Exercise of inherent powers under Rule 11 of NCLAT Rules, 2016 cannot be enlarged to review decisions and substitute a view: NCLAT

Exercise of inherent powers under Rule 11 of NCLAT Rules, 2016 cannot be enlarged to review decisions and substitute a view: NCLAT

The Appeal filed against Bank of India and RNA Corp. Pvt. Ltd. has been dismissed by the National Company Law Appellate Tribunal (NCLAT).

In this matter a Company Appeal titled Anubhav Anilkumar Agarwal Vs. Bank of India & Anr was dismissed in terms of the judgment rendered by the Appellate Tribunal with observations that the application filed under Section 7 of I&B Code by the Financial Creditor – Bank of India seeking initiation of Corporate Insolvency Resolution Process against 'RNA Corporation Ltd. (Corporate Debtor), who was the Guarantor was not barred by limitation.

The instant Application had been filed by the Appellant under Rule 11 of NCLAT Rules, 2016 to review the judgment on the ground that the Appellate Tribunal made an inadvertent error in Para 14 of the Judgment ignoring various documents placed on record by both the parties which included the Deed of Guarantee executed by Chamber Constructions in favour of Respondent No. 1 on 9th December, 2013 and consequent to this error there was no debt due payable in law by the Corporate Debtor as Respondent No. 1 had claimed the same amount pertaining to the same debt in the Corporate Insolvency Resolution Process of the Guarantor viz. M/s Chamber Constructions Pvt. Ltd.

The Appellate Tribunal observed that power of review has not been expressly conferred on this Appellate Tribunal and the power vested in this Appellate Tribunal under Rule 11 can only be exercised for correction of a mistake.

The NCLAT ruled, "This Appellate Tribunal does not enjoy power of review under Rule 11. The power of review is not an inherent power which cannot be exercised unless conferred specifically or by necessary implication. Exercise of inherent powers under Rule 11 has limitations and same cannot be enlarged to review the decisions and substitute a view."

Further it held, "The error apparent on the face of record must be manifest and self-evident and it is impermissible to travel beyond record to see whether the judgment is correct or not. The inherent power cannot be exercised in a manner that it would amount to sitting in appeal over the findings recorded on appreciation of evidence. Reappraisal of evidence for examining correctness or otherwise of the finding would amount to sitting in appeal in disguise."

The Appellate Tribunal opined that the findings of fact, how-so-ever erroneous they may be, cannot be revisited and substituted within the limited scope of exercise of powers under Rule 11. Applicant cannot be permitted to seek rehearing of the appeal or reconsideration of the judgment in regard to a finding, even when the same is erroneous. It would be appropriate to refer to provisions of Section 420 of the Companies Act, 2013 dealing with orders of the Tribunal as this Appellate Tribunal is a creation of the statute.

It was observed that Section 420 of the Companies Act, 2013 would reveal that the powers thereunder are exercisable by the 'Tribunal' defined under Section 2(90) which means the 'National Company Law tribunal, constituted under Section 408'. This power is not specifically conferred on the Appellate Tribunal. That apart, power to rectify a mistake apparent from the record cannot be construed to confer a power on the Appellate Tribunal to reappraise material on record to substitute a finding.

According to the tribunal, this would amount to usurping the jurisdiction vested in a court of appeal. The finding of fact may be erroneous but if the same is based on appreciation of evidence, reappraisal of material on record to arrive at a different finding changing the decision rendered on merit would be impermissible.

The Appellate Tribunal affirmed that the Applicant was primarily aggrieved of the finding recorded by this Appellate Tribunal in para 14 of the judgment that there was nothing on record to suggest that with regard to the very same debt 'M/s Chamber Constructions Pvt. Ltd.' had issued any Guarantee.

Assuming that such finding was erroneous and there was material in the form of Deed of Guarantee, admission of Respondent No. 1 and other material on record to justify a finding contrary to the one recorded by the NCLAT in para 14 of the judgment, it would be impermissible for the Tribunal to substitute the finding within the scope of powers exercisable under Rule 11 of NCLAT Rules, 2016.

The Appellate Tribunal was of the considered opinion that acceding to the prayer of Applicant would result in substituting the observations and finding recorded in para 14 of the judgment, which is beyond the ambit and scope of Rule 11 of NCLAT Rules and would amount to substituting of finding by reappraisal of evidence, a power only exercisable by a competent court while sitting in appeal the exercisable under Rule 11 of NCLAT Rules, 2016.

For these reasons, Rule 11 of NCLAT Rules, 2016 could not be invoked in the instant case.