Pranav B Prem

In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) Principal Bench, New Delhi, comprising Justice Ashok Bhushan (Chairperson), Mr. Arun Baroka (Technical Member) and Mr. Barun Mitra (Technical Member), has held that an order passed by the Adjudicating Authority after considering all essential materials for determining the issue cannot be recalled. The Tribunal emphasized that an order can only be recalled on limited grounds such as procedural errors or if the judgment was obtained by playing fraud on the court.

Background of the Case

The case revolves around Sarga Udaipur Hotels & Resorts Private Limited (Corporate Debtor) which entered into a loan agreement with Housing and Urban Development Corporation Limited (HUDCO) for an amount of Rs. 6907.92 Lakhs. Under the agreement, HUDCO was empowered to appoint a Nominee Director to the Corporate Debtor's Board. Dr. Alok Kumar Joshi was appointed by HUDCO in this capacity. The Corporate Debtor initiated the Corporate Insolvency Resolution Process (CIRP) by filing an application under Section 10 of the Insolvency and Bankruptcy Code, 2016. The Adjudicating Authority admitted the application on April 29, 2022.

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HUDCO filed a claim for Rs. 23,82,02,414/- in the CIRP proceedings, out of which Rs. 20,60,55,675/- was admitted by the Resolution Professional. However, the Resolution Professional refused to include HUDCO in the Committee of Creditors (CoC) on the grounds that it was a related party under Section 5(24) of the IBC. HUDCO challenged this decision by filing I.A. No. 514/KB/2022 before the Adjudicating Authority, seeking inclusion in the CoC. On August 30, 2023, the Adjudicating Authority ruled in favor of HUDCO, holding that it was not a related party and directing the Resolution Professional to reconstitute the CoC. The present appeal was filed by Shristi Infrastructure Development Corporation Limited (Appellant) seeking a recall of the order dated August 30, 2023, arguing that the order was obtained by suppression of material facts and amounted to fraud on the court.

Arguments by the Parties

Appellant's Contentions:

1. The Appellant argued that HUDCO, through its joint venture with Shristi Infrastructure Development Corporation Limited (SIDCL), controls the Corporate Debtor via Srishti Urban Infrastructure Development Ltd. (SUIDL), where HUDCO holds a 40% share and SIDCL holds 60%.

2. It was further argued that HUDCO failed to disclose its 51st Annual Report, which described the Corporate Debtor as its subsidiary company. This non-disclosure, according to the Appellant, amounted to playing fraud on the court, thus justifying a recall of the August 30, 2023, order.

Respondent's Contentions:

1. The Respondent (HUDCO) argued that the issue of whether it was a related party was thoroughly examined by the Adjudicating Authority. All evidence and arguments were considered, and the decision was reached on merit.

2. HUDCO contended that the Annual Report relied upon by the Appellant was already in the public domain, being filed with the Registrar of Companies (RoC), and was considered by the Adjudicating Authority. Hence, the allegation of suppression was unfounded.

3. The Respondent maintained that the Appellant's application was essentially a disguised attempt to seek a review of the prior judgment, which is not permissible under the IBC framework.

Observations of the NCLAT

The NCLAT, while dismissing the appeal, made the following key observations:

1. The Tribunal reiterated the distinction between a review and a recall. Citing its earlier decision in Union Bank of India v. Dinkar T. Venkatasubramanian & Ors., the NCLAT highlighted that while it lacks the power to review its judgments, it possesses the inherent power to recall judgments only under exceptional circumstances. These include procedural errors, such as the absence of a necessary party, or where the judgment was obtained by fraud.

2. The Tribunal noted that the Adjudicating Authority had considered all arguments, including the Resolution Professional's assertion that HUDCO exercised control over the Corporate Debtor through SUIDL. The 51st Annual Report, which the Appellant claimed was suppressed, was found to be part of the public record and was also referred to in the impugned order.

3. The NCLAT emphasized that there was no suppression by HUDCO, as the 51st Annual Report was publicly available. The report, while mentioning SUIDL as an associate company, did not classify the Corporate Debtor as a related party to HUDCO.

4. The Adjudicating Authority had thoroughly examined the nature of the relationship between HUDCO, the Corporate Debtor, and SUIDL. The Tribunal observed: "All aspects of the matter including HUDCO having promoted JV with Appellant where HUDCO has 40% shareholding and Appellant has 60% shareholding has been noticed and examined by the Adjudicating Authority in order dated 30.08.2023."

5. The Tribunal concluded that the Appellant's allegations of fraud were without merit, as there was no evidence to suggest deliberate suppression or misrepresentation by HUDCO.

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Dismissing the appeal, the NCLAT held that the order dated August 30, 2023, was passed after a thorough consideration of all relevant facts and materials, and no valid grounds for recall were established.

Appearance:

For Appellant: Mr. Abhishek Anand, Ms. Sugandh Kocchar, Ms. Srishti Juneja and Ms. Akshra Arshi, Advocates.

For Respondents: Mr. Ashok Kumar Jain, Advocate.

Cause Title: Shristi Infrastructure Development Corporation Limited V. Housing and Urban Development Corporation Limited and Anr.

Case No: Company Appeal (AT) (Insolvency) No. 376 of 2025

Coram:  Justice Ashok Bhushan [Chairperson] , Mr. Arun Baroka [Member (Technical)], Mr. Barun Mitra [Member (Technical)]

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