Introduction

The Supreme Court of India ("Supreme Court") recently dismissed five Review Petitions1 seeking review of the judgment passed in State Tax Officer vs. Rainbow Papers Limited ("Rainbow Papers judgment")2.

Facts

In the Rainbow Papers judgment, the Supreme Court held that the State is a secured creditor under the Gujarat Value Added Tax, 2003 ("GVAT Act"). Accordingly, under Section 53(1)(b)(ii) of the Insolvency and Bankruptcy Code, 2016 ("IBC"), the debts owed to the State under the GVAT Act, being a secured creditor, are to rank equally with other specified debts including debts on account of workman's dues for a period of 24 months preceding the liquidation commencement date. The Supreme Court also held that Section 48 of the GVAT Act is not contrary to or inconsistent with Section 53 or any other provisions of the IBC.

Aggrieved by the findings in the Rainbow Papers judgment which had caused quite a stir in the lender community, five Review Petitions were filed seeking review of the judgment. The Counsels for the Review Petitioners relied heavily on the observations made by a two Judge Bench of the Supreme Court in Paschim Anchal Vidyut Vitran Nigam Limited vs. Raman Ispat Private Limited and Others3 which stated that the Rainbow Papers judgment did not notice the waterfall mechanism under Section 53 of the IBC, which placed dues payable to the government below those of secured creditors and even unsecured and operational creditors. Placing reliance on the judgment of Paschim Anchal Vidyut Vitran Nigam Limited (supra), the Counsels for the Petitioners urged to review the Rainbow Papers judgment.

Summary of the Judgment

Before delving into the facts of the Review Petition, the Supreme Court, referring to Order XLVII of the Code of Civil Procedure, 1908 ("CPC") along with various other judgments4 passed by the Supreme Court, elucidated the grounds for review of a judgment which are:-

  1. A judgment is open to review inter alia if there is a mistake or an error apparent on the face of the record;
  2. A judgment pronounced by the Court is final, and departure from that principle is justified only when circumstances of a substantial and compelling character make it necessary to do so;
  3. An error which is not self-evident and has to be detected by a process of reasoning, can hardly be said to be an error apparent on the face of record justifying the court to exercise its power of review;
  4. In exercise of the jurisdiction under Order 47 Rule 1 CPC, it is not permissible for an erroneous decision to be "reheard and corrected";
  5. A Review Petition has a limited purpose and cannot be allowed to be "an appeal in disguise".
  6. Under the guise of review, the petitioner cannot be permitted to reagitate and reargue the questions which have already been addressed and decided;
  7. An error on the face of record must be such an error which, mere looking at the record should strike and it should not require any long-drawn process of reasoning on the points where there may conceivably be two opinions;
  8. Even the change in law or subsequent decision/ judgment of a co-ordinate or larger Bench by itself cannot be regarded as a ground for review.

The Supreme Court noted that a co-ordinate Bench of the Court made an observation of the Rainbow Papers judgment passed by another Bench. With respect to the same, the Supreme Court observed that a co-ordinate Bench cannot comment upon the discretion exercised or judgment rendered by another co-ordinate Bench of the same strength, and the only recourse available if a Bench is of the opinion that the co-ordinate Bench has passed an incorrect decision on a question of law, the recourse would lie in reference of the matter to a larger Bench. This observation was also made by a three Judge Bench in the matter of Sant Lal Gupta and Others vs. Modern Cooperative Group Housing Society Limited and Others5.

Apart from the above, the Court dismissed the Petitioners' submission that the Court failed to consider waterfall mechanism in Section 53 and other provisions of the IBC in the Rainbow Papers judgment. It further noted that since there was no error apparent on the face of the record in the Rainbow Papers judgment to make it eligible for review, and dismissed the petitions.

Conclusion

In view of the dismissal of the five Review Petitions, the judgment of Rainbow Papers which observed that the State is a secured creditor under the GVAT Act and accordingly as per Section 53(1)(b)(ii) of the IBC, the debts owed to the State under the GVAT Act, being a secured creditor are to rank equally with other specified debts including debts of workman's dues, still hold the field.

Footnotes

1. Review Petition (Civil) No.1620 of 2023 in Civil Appeal No. 1661 of 2020

2. Civil Appeal No. 1661 of 2020

3. Civil Appeal No. 7976 of 2019

4. Parsion Devi and Others vs. Sumitri Devi and Others, (1997) 8 SCC 715; Shanti Conductors Private Limited vs. Assam State Electricity Board and Others (2020) 2 SCC 677; Arun Dev Upadhyaya vs. Integrated Sales Service Limited & Another R.P. (C) Nos.

5. (2010) 13 SCC 232

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