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TMI Blog2024 (10) TMI 333X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been brought out that the Corporate Debtor was required to replace the parts rendered unfit for use and other APU was also treated as parts and for ownership of Parts , the Agreements provided that, if replaced as per the Agreement, title to such replaced part was to vest in the Appellant and title to the removed part would vest with the Corporate Debtor - It has been brought out that as per definition of engine, the terms Engine includes Replacement Engine and engine does not fall within the definition of Parts . As per the original application submitted by the Respondent No. 1, it was clearly stated and supported with documents that Corporate Debtor s Engine bearing number 803473 and Corporate Debtor s APU bearing number 5121 were in possession of the Appellant and should be returned back to maximize the value of Corporate Debtor, as the Corporate Debtor s engine and APU is of greater value. In the same order, it was mentioned that the Original Engine belonging to the Respondent No. 1 has travelled back to the Respondent No. 1 which is not correct position because it was still with Respondent No. 1 as their engine was fitted in the aircraft. However, the Adjudicating Author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 bearing Manufacturer s Serial Number ( MSN ) 34799 (hereinafter called as Aircraft No. 1) fitted with Engine Serial Numbers ( ESN ) 894166 and 894175 along with Auxiliary Power Unit ( APU ) No. 7243. The Appellant submitted that similarly on 22.12.2016. he entered into another Lease Agreement of aircraft bearing MSN 30410 (hereinafter called as Aircraft No. 2) fitted with ESN 890246 and 890248 and APU No. 6355. 5. It is the case of the Appellant that due to defaults in payments in accordance with the Lease Agreements for Aircraft No. 1 and Aircraft No. 2, the said Aircrafts were de-registered by the Directorate General of Civil Aviation and were re-possessed by the Appellant. 6. The Appellant submitted that when he re-possessed the Aircraft No. 1, he found that Aircraft No. 1 had different ESN 803473, (in short the engine in dispute) (Original ESN were 894166 and 894175). Similarly, the Aircraft No. 2 had different APU No. 5121, (in short the APU in dispute) (Original APU No. 6355). 7. The appellant submitted that the Corporate Debtor was initiated under Corporate Insolvency Resolution Process ( CIRP ) vide order dated 20.06.2019 and the moratorium under Section 14 of the Code ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lease Agreement, specifically Clause 10.4 and Clause 1.3 of Schedule in support of his claims. The Appellant stated that since these are properties of the Appellant, there is no merit in the arguments of Respondent No. 1 claiming right on such engine/ APU. 15. The Appellant submitted that the Respondent No. 1 filed an IA No. 1011/ 2024 for recalling of the order dated 04.12.2023 on account of alleged factual inconsistencies. The Appellant brought out that no appeal had been filed by the Respondent No. 1 against the order dated 04.12.2023 and thus it attained finality. It is the case of the Appellant that in disguise of recall application, the Respondent No. 1 effectively made out fresh case for review of original order dated 04.12.2023 which is not permissible as per laid down law. 16. The Appellant submitted that the Adjudicating Authority passed the Impugned Order on 09.05.2024 in IA No. 1011/2024 in Company Petition (IB) No. 2205/MB/2019, which is incorrect order. It is the case of the Appellant, that the Adjudicating Authority can only recall the order in case of factual mistakes but cannot pass fresh order giving new or modified reliefs in favour of the Respondent No. 1. 17. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t property taken prior to commencement of CIRP cannot be covered by the Resolution Plan under the Code. 22. The Appellant argued that reliance placed in a judgment passed by Hon ble Delhi High Court in the matter of Tata Steel BSL Limited vs. Venus Recruiter private Limited Ors. [(2023) SCC OnLine Del 155] decided on 13.01.2023 in LPA 37/2021 and C.M. Nos. 2664/2021, 2665/2021 2666/2021 and LPA 43/2021 and C.M. Nos. 3196/2021 3198/2021 by the Adjudicating Authority is misplaced on account of the fact that the said judgment itself records that the Resolution Professional is functus officio vis-a-vis CIRP. 23. The Appellant further challenged the Impugned Order since post resolution of CIRP, no relief can be granted by the Adjudicating Authority of this nature and for which the only remedy is civil appeal in appropriate legal forum. 24. The Appellant submitted that the Adjudicating Authority has failed to consider that the entire basis of the Respondent No. 1 seeking to recover APU in dispute is that it was installed in lieu of APU 7243 through purchase by paying USD 3,50,000 which was sent to Honeywell for repair and has now been recovered by the Appellant therefore, the Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate Debtor was installed in the Aircraft 1 instead. The Respondent No. 1 emphasized that the said engine installed by the Corporate Debtor on the aircraft does not fall within the meaning of parts mentioned in Clause 1.3 of Schedule 3 of the Agreements (Part A of Schedule 2), and though installed on the Appellant s Aircraft, does not become the Appellant's property. Notably, as per Clause 1.3.2 of the Lease Agreements, as the Corporate Debtor s APU was fitted on Aircraft 2. title of the replaced APU, vested with the Corporate Debtor. The Respondent No. 1 stated that under Section 18(1)(f) of the Code, requires the resolution professional to take custody of all assets belonging to the Corporate Debtor and this was exactly done by him. 32. The Respondent No. 1 submitted that in the year April 2019, on account of the financial crisis faced by the Corporate Debtor, various aircrafts operated by it were grounded and consequently, returned to be repossessed by the lessor. The Respondent No. 1 stated that when the Appellant repossessed its Aircrafts, the Corporate Debtor s Engine remained attached to Aircraft 1 and the Corporate Debtor s APU remained attached to Aircraft 2 and su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Corporate Debtor. The Respondent No. 1 also refuted allegations of the Appellant that the Respondent No. 1 was seeking a review of the Impugned Order in name of the recall of the order. The Respondent No. 1 submitted that his Interlocutory Application was perfectly maintainable since at that juncture the Respondent No. 1 was duly authorized to file the same and was filed by the Respondent No. 1 on 27.02.2021, during the CIRP of the Corporate Debtor, in his capacity as the Resolution Professional of the Corporate Debtor. The Respondent No. 1 brought out that subsequently, the resolution plan of the Corporate Debtor was approved on 22.06.2021 and Monitoring Committee ( MC ) was appointed by the Adjudicating Authority to oversee the implementation of the said resolution plan. The MC appointed the Respondent No. 1 as its authorized representative and therefore the Respondent No. 1 has legal rights to file the said application. The Respondent No. 1 elaborated that the original order was passed on 04.12.2023 and the plan was still being implemented in respect of the Corporate Debtor, thus, his recall Application had to have been filed by the Respondent No. 1 on behalf of the Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period for which the Appellant has been using both Appellant s and CD's APU for Appellant s own commercial gain. 42. The Respondent submitted that the Adjudicating Authority made the following observations about CD's APU in the Order: As regards return of APU E-5121 ( APU ), we do not find any submissions from the Resolution Professional in relation to the status of Original APU except that the said APU is to be returned by JetLite, their sister concern. However, we find that Lease Agreement in relation to Aircrafts was entered into between the Corporate Debtor and Respondent No. 1. hence, the Resolution Professional cannot shift the onus to recover the said APU from JetLite as there exists no privity of contract between JetLite and the Respondent No. 1.... Further, the repossession took place prior to CIRP, the right of set-off is available to the Respondent No. 1 in relation to exchange of APU However, the parties shall be entitled to make claim for the differential in price, if it is ascertainable. ( Emphasis Supplied ) 43. It is submitted by the Respondent No. 1 that JetLite is in no manner involved in the present dispute between the Applicant and Respondents. The Adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Aircraft I being Aircraft No. MSN-34799 and, therefore, at the time of repossession of Aircraft No. MSN-34799 by the Appellant, Engine No. ESN 803473 (CD's Engine) continued to remain installed on it (Engine Nos. ESN 894166 and ESN 894175 which were originally installed on Aircraft No. MSN-34799 came to be installed on different Aircraft of the Appellant which have anyway already been repossessed by the Appellant. The Appellant stated that, at present, admittedly, the Engine remains in the Appellant s possession, and the only engine belonging to Appellant s that remains in the Corporate Debtor's possession is Engine No. ESN 896341. 47. The Respondent No. 1 assailed the conduct of the Appellant who despite discussing swap of the Engine No. ESN 803473 (CD's Engine) (which was in Appellant possession), with Engine No. ESN 896341 (Appellant 's Engine) (which was in the Corporate Debtor's possession), the Appellant failed to return the CD's Engine and either of the APUs to the Corporate Debtor and continued to monetise the CD's Engine to the detriment of the Corporate Debtor. 48. The Respondent No. 1 submitted that the Appellant has not made any claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In order to get over this, it has now become mandatory that the Resolution Plan will necessarily have to take into account these fraudulent transactions which if are set aside would give Committee of Creditors that extra amount which they would otherwise have lost because of the fact that the Resolution Process has come to an end. The contention of Mr. Sibal that the fact that this Resolution has come into effect only from 14.06.2022 means that all the resolution processes which have come into effect prior to 14.06.2022 cannot be re-opened and that the NCLT and the Resolution Professional becomes functous officio once the Committee of Creditors has accepted the Resolution Plan and which has been approved by the NCLT, cannot be accepted. If such an interpretation is accepted it will go against the very purpose of the IBC. The scheme of IBC is just not a commercial call taken by the Committee of Creditors. It was enacted by the legislature to ensure maximum recovery due to the creditors who had lent money to a corporate entity. The endeavour must always be to ensure maximum recovery of that money to the Committee of Creditors because it is public money and public cannot be made to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2022 altogether. 89. Conclusion a) The phrase arising out of or in relation to as situated under Section 60(5)(c) of the IBC is of a wide import and it is only appropriate that such applications are heard and adjudicated by the Adjudicating Authority, i.e., the NCLT or the NCLAT, as the case maybe, notwithstanding that the CIRP has concluded and the resolution applicant has stepped into the shoes of the promoter of the erstwhile corporate debtor. b) CIRP and avoidance applications, are, by their very nature, a separate set of proceedings wherein, the former, being objective in nature, is time bound whereas the latter requires a proper discovery of suspect transactions that are to be avoided by the Adjudicating Authority. The scheme of the IBC reinforces this difference. Accordingly, adjudication of an avoidance application is independent of the resolution of the corporate debtor and can survive CIRP. c) The endeavour of the IBC and its rules and regulations is to ensure that all processes within the insolvency framework are time efficient. While the law mandates a resolution plan to necessarily provide for the treatment of avoidance applications if the same are pending at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14.08.2024 in the matter of Amit Dineshchandra patel Vs. Chandra Prakash Jain Resolution Professional of Sintex Prefab Infra Ltd in Comp. App. (AT) (Ins) No. 785 of 2022. 55. Thus, we hold that the Respondent No. 1 had locus and was entitled to file the application for recall of the order dated 04.12.2023 and on this account, the Adjudicating Authority did not commit any error. 56. At this stage, it is important to go into aspect of recall v/s review primary issue in the present appeal. We note that several judgments have been passed by the Hon ble Supreme Court of India and this Appellate Tribunal explaining the distinction between review petition and recall petition. Based on such judgements, we find following ratios relevant which are summarised as under :- Power of review has to be expressly conferred by a Statute. Power to recall does not require an express provision in a Statute. To recall is an inherent power whereas to review its judgement is not. In a review petition, the Court considers the error apparent on the face of record on its merits. Power of recall is not power of the Tribunal to rehear the case to find out any apparent error in the judgment which is the scope o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that Rule 11 of the NCLAT Rules is merely declaratory in the sense that the NCLAT 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. This Appellate Tribunal further held that even in absence of Rule 11, the 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. 62. However, the Rule cannot be invoked to revisit the findings and it is not open to re-examine the findings. The mistake/error must be apparent on the face of the record and must have occurred due to oversight, inadvertence or human error. It would be open to correct the conclusion if the same is not compatible with the finding recorded on the issues raised. 63. We will also take into account the relevant portion of this Appellant Tribunal s earlier order in the case of U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aud played on the Court in obtaining judgment from the Court. We, for the purpose of answering the questions referred to us, need not further elaborate the circumstances where power of recall can be exercised. (Emphasis Supplied) 64. Above makes clear the distinction between the recall and review. We reiterate that NCLT/NCLAT has inherent power to recall orders but no power for revision of the order. 65. Having noted correct legal position on recall v/s review, we will proceed to examine whether the present Impugned Order dated 09.05.2024 was proper and legal recall order or incorrect and perverse review in name of recall. 66. We note that IA No. 1011/2024 in Company Petition (IB) No. 2205/MB/2019 sought recall of original order dated 04.12.2023 on the ground that there have been certain errors inadvertently included on erroneous basis on the subject matter of disputes by the Adjudicating Authority based on wrong facts. 67. The recall IA was filed by the Respondent No. 1, inter-alia, under section 18 and 25 Code of the Code seeking direction against the Appellant Klaatu Aircraft Leasing (Ireland) Private Limited (now called as Aircastle (Ireland) Ltd. the Appellant herein) and Spic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came to be fitted into the repossessed Aircrafts in replacement of existing Engine and APU. It is the case of the Resolution Professional that original Engine is lesser in value than the Engine owned by the Corporate Debtor and fitted in the repossessed Aircraft prior to its repossession and the Original Engine has been retrieved by Aircastle from Honeywell, whom such original engine was given for repair. Accordingly, the Original Engine belonging to the Respondent No. 1 has travelled back to the Respondent No. 1. It is undisputed fact that the Engine and APU, fitted in the repossessed Aircrafts were owned by the Corporate Debtor, and the re-possession took place prior to commencement of CIRP. The Engine and APU came to be fitted into the repossessed Aircrafts in replacement of existing Engine and APU. It is the case of the Resolution Professional that original Engine is lesser in value than the Engine owned by the Corporate Debtor and fitted in the repossessed Aircraft prior to its repossession and the Original Engine has been retrieved by them from Honeywell, whom such original engine was given for repair. Accordingly, they ought to be given back their engine by the Respondent N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, the parties shall be entitled to make claim for the differential in price, if it is ascertainable. As regards return of APU E-5121 ( APU ), we find that this APU was installed on Aircraft-2 after removal of Lesser's APU P-7243 therefrom. APU P-7243 was sent for repairs to Honeywell on 04.08. 2017 was retrieved by Aircastle i.e. sister concern of Respondent No. 1 by 22nd January 2020. The APU E- 5121 fitted in Aircraft - 2 had also gone to the Lesser on repossession of the Aircraft in other words both APUs reached to the Lesser, thus, causing their unjust enrichment. Accordingly, we direct the Respondent No. 1 to return APU E-5121 to the Applicant within 15 days the date of this order. However, the Respondent No. 1 shall be entitled to make claim for job work charges paid by them M/s Honeywell while retrieving Original Engine from them. As regards usage charges of APU, we note that both the APUs came into possession of the Respondent No. 1 latest by 22.01.2020. Accordingly, we direct the Respondent No. 1 to a sum of Rs. 12,26,000/- towards fixed lease rental for use of APU and USD 220 per hours and USD 180 per cycle as variable rentals for the period from 23.01.2020 to 04. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir. As such the Appellant could not have claimed for the alleged work/ repair charges paid to Honeywell for repair of Engine to be recovered from the Respondent No. 1. However, the errors in both the orders does not impact the merits of the case, although, the error persist. The change made in the Impugned Order dated 09.05.2024 in Para 7.7 is that the Adjudicating Authority has asked the Appellant and the Respondent No. 1 to make claims for the differential in prices, if it is ascertainable and agreeable to the parties. This tantamount that the issue is the differential of pricing which has not been gone into or adjudicated by the Adjudicating Authority and has been left open to the Appellant and the Respondent No. 1 to decide mutually. In view of this, the amended para 7.7 cannot be treated as a review as alleged by the Appellant. 77. As regard, in Para 7.8, we note that in the original order dated 04.12.2023 as well as in the Impugned Order dated 09.05.2024, the Adjudicating Authority have discussed regarding return of APU 5121 (APU in dispute). Significantly, we note that the claims of Respondent No.1 regarding usage charges w.r.t. to APU 5121 (APU in dispute), the Adjudicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Hon'ble Tribunal be pleased to:- (e) Direct Respondent Nos. 1 and 2 to pay to the Corporate Debtor, s sum of INR 12.26.000/- (Rupees Twelve Lakhs Twenty Six Thousand Only) towards fixed lease rental for use of the APU and USD 220 per hour and USD 180 per cycle as variable rentals. pending hearing and final disposal of this Application. 81. Thus, these were specifically pleaded facts before the Adjudicating Authority, however, the Adjudicating Authority due to mistaken facts regarding JetLite, ignored this point. Since the issue itself was ignored by the Adjudicating Authority and once the issue has been corrected by the Adjudicating Authority through suitable corrections, the Adjudicating Authority has recorded consequential correction in the Impugned Order dated 09.05.2024. In view of this, we hold that this is not in nature of review of its order but rather recall. 82. We reiterate that in the order dated 04.12.23, the Adjudicating Authority wrongly confused JetLite with Spicejet, whereas we note that as per the Lease Agreements between the Appellant and the Corporate Debtor, JetLite has no contractual obligation in this matter. The Adjudicating Authority has confused Spice ..... X X X X Extracts X X X X X X X X Extracts X X X X
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