Introduction
A three-member bench of the NCLAT held that the NCLT and NCLAT have inherent power under Rule 11 of NCLAT Rules, 2016. In holding so, the NCLAT laid emphasis on the distinction between the power to recall an order as opposed to a review. Further, the NCLAT clarified that the Rule cannot be invoked to revisit or re- examine the tribunal's findings or reopen a case.
The following article delves into the various judicial decisions and legal provisions related to the NCLAT and NCLT's power to recall their orders. It also highlights the appellate tribunal's recent decision in Aircastle (Ireland) Ltd. v. Mr. Ashish Chawchharia, RP of Jet Airways (India) Ltd. and Ors1 (the Aircastle case).
Factual Background
An appeal was filed by Aircastle (Ireland) Ltd. (the appellant), against an order (impugned order) of the NCLT, Mumbai Bench. The appellant had leased out two aircraft to Jet Airways (Jet). Upon repossession of both aircraft, the appellant discovered the engine and Auxiliary Power Unit (APU) system attached to the aircraft had been replaced by Jet. The appellant claimed that under the terms of the lease agreement, the replaced components became the appellant's property. Both aircraft were later re-released to SpiceJet.
In June 2019, Jet entered the Corporate Insolvency Resolution Process (CIRP). Subsequently, Jet's resolution professional (the respondent) filed applications to recover the components in dispute that belonged to Jet (corporate debtor) and maximise value for its creditors.
Additionally, the respondent also claimed usage charges from the Appellant for using the components.
Legislative Background (Aircastle Case)
In the original order passed by the NCLT in December 2023 (original order), the tribunal made certain factual errors. The tribunal, despite discussing the respondent's contentions regarding its entitlement for recoverable usage charges, incorrectly concluded that no merit was found in the respondent's contentions regarding the usage charges. Further, the NCLT incorrectly referred to SpiceJet as JetLite, even though JetLite had no contractual obligation in this matter and was not a party to these proceedings. The NCLT erroneously observed that the components should not be returned to the corporate debtor solely on account of it being with the corporate debtor's sister concern JetLite. Genuine mistakes made by the NCLT regarding the possession and control of the components in dispute seriously prejudiced the respondent and Jet.
Accordingly, the respondent filed an application under Sections 18 and 25 of the Insolvency and Bankruptcy Code, 2016 (IBC), requesting the tribunal to recall its original order so as to rectify the factual errors that prejudiced the respondent. Consequently, the NCLT recalled the original order, corrected the factual errors mentioned above, and made consequential changes, as mentioned in the impugned order, regarding the respondent's right to claim the possession of the components in dispute and usage charges.
The appellant, in appeal before the NCLAT, claimed that the impugned order passed by the NCLT was tantamount to review, not recall. The appellant requested the appellate tribunal to set aside the impugned order.
Recall Vs. Review: Judicial Background and Legal Provision
The issue of the distinction between the powers to recall and review has been discussed by the Hon'ble Supreme Court and the NCLAT on previous occasions. In in Sri Budhia Swain v. Gopinath Deb & Ors. (1999) 4 SCC 396 the Supreme Court stipulated that an order can be recalled in the following scenarios: the proceedings suffer from inherent lack of jurisdiction, the existence of fraud or collusion in obtaining the order, mistake of the Court prejudicing a party, or if the judgement 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. requested the appellate tribunal to set aside the impugned order.
On the other hand, the power to review, generally speaking, is conferred on a judicial forum only by a statutory provision. In Union Bank of India v. Dinkar T. Venkatasubramanian & Ors.2, the NCLAT laid down the distinction between the powers of review and recall. The NCLAT noted that the power to recall does not entitle the tribunal to rehear the case nor to find out any apparent error in the judgement, which is the scope of review. The NCLAT also noted that the tribunal is vested with the inherent power to recall and set aside its orders in certain circumstances.
Rule 11 of the NCLAT Rules, 2016 (the Rules), provides the tribunal with the inherent power to recall an order. However, the Rules do not confer upon the tribunal the power to review its orders. In Action Barter Pvt. Ltd. Vs Srei Equipment Finance Ltd.,3 the NCLAT clarified that Rule 11 is merely declaratory in nature. The appellate tribunal, by nature of being a judicial forum determining and deciding the rights of parties, is inherently vested with the power to recall its orders. Rule 11 is simply a declaration of said inherent powers to avoid ambiguity. However, Rule 11 cannot be invoked to re-examine the findings or review an order. The NCLAT, based on several judgements passed by the Hon'ble Supreme Court and the NCLAT itself, explained the distinction between a review petition and a recall petition.
The NCLAT clarified that the power of recall does not allow the tribunal to rehear the case to find any apparent error in the judgement. The tribunal is entitled to exercise its inherent power of recall when a procedural error is committed in delivering the previous order. For instance, a necessary party was not served or was not before the tribunal when an adverse order was passed against such party. Further, the NCLAT reiterated the conditions under which an order may be recalled, as stipulated by the Supreme Court in Budhia Swain.
Further, the tribunal shall not exercise the power to recall if the grounds for reopening the proceedings were available to be pleaded in the original action and were not utilised. Similarly, the power to recall is not available to the tribunal in cases where a proper remedy, such as by way of appeal or revision, was available but not pursued.
Additionally, the NCLAT noted that the tribunal cannot entertain an application that is styled as recall but, in essence, is a review application. The NCLAT emphasised that the NCLT and NCLAT have the inherent power to recall orders. However, the tribunals have no power to review their orders.
In light of these observations, the NCLAT, in the Aircastle case, ruled that the impugned order fell under the conditions mentioned in Budhia Swain, specifically, the existence of a mistake of the Court or Tribunal prejudicing a party. Accordingly, the adjudicating authority correctly issued the impugned order, rectifying the mistakes of fact made in the original order and making consequential changes.
Conclusion
In light of the NCLAT's decision in the Aircastle case, the distinction between recall and review can be summarised as follows:
NCLAT and NCLT are vested with inherent powers to recall, not review. The power to review should be expressly conferred by a statute.
- Power to recall can be exercised under Rule 11.
- Power to recall does not entitle the tribunal to look for apparent errors in the judgement, which is the scope of review.
- Power to recall can be exercised by the tribunal when any procedural error is committed, for advancing the cause of justice or preventing abuse of the appellate tribunal's process.
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Footnotes
1. Comp. App. (AT) (Ins) No. 1178 of 2024
2. Comp. App. (AT) (Ins.) No. 729/2020
3. Company Appeal (AT) (Ins.) No. 1434 of 2019
Originally published 27th Feb 2025
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