Striking a Balance - NCLAT's Judgment Introduces a New Era in Tribunal's Jurisdiction

In a groundbreaking ruling, a five-member special bench of the NCLAT has clarified and upheld its power to recall judgments, marking a significant turning point in the tribunal's jurisdiction. This pivotal ruling stemmed from the resolution plan of Amtek Auto, wherein the financial creditors sought reconsideration of a previous judgment rendered by a three-member bench, through a 'recall application.' Notably, Union Bank of India contested this application by citing prior NCLAT judgments in cases of Agarwal Coal Corporation Private Ltd vs. Sun Paper Mill and Rajendra Mulchand Varma vs. KLJ Resources, which previously held that the NCLAT lacked the authority to recall its own judgments.

The special bench was tasked with addressing three crucial questions:

1. Does the NCLAT have the power to entertain a recall application, despite not being vested with review powers?

2. Do the judgments in the cases of Agarwal Coal Corporation Private Ltd and Rajendra Mulchand Varma imply that the NCLAT lacks the power to recall judgments?

3. Do the judgments in those cases correctly interpret the law?

In a well-reasoned judgment, the NCLAT drew a clear distinction between review and recall petitions. While review petitions are intended to address apparent errors in judgments, the power to recall can be exercised when any procedural error occurs during the delivery of a judgment. This includes situations where a necessary party has not been served or represented before the Tribunal or where fraud has been perpetrated to obtain a judgment.

Ultimately, the special bench overturned the previous judgments in Agarwal Coal Corporation Private Ltd and Rajendra Mulchand Varma with regards to the lack of power to recall. It firmly established that the NCLAT indeed possesses recall powers, especially in the stated circumstances. The power to recall is inherent in both the Court and the Tribunal, which exercises judicial authority on behalf of the State. However, the bench upheld the judgment regarding the 'review' aspect, affirming that the Tribunal does not have the power to review its own judgments. This watershed ruling definitively establishes the recall power for the Tribunal, facilitating the swift resolution of clerical and procedural errors and consequently reducing unnecessary appeals.

Nevertheless, there is a concern that unscrupulous litigants might exploit this newfound avenue by filing review applications disguised as recall applications, potentially burdening the Tribunal further. Such actions could undermine the efficacy of the Insolvency Code's mechanism for banks and financial institutions, potentially obstructing proceedings and leading to adverse implications on the broader economic and financial landscape.

To address this concern, the Hon'ble Supreme Court, in its recent order on July 31, upheld the NCLAT's view on the "recall jurisdiction." In conclusion, this landmark judgment heralds a new chapter in the Tribunal's functioning. While it streamlines the process of rectifying clerical and procedural errors, it also calls for constant vigilance against any misuse of the recall mechanism, as is the case in any revolutionary process.

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