NCLAT Examines the Inherent Powers of Tribunals, Specifically Highlighting Its Ruling in the CIRP of Jet Airways

The NCLAT examined the inherent powers of tribunals, specifically highlighting its ruling in the corporate insolvency resolution process (CIRP) of Jet Airways.

The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, led by Justice Rakesh Kumar Jain (Judicial Member) and Technical Members Mr. Naresh Salecha and Mr. Indevar Pandey, reviewed an appeal and observed that Appellate Tribunals (NCLAT) possess inherent powers to recall orders to correct factual or procedural errors, but not to review final orders for errors. The NCLAT Bench held that the NCLT’s order constituted a valid recall to rectify factual inaccuracies regarding asset ownership, aligning with Rule 11 of the NCLAT Rules, 2016.

In this appeal before the National Company Law Appellate Tribunal (NCLAT), Aircastle (Ireland) Ltd. challenged the National Company Law Tribunal (NCLT), Mumbai's order dated May 9, 2024, under Section 61 of the Insolvency and Bankruptcy Code (IBC). The appeal arose in the context of Jet Airways' ongoing Corporate Insolvency Resolution Process (CIRP). Aircastle, which had leased aircraft to Jet Airways, repossessed them following defaults in payments. Upon repossession, Aircastle discovered that certain aircraft parts, including engines and auxiliary power units (APUs), had been replaced during Jet Airways' operations, leading to a dispute over ownership of these parts.

Aircastle asserted that under the Lease Agreements, it retained ownership of replaced parts, and therefore, the disputed APU belonged to it. Conversely, the resolution professional for Jet Airways, Ashish Chawchharia, argued that these parts were assets of the corporate debtor and sought their return, claiming that Aircastle’s repossession included Jet Airways' assets. The NCLT ruled in favour of the resolution professional, directing Aircastle to pay charges for the use of the disputed APU. Aircastle contended that the NCLT’s order was flawed, as the resolution professional’s authority ceased once the resolution plan was approved, and his actions amounted to an impermissible review of a final order.

In its judgment, the NCLAT distinguished between recall and review powers, referencing key precedents. It concluded that the NCLT's order was a recall to correct factual inaccuracies rather than a review, which would involve re-examining the case for errors. The tribunal found that the original order wrongly included JetLite in the proceedings and misrepresented ownership details of the engine and APU, necessitating correction under Rule 11 of the NCLAT Rules, 2016. Upholding procedural fairness, the NCLAT affirmed the NCLT’s correction, ensuring that Aircastle returned the corporate debtor’s assets while clarifying the scope of the resolution professional’s powers post-CIRP approval.

Mr. Ankur Mahindro, Mr. Rohan Taneja, Mr. Ajay Kumar, Ms. Aanchal Nanda, Mr. Hetaram Bishnoi, and Mr. Aditya Kapur, Advocates, represented the Appellant.

Mr. Malhar Z., Mr. Raghav Chadha, Mr. Dhiraj Kumar Totala, Ms. Aditi Bhansali, Ms. Vasudha Jain, Mr. Ankit Pal, Mr. Ajay Raj, and Mr. Nishant Upadhyay, Advocates, appeared for Respondent No. 1.

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REEDLAW 2024 NCLAT Del 10507