sought the Adjudicating Authority's intervention for correcting the same vide his application for recall of the order dated 04.12.2023. 37. The Respondent No. 1 refuted the Appellant's allegations that the recall Application was not maintainable since the Respondent No. 1 (i.e, the Resolution Professional) was no longer in-charge of the affairs of the Corporate Debtor. The Respondent No. 1 also refuted allegations of the Appellant that the Respondent No. 1 was seeking a review of the Im....
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....n 04.08.2017 (prior to the commencement of the CIRP) and was retrieved by the Appellant. The Respondent No. 1 submitted that the Adjudicating Authority conclusion in original order dated 04.12.2023 that " we do not find any submission from the Resolution Professional in relation to status of Original APU...." was a mistake by the Adjudicating Authority and because of this mistake, the Adjudicating Authority did not consider the Respondent No. 1 submissions in relation to Original APU, which prejudiced the Corporate Debtor. The Respondent No. 1 emphasised that the Appellant's Original APU was no longer in the possession, custody or control of the Respondent No. 1 and in fact both Appellant's and the CD's APU were in the custody and control of Appellant since January 2020, which was illegal action on part of the Appellant. 41. The Respondent No. 1 clarified that no reliefs were sought in relation to Appellant's Original APU and the Respondent was only seeking return of the CD's APU and usage charges for period January 2020 till date i.e. the period for which the Appellant has been using both Appellant's and CD's APU for Appellant's own commercial gain. 42. The R....
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....s in possession and control of Appellant's Original APU and the CD's APU and the Appellant has been monetising both APUs. The Respondent No. 1 sated that under no circumstances or the Agreements, the Appellant was entitled to be in possession of and commercially exploit both APUs and the mistake by the Adjudicating Authority in relation to the factual position qua the CD's APU and consequent decision based thereon, including qua usage charges, caused prejudice to the Corporate Debtor and all its stakeholders and therefore the Respondent No. 1 requested the Adjudicating Authority to recall the order dated 04.12.2023. 45. The Respondent No. 1 contended that since the APUs on the aircrafts were "parts" as defined in the Lease Agreements, title to the APUs passed the Respondent No. 1 when the APUs were installed on the aircrafts (which Appellant repossessed) as in terms of Clause 1.3.2, the replaced APU's title passes to the Corporate Debtor. 46. The Respondent No. 1 stated that on February 20, 2019, Engine No. ESN 962829 was removed and the CD's Engine came to be installed in the Aircraft I being Aircraft No. MSN-34799 and, therefore, at the time of repossession ....
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..... (iii) Whether the Impugned Order dated 09.05.2024 is incorrect on as its tantamount to review rather than recall of the order and gave relief to the Respondent No. 1 wrongly which are not permissible as per laid down law and judicial precedents. Since, all these issues are inter-related, inter-connected and inter-dependent, we shall deal with these issues in conjoint manner in subsequent discussions. 52. As regards, the issue of maintainability of the appeal filed by the Respondent No. 1 in the capacity of Resolution Professional who has become allegedly functus officio as claimed by the Appellant, we find that similar issue was decided in the judgment of Tata Steel BSL Ltd. (Supra), and the relevant portion of the same reads as under :- 70. A perusal of the said amendment demonstrates that the authorities were aware that many a times a company was driven to insolvency due to dubious transactions which are extremely complicated. The Resolution Professional has a very limited time to unearth these transactions by which time the period of resolution process gets over and the Committee of Creditors are forced to take a haircut. In order to get over this, it h....
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....nt No. 1‟s reliance upon this clause is misplaced. This clause has no bearing on the dispute in the present matter. Regulation 38 is titled ―Mandatory contents of the Resolution Plan‖. Regulation 38(2) requires that a resolution plan "shall" contain whatever is listed under sub-clauses (a) to (d). Therefore, the understanding is that Regulation 38(2)(d) necessitates a resolution plan to provide for the manner in which the resolution applicant seeks to deal with a pending avoidance application and the proviso sets a cut-off date for the applicability of the new regulation. Therefore, all resolution plans submitted before the NCLT for approval on or after 14.06.2022 must mandatorily provide for the manner in which they seek to deal with a sub-judice avoidance application and resolution plans submitted for approval before 14.06.2022 are not necessitated to provide for the manner in which the resolution applicant seeks to deal with such claims. Therefore, the provision only deals with what ought to be in resolution plans and cannot be interpreted to extinguish proceedings pertaining avoidable transactions in resolution plans submitted before 14.06.2022 altogether. ....
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....pect to adjudication of avoidance applications in a situation, as described hereinabove. There being a clear demarcation between the scope and nature of the CIRP and avoidance application within the scheme of the IBC, the RP can continue to pursue such application. ... (Emphasis Supplied) 53. We are conscious of the fact that the above judgement of Tata Steel BSL Ltd. (Supra), was in context of avoidance application filed by the Resolution Professional which were allowed to be continued and in this context, the Hon'ble Delhi High Court held that the Resolution Professional cannot be treated as functus officio and was allowed to continue. The present case is on its own facts where the Resolution Professional was pursuing his prayers during CIRP was authorised to file Interlocutory Application on behalf of the Monitoring Committee for the benefit of the Corporate Debtor. The rationale for the ratio remains the same and applicable in this case i.e., the Resolution Professional should not be treated as functus officio and therefore the argument of the Appellant that the appeals are not maintainable does not hold any ground. 54. Incidentally, we held the similar position ....
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....arty, or iv) A judgment was rendered in ignorance of the fact that a necessary party had not been served at all or had died and the estate was not represented. 58. The power to recall a judgment will not be exercised when the ground for reopening the proceedings or vacating the judgment was available to be pleaded in the original action but was not done or where a proper remedy in some other proceeding such as by way of appeal or revision was available but was not availed. The right to seek vacation of a judgment may be lost by waiver, estoppel or acquiescence. 59. Generally speaking, review can be permitted, if found in the statute by the competent judicial forum. Review can be filed, if there is discovery of New and Important matter or evidence, which, after the exercise of due diligence was not within the knowledge of the person seeking review or could not be produced by him at any time when the decree was passed or order made or some mistake or error apparent on the face of the record or any other sufficient reason. 60. We consciously note that the NCLT & NCLAT have inherent powers to recall order but have no power to review its order. 61. We further note t....
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.... exists fraud or collusion in obtaining the judgment. (iii) there has been a mistake of the court prejudicing a party, or (iv) a judgment was rendered in ignorance of the fact that a necessary party had not been served at all or had died and the estate was not represented... 20. The above judgments of the Hon'ble Supreme Court clearly lays down that there is a distinction between review and recall. The power to review is not conferred upon this Tribunal but power to recall its judgment is inherent in this Tribunal since inherent power of the Tribunal are preserved, powers which are inherent in the Tribunal as has been declared by Rule 11 of the NCLAT Rules, 2016. Power of recall is not power of the Tribunal to rehear the case to find out any apparent error in the judgment which is the scope of a review of a judgment Power of recall is not power of the Tribunal to rehear the case to find out any apparent error in the judgment which is the Reference in I.A. No. 3961 of 2022 in Company Appeal (AT) (Ins.) No 729 of 2020 scope of a review of a judgment. Power of recall of a judgment can be exercised by this Tribunal when any procedural error is committed i....
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....replaced from time to time, inter-alia, with an APU number 7440 and then on August 04, 2017, an APU 121 ("CD's APU"). On July 24, 2018, the Original APU was sent by the Corporate Debtor to M/s Honeywell for repairs. 71. We note that around April 2019, on account of the financial crisis faced by the Corporate Debtor, various aircrafts operated by the Corporate Debtor were grounded and consequently returned to the lessor and accordingly the Appellant repossessed both its leased Aircrafts. When the Appellant repossessed its Aircrafts, the CD's Engine and CD's APU remained attached to the Aircrafts. Subsequently, Appellant leased these Aircrafts to Respondent No. 2 who has been operating the same with the CD's Engine and CD's APU fitted thereon. 72. Thus, the Appellant is in possession of Original APU (7243), CD's APU (5121) and CD's Engine (803473). Further, both the aircrafts were re-leased to SpiceJet (R2) and they too were utilising the fitted engine (803473) and APU (5121) which belonged to CD. 73. There were some factual inaccuracies and error in the order dated 04.12.2023 in IA no. 615 of 2023, which has been corrected in the Impugned Order dated 09.....
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....or such engine. Accordingly, the Respondent No. 1 is duty bound to return the Engine no. ESN 803473 ("Engine"), and the corporate debtor shall hand over the original engine to them. However, the respondent no 1 shall be entitled to make claim for the job work charges paid by them to M/s Honeywell while retrieving the Original Engine from them. Since, the said Engine was fitted in replacement of Original Engine and Respondent No.1 was deprived Original Engine which is still in possession of Corporate Debtor, we not find any merit in the claim for usage of charges for such engine. In the alternate, the parties may choose to make claim for the differential in price, if it is ascertainable, and agreeable to the Parties. 7.8 As regards return of APU E-5121 ("APU"), we do not find any submission from the Resolution Professional in relation to status of Original APU, except that the said APU is to be returned by JetLite, their sister concern. However, we find that Lease Agreement in relation to Aircrafts was entered into between the Corporate Debtor and Respondent No. 1, hence, the Resolution Professional cannot shift the onus to recover the said APU from JetLite, as there exi....
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....d should be returned back to maximize the value of Corporate Debtor, as the Corporate Debtor's engine and APU is of greater value. In the same order, it was mentioned that 'the Original Engine belonging to the Respondent No. 1 has travelled back to the Respondent No. 1' which is not correct position because it was still with Respondent No. 1 as their engine was fitted in the aircraft. However, the Adjudicating Authority did not mention that Corporate Debtor's Engine and APU were in possession of the Appellant and should be returned to Corporate Debtor as it is of greater value. This was corrected in the order of the Adjudicating Authority dated 09.05.2024 mentioning that the Appellant should return Corporate Debtor's engine which is of greater value and the original engine of the Appellant shall be returned them by Corporate Debtor. Thus, we find the correction in nature of recall. 76. We note that in Para 7.7 of the Impugned Order dated 09.05.2024 as well as in order dated 04.12.2023 the Adjudicating Authority had discussed regarding return of Engine No. ESN No. 803473 (disputed engine) and regarding entitlement of the Appellant to make claims for the job work charges paid to H....
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....ng two APUs in possession of the Appellant, the Adjudicating Authority has directed the Appellant to return APU 5121 to the Respondent No. 1 and also entitling the Appellant herein to make claim for job work charges paid by the Appellant to M/s Honeywell. 78. After correcting the facts and stating the details in the amended para 7.8 in the Impugned Order dated 09.05.2024 the Adjudicating Authority also corrected omission of the usage charges payable by the Appellant to Respondent No. 1. 79. We note that in the original appeal before the Adjudicating Authority 24.02.2021, following was specifically pleaded by the Appellant. "28. The Applicant states that, as on the date of filing the present Application, the Respondents are liable to pay a sum of INR 12,79,29.115/- (Ruposs Twelve Crores Seventy Nine Lakhs Twenty Nine Thousand One Hundred and Fifteen Only) towards fixed lease rent of the Engine from June 20. 2019 to February 22, 2021 (@USD 3000 per day) along with variable lease rentals at the rate of USD 220 per hour and USD 180 per cycle against usage of the Engine during the aforesaid period. Further, the Respondents are liable to pay a sum of INR 8.52.86.077/- (Rup....