Advertisement

Tribunal Invested With Power To Recall Order, SC Holds

Bench comprising Chief Justice of India DY Chandrachud, Justice JB Pardiwala and Justice Manoj Misra heard a batch of appeals under Section 62 of the Insolvency and Bankruptcy Code, 2016 directed against the judgment and order of the National Company Law Appellate Tribunal, Principal Bench, New Delhi

Insolvency and Bankruptcy code, BW Legal World

The Supreme Court of India, on February 12, held that a Court or a Tribunal, in absence of any provision to the contrary, has inherent power to recall an order to secure the ends of justice and/or to prevent abuse of the process of the Court.

Bench comprising Chief Justice of India DY Chandrachud, Justice JB Pardiwala and Justice Manoj Misra heard a batch of appeals under Section 62 of the Insolvency and Bankruptcy Code, 2016 directed against the judgment and order of the National Company Law Appellate Tribunal, Principal Bench, New Delhi whereby the appellant’s appeal against the order of the National Company Law Tribunal, New Delhi came to be dismissed.

Factual matrix 

The appellant (Greater Noida Industrial Development Authority) acquired land for setting up an urban and industrial township. In one of the leases, the Corporate Debtor (CD) committed default in payment of instalments and was served with demand cum pre-cancellation notice. A company petition was filed against the CD for initiating Corporate Insolvency Resolution Process. Consequently, claims were invited through a public announcement. 

Pursuant to the public notice the appellant submitted a claim of Rs. 43,40,31,951, being unpaid instalments payable towards premium for the lease. The claim was set up by the appellant as a financial creditor of the CD. However, the RP treated the appellant as an operational creditor and, vide an email, requested the appellant to submit its claim in Form B, as an operational creditor of the CD. The appellant did not submit its claim afresh as an operational creditor. In the meantime, the COC (Committee of Creditors) approved a plan which was presented to the Adjudicating Authority (NCLT) for approval. The NCLT approved the same. On getting information that the plan had been finalised and approved, the appellant filed Interlocutory Applications questioning, inter alia, the resolution plan, the decision of the RP to treat the appellant as an operational creditor, and all actions in pursuance thereof.

The NCLT rejected the said applications on the ground that, despite lapse of seven months between the date of filing its claim in January, 2020 and the date of approval of the plan in August 2020, the appellant took no steps against the RP for not taking a decision on its claim, even though it was aware about initiation of the CIRP, and now it was not permissible to take a decision on the claim application of the appellant as the CIRP was complete consequent to approval of the plan.

The appeal before the NCLAT also came to be dismissed.

Hence, the instant appeal was preferred before the Supreme Court of India.

Observations 

The Court observed that, "...even if a claim submitted by a creditor against the CD is in a Form not as specified in the CIRP Regulations, 2016, the same has to be given due consideration by the IRP or the RP, as the case may be, if it is otherwise verifiable, either from the proof submitted by the creditor or from the records maintained by the CD."

"...though commercial wisdom of the COC in approving a resolution plan may not be justiciable in exercise of the power of judicial review, the Adjudicating Authority can always take notice of any shortcoming in the resolution plan in terms of the parameters specified in sub-section (2) of Section 30 of the IBC coupled with Regulations 37 and 38 of the CIRP Regulations 2016," the Court noted.

Holding that the recall application was maintainable, the Supreme Court said that, "The law which emerges from the decisions above is that a Tribunal or a Court is invested with such ancillary or incidental powers as may be necessary to discharge its functions effectively for the purpose of doing justice between the parties and, in absence of a statutory prohibition, in an appropriate case, it can recall its order in exercise of such ancillary or incidental powers."

Decision 

The Apex Court set aside the order passed by the NCLT approving the resolution plan. The resolution plan was sent back to the COC for re-submission after satisfying the parameters set out by the IBC.



Around The World

Advertisement