NCLAT New Delhi: Adjudicating Authority Can Recall Judgments But Lacks Power To Review

NCLAT New Delhi: Adjudicating Authority Can Recall Judgments but Lacks Power to Review

The NCLAT Delhi bench, comprising Justice Rakesh Kumar Jain (Member Judicial), Naresh Salecha (Member Technical), and Indevar Pandey (Member Technical), dismissed the appeal filed by Aircastle (Ireland) Ltd. (Appellant), which was aggrieved by the order of the Adjudicating Authority. The Bench distinguished between a review petition and a recall petition, stating that adjudicating authorities have the inherent powers to recall their orders but lack the authority to review the same.

The appeal was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016, against the order of the adjudicating authority by Aircastle (Ireland) Ltd. (Appellant). The appellant had entered into a lease agreement for two aircraft fitted with engines and APUs with the respondent. Due to defaults in payment according to the lease agreement for both aircraft, the Directorate General of Civil Aviation (DGCA) de-registered and repossessed the aircraft. Upon repossession, it was discovered that Aircraft 1 had a different engine and Aircraft 2 had a different APU system installed. By an order dated June 20, 2019, the Corporate Insolvency Resolution Process (CIRP) was initiated, and a moratorium was instituted under Section 14 of the Code against the corporate debtor.

One of the original APU systems had been sent by the corporate debtor for repairs to a company named Honeywell prior to the initiation of the CIRP. Due to difficulties in payment for the repairs, Honeywell retained a lien on the APU and did not return it to the corporate debtor or the appellant. Subsequently, Honeywell decided to auction the system to recover its repair costs, leading the appellant to execute an agreement with the company to acquire it. The respondent requested the appellant to return the engine and APU, asserting that the replaced parts belonged to the lessee and that they were the rightful owners. The respondent also demanded usage charges for the parts, which they claimed had been appropriated for their own use. They filed a case before the adjudicating authority seeking the return of the engine and APU along with rental charges for their usage.

The adjudicating authority ruled in favor of the respondent, prompting the appellant to approach the NCLAT, arguing that it was the owner of the disputed engine and APU and that the adjudicating authority had no right to issue new or modified reliefs.

The appellant, aggrieved by the order, contended that the respondent was not entitled to claim ownership of the engine and APU, asserting that the particulars of the lease agreement were not properly assessed by the adjudicating authority. The appellant emphasized that, according to the agreement, if the lessee (the corporate debtor) replaced any parts in the aircraft, the lessee (the appellant) would become the owner of those parts. Furthermore, the appellant argued that the respondent had no grounds to file a recall application, stating that the tribunal could only recall orders in cases of factual mistakes, not to grant new or modified reliefs.

Conversely, the respondent maintained that the replaced parts belonged to the lessee and demanded their return along with usage charges for the engine and APU in dispute. The respondent also asserted that the tribunal needed to recall its judgment due to its failure to assess the usage charges properly and referred to SpiceJet as JetLite, claiming this constituted a factual defect requiring rectification.

The Principal Bench dismissed the appeal filed by Aircastle, upholding the NCLT's decision and stating that rectification of factual errors by the tribunal was not arbitrary. The court affirmed that the respondent was entitled to ownership of the replaced parts and directed the appellant to return them.

Additionally, the court recognized the respondent's claim for usage charges and stated that the appellant was responsible for paying the specified amount to the respondent. The Tribunal dismissed the appellant's argument that the NCLT had conducted a review instead of a recall, clarifying that the NCLT possesses the authority to recall its orders when they contain factual errors that cause confusion among parties. This recall does not equate to a review, which would necessitate a re-examination of the case merits and statutory provisions.

Ultimately, the court ruled in favor of the respondent, asserting that it was the rightful owner of the replaced parts and that the appellant had wrongfully used them, thus being liable for the usage charges.