Thursday 2 May 2024

Imp. Rulings; - Recall of orders obtained through fraud or misrepresentation.

Imp. Rulings; - Recall of orders obtained through fraud or misrepresentation.

Index; 

  1. SCI (2024.02.12) in Greater Noida Industrial Development Authority Vs. Prabhjit Singh Soni and Anr. [Civil Appeal Nos. 7590-7591 of 2023]

  2. SCI (31.10.2023) in Sanjay Kumar Agarwal Vs. State Tax Officer (1) & Anr. [Review Petition (Civil) No. 1620-1623 of 2023 in Civil Appeal No. 1661 of 2020 (Neutral Citation No. 2023 INSC 963)]

  3. NCLAT (25.05.2023) In Union Bank of India Vs. Dinkar T. Venkatasubramanian & Ors.  [Reference made by Three Member Bench in I.A. No. 3961 of 2022 in Company Appeal (AT) (Ins.) No. 729 of 2020, (2023) ibclaw.in 85 SC]

  4.  NCLT Hyderabad (15.11.2022) in Mr. H. Kishen  Vs. Feno Plast Limited & Anr. [ IA 1248 of 2022 in CP(IB) No. 10/7/HDB/2022

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1. SCI (2024.02.12) in Greater Noida Industrial Development Authority Vs. Prabhjit Singh Soni and Anr. [Civil Appeal Nos. 7590-7591 of 2023] held that;

  • That the Form in which a claim is to be submitted under the CIRP Regulations 2016 is directory and not mandatory. What is important is, the claim must be supported by proof.

  • That the RP is under a statutory obligation to collate the data obtained from (a) the claim(s) made before it and (b) information gathered from the records including those maintained by the CD.

  • In consequence, 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,

  • A fortiori, if a claim is submitted by an operational creditor claiming itself as a financial creditor, the claim would have to be accorded due consideration in the category to which it belongs provided it is verifiable.

  •  in our view, 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. If any such shortcoming appears in the resolution plan, it may send the resolution plan back to the COC for re-submission after satisfying the parameters so laid down.

  • The inherent power has not been conferred upon the court; it is a power inherent in the Court by virtue of its duty to do justice between the parties before it.”

  • 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

  • It was observed that there may be other grounds for recall of a judgment one of them being where fraud is played on the Court in obtaining a judgment.

[ Link Synopsis ]

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2. SCI (31.10.2023) in Sanjay Kumar Agarwal Vs. State Tax Officer (1) & Anr. [Review Petition (Civil) No. 1620-1623 of 2023 in Civil Appeal No. 1661 of 2020 (Neutral Citation No. 2023 INSC 963)]  ex-parte proceedings, AA observed as under;

  • We are of the opinion that the well-considered judgment sought to be reviewed does not fall within the scope and ambit of Review. The learned Counsels for the Review Petitioners have failed to make out any mistake or error apparent on the face of record in the impugned judgment, and have failed to bring the case within the parameters laid down by this Court in various decision for reviewing the impugned judgment.

[ Link Synopsis ]

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3. NCLAT (25.05.2023) In Union Bank of India Vs. Dinkar T. Venkatasubramanian & Ors.  [Reference made by Three Member Bench in I.A. No. 3961 of 2022 in Company Appeal (AT) (Ins.) No. 729 of 2020, (2023) ibclaw.in 85 SC] held that;

  • The inherent power has not been conferred upon the Court; it is a power inherent in the Court by virtue of its duty to do justice between the parties before it.

  • The Hon’ble Supreme Court in the above judgment has clearly held that where a party has had no notice and decree is made against him, he can approach the court for setting-aside the decision.

  • There is a distinction between a petition under Article 32, a review petition and a recall petition. While in a review petition the Court considers on merits where there is an error apparent on the face of the record, in a recall petition the Court does not go into the merits but simply recalls an order which was passed without giving an opportunity of hearing to an affected party.”

  • In our opinion a tribunal or a court may recall an order earlier made by it if

- (i) the proceedings culminating into an order suffer from the inherent lack of jurisdiction and such lack of jurisdiction is patent,

- (ii) there 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.

  • The order passed is liable to be recalled and reviewed not because it is found to be erroneous, but because it was passed in a proceeding which was itself vitiated by an error of procedure or mistake which went to the root of the matter and invalidated the entire proceeding.

  • That no review lies on merits unless a statute specifically provides for it. Obviously when a review is sought due to a procedural defect, the inadvertent error committed by the Tribunal must be corrected ex debito justitiae to prevent the abuse of its process, and such power inheres in every court or Tribunal.

  • This Tribunal is not vested with any power to review the judgment, however, in exercise of its inherent jurisdiction this Tribunal can entertain an application for recall of judgment on sufficient grounds.

Further Developments;

Hon'ble Supreme Court (31.07.2023) in Union Bank of India v. Financial Creditors of Amtek and ors,[Civil Appeal No. 4620/2023]  observed as under;

"We are in agreement with the view taken by the Five Judges Bench of the NCLAT and thus find no reason to interfere with the impugned judgment."

[ Link Synopsis ]

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4. NCLT Hyderabad (15.11.2022) in Mr. H. Kishen  Vs. Feno Plast Limited & Anr. [ IA 1248 of 2022 in CP(IB) No. 10/7/HDB/2022 ]  held that;

  • 'The principle that a person who does not come to the Court with clean hands is not entitled to be heard on the merits of his grievance and, in any case, such person is not entitled to any relief is applicable not only to the petitions filed under Articles 32, 226 and 136 of the Constitution but also to the cases instituted in others courts and judicial forums

  • Therefore, we have no doubt that the remedy to move for recalling the order on the basis of the newly discovered facts amounting to fraud of high degree, cannot be foreclosed in such a situation

  • "No court or tribunal can be regarded as powerless, to recall its own order. If it is convinced that the order was wangled through fraud or misrepresentation of such a dimension as would affect the very basis of the claim".

[ Link Synopsis ]

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Disclaimer:

The sole purpose of this post is to create awareness on the "IBC - Case Law" and to provide synopsis of the concerned case law, must not be used as a guide for taking or recommending any action or decision. A reader must refer to the full citation of the order & do one's own research and seek professional advice if he intends to take any action or decision in the matters covered in this post.

Mr. Vijendra Kumar Jain Vs Mr. Nitin Ramchandra Jadhav and Ors.. - Thus, by taking a cue from the judgments rendered by the English Courts in this regard, the following acts have been held to constitute ‘Wrongful Trading’;

NCLT Mumbai-V (2024.05.07) in Mr. Vijendra Kumar Jain Vs Mr. Nitin Ramchandra Jadhav and Ors..[ (2024) ibclaw.in 515 NCLT, I.A. 677 of 2023...