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Exercise of inherent powers u/r 11 has limitations and same can't be enlarged to review the decision

Exercise of inherent powers u/r 11 has limitations and same can't be enlarged to review the decision

NCLAT Rules 2016

Rule 11. Inherent powers

Rule 11 of the NCLAT Rules, 2016, relevant for the purposes of disposal of an application, is as under:

"Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Appellate Tribunal to make such orders or give such directions as may be necessary for meeting the end of justice or to prevent abuse of the process of the Appellate Tribunal” 

The Appellate Tribunal, while dealing with the scope of power conferred under Rule 11 in Action Barter Private Limited v. SREI Equipment Finance Limited and Another, REED 2020 NCLAT Del 2734, held as under:

“6.  …………. Rule 11 is merely declaratory in the sense that this Tribunal is armed with inherent powers to pass orders or give directions necessary for advancing the cause of justice or prevent abuse of the Appellate Tribunal’s process. Even in absence of Rule 11 this Appellate Tribunal, being essentially a judicial forum determining and deciding rights of parties concerned and granting appropriate relief, has no limitations in exercise of its powers to meet ends of justice or prevent abuse of its process. Such Powers being inherent in the constitution of the Appellate Tribunal, Rule 11 can merely be said to be declaring the same to avoid ambiguity and confusion. Having said that, we are of the firm view that the Rule cannot be invoked to revisit the findings returned as regards the assertion of facts and pleas raised in the appeal and it is not open to reexamine the findings on questions of fact, how-so-ever erroneous they may be. The mistake/error must be apparent on the face of the record and must have occurred due to oversight, inadvertence or human error. Of course, it would be open to correct the conclusion if the same is not compatible with the finding recorded on the issues raised. We accordingly decline to entertain any plea in regard to the merits of the matter involved at the bottom of the appeal and confine ourselves to the interpretation of the findings recorded and the conclusions derived therefrom as regards fate of the application under Section 7 of I&B Code filed by the Financial Creditor and the disposal of appeal.” 

Dealing with the scope of review in ‘Lily Thomas and Others v. Union of India and Others, reported in (2000) 6 SCC 224, the Hon’ble Apex Court summed up its conclusions as under:

“56. ………… Such powers can be exercised within the limits of the statute dealing with the exercise of power. The review cannot be treated like an appeal in disguise. The mere possibility of two views on the subject is not a ground for review.” 

Admittedly, power of review has not been expressly conferred on the Appellate Tribunal and the power vested in the Appellate Tribunal under Rule 11 can only be exercised for correction of a mistake. The 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. 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. 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 the Appellate Tribunal is a creation of the statute. Relevant portion of Section 420 reads as under: 

“420 (2) The Tribunal may, at any time within two years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it, and shall make such amendment, if the mistake is brought to its notice by the parties: 

Provided that no such amendment shall be made in respect of any order against which an appeal has been preferred under this Act.” 

A mere glance at 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. 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. Elaborating it to avoid confusion, it can be stated without any fear of contradiction that misreading of evidence/ material or drawing of a wrong conclusion from it which involves application of mind, would not justify invoking of inherent powers to substitute that findings and alter the judgment. 

In the case of Anubhav Anilkumar Agarwal RNA Corporation Private Limited v. Bank of India and Another, REED 2020 NCLAT Del 9005, Applicant is primarily aggrieved of the finding recorded by the 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 is erroneous and there is 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 Appellate Tribunal in para 14 of the judgment, it would be impermissible for the Appellate Tribunal to substitute the finding within the scope of powers exercisable under Rule 11 of NCLAT Rules, 2016. 

The Appellate Authority 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. 

For the aforesaid reasons, the Appellate Authority observed that Rule 11 of NCLAT Rules, 2016 cannot be invoked in the instant case. The application is accordingly dismissed.

Click here to view the Judgment 


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