2022 (5) TMI 1446 - Tri - Insolvency and Bankruptcy

Seeking recalling of order passed by this Adjudicating Authority for initiation of Corporate Insolvency Resolution Process - Where the rights of a party have been considered and declared, then the said proceedings cannot be reopened on the ground that a contrary view has been taken subsequently by the Hon ble Supreme Court in different proceeding and between different parties? HELD THAT - The law laid down by the Hon ble Supreme Court of India in subsequent judgment in Anuj Jain case on 26 February, 2020 2020 (2) TMI 1259 - SUPREME COURT , taking a different view as to Pledge of debentures is not a operational debt has, has apply in those cases where the proceedings initiated under IBC 2016 have not attained finality. Where proceedings have attained finality like decree has become final in a civil court, a different view in Interpretation Nature of Debt, subsequently by Hon ble Supreme Court will apply only to proceedings that may be initiated subsequent to this judgment and pending proceedings which have not attained the finality. Petition dismissed.

Summary

Issues Involved:
1. Lack of jurisdiction under Section 7 of the Insolvency and Bankruptcy Code (IBC).
2. Doctrine of res judicata, merger, and finality of judgment.
3. Applicability of the doctrine of prospective ruling.
4. Power to recall under Rule 11 of NCLT Rules-2016.
5. Locus standi of JSPL to oppose the revival plans of the Corporate Debtor.
6. Doctrine of merger and its applicability.

Detailed Analysis:

1. Lack of Jurisdiction:
The applicant argued that the liquidation proceedings were initiated by JSPL, which is not a financial creditor as per the Supreme Court's ruling in Anuj Jain v. Axis Bank. The pledge of shares does not qualify as "financial debt," making the application under Section 7 of IBC by JSPL non-maintainable. The applicant contended that any order passed without jurisdiction is a nullity and cannot continue legally.

2. Doctrine of Res Judicata, Merger, and Finality of Judgment:
The applicant claimed that the doctrine of res judicata and merger does not apply due to intrinsic lack of jurisdiction. They referenced multiple cases, including Dwarka Prasad Agarwal v. BD Agarwal, to argue that any order without jurisdiction is null and void and can be challenged at any stage. The applicant also emphasized that they were not parties to the original proceedings, making res judicata inapplicable.

3. Applicability of Doctrine of Prospective Ruling:
The applicant argued that the law declared in Anuj Jain's case applies retrospectively, as the Supreme Court did not specify prospective application. They cited MA Murthy v. State of Karnataka to support that unless explicitly stated, Supreme Court judgments apply retroactively.

4. Power to Recall under Rule 11 of NCLT Rules-2016:
The applicant asserted that Rule 11 of the NCLT Rules, which is similar to Section 151 of the CPC, includes the power to recall orders due to lack of jurisdiction. They referenced Jet Plywood Ltd. v. Madhukar Nowlakha and Jotun India Pvt Ltd. v. PSL Ltd. to support their claim that the Tribunal has the power to recall orders on the ground of lack of jurisdiction.

5. Locus Standi of JSPL to Oppose Revival Plans:
The applicant argued that JSPL, not being a financial creditor, has no locus standi to oppose the revival plans of the Corporate Debtor. They contended that JSPL's opposition is against the interest of all stakeholders and lacks justifiable logic.

6. Doctrine of Merger and Its Applicability:
The applicant argued that the doctrine of merger does not apply as the original order was a nullity and cannot merge with any other order. They cited Kunhayammed v. State of Kerala to explain that the doctrine of merger is not universally applicable and depends on the nature of jurisdiction exercised by the superior forum.

Respondent's Arguments:

1. Doctrine of Merger:
The respondent argued that the order dated 11.03.2019, admitting the Corporate Debtor into CIRP, was upheld by the NCLAT and the Supreme Court, and thus, stands merged with the Supreme Court's order. They cited M/s Gojer Bros (Pvt.) Ltd. Vs. Shri Ratan Lal Singh to support their claim.

2. No Power of Review:
The respondent contended that the Tribunal has no power of review under Rule 11 of the NCLT Rules, as held in Adish Jain Vs. Sumit Bansal & Ors. They argued that the applicant is effectively seeking a review, which is not permissible.

3. Applicability of Anuj Jain's Case:
The respondent argued that the factual matrix of the present case is distinguishable from Anuj Jain's case and that the reasoning given by the Supreme Court in Anuj Jain does not apply to the present case.

4. Res Judicata:
The respondent argued that even an erroneous decision on a question of law operates as res judicata, citing Mohanlal Goenka Vs. Benoy Kishna Mukherjee And Others.

Tribunal's Decision:

1. Finality of Proceedings:
The Tribunal held that where the rights of a party have been considered and declared, the proceedings cannot be reopened based on a subsequent contrary view by the Supreme Court in different proceedings. They relied on Union of India Vs. Madras Telephone SC & ST Social Welfare Assn. and State of M.P. vs. Maharaj Singh to support this view.

2. Irreversibility of Liquidation Process:
The Tribunal noted that the process after the appointment of a Liquidator is irreversible, particularly after the dismissal of the SLP by the Supreme Court on 16.08.2019.

3. Applicability of Anuj Jain's Case:
The Tribunal held that the law laid down in Anuj Jain's case applies only to proceedings that have not attained finality. Since the proceedings in the present case had attained finality, the subsequent judgment in Anuj Jain's case does not apply.

Conclusion:
The Tribunal rejected the application, stating that the proceedings had attained finality, and the subsequent judgment in Anuj Jain's case does not apply to the present case. The Tribunal emphasized the importance of finality in judicial proceedings and the irreversibility of the liquidation process.