- Apprentice Lawyer
Calling it "inappropriate", incompetent" and a "misadventure", a five-member bench of the National Company Law Appellate Tribunal has turned down the reference by a three-member bench to reconsider the decision in V Padamakumar vs Stressed Assets Stabilization Fund (SASF) & Anr. [Bishal Jaiswal vs ARC LTd & Ors]
A bench headed by Justice Bansi Lal Bhat, Acting Chairperson said,
"..it was inappropriate on the part of the Referral Bench to doubt the correctness of the five Member Bench Judgment, which admittedly has not been appealed against and occupies the field till date..It was a matter of judicial discipline for the Referral Bench to follow the judgment of the five-member Bench in ‘V. Padmakumar’s Case’ as a binding precedent and not question the correctness of the Judgment by adopting the ‘cut and paste’ methodology in branding the five Member Bench Judgment in ‘V. Padmakumar’s Case’ as ‘so very incorrect’.."
Other members of the bench were Justices Venugopal M and Anant Bijay Singh, Members (Judicial) along with Kanthi Narahari and Shreesha Merla, Members (Technical).
With a 4:1 majority, a five-member bench in V Padamakumar had held that reflection of debt in the balance sheet could not be considered as an acknowledgment of debt under Section 18 of the Limitation Act.
The reference order was passed by a bench of Justice Jarat Kumar Jain, Member (Judicial), Balvinder Singh and VP Singh, Members (Technical).
Clarifying that it was not a "Constitutional Court", the NCLAT stated that it was an "Appellate Tribunal" whose mandate was to only interpret and apply the law as it is.
Defending the verdict, the NCLAT stated that the five-member Bench took note of the relevant and latest authoritative pronouncements of the Supreme Court.
After revisiting the series of case laws, the NCLAT recorded,
"..In “Babulal Vardharji Gurjar Vs. Veer Gurjar Aluminum Industries Ltd. & Anr.”, Civil Appeal No. 6347 of 2019, the Hon’ble Apex Court observed that Section 18 of the Limitation Act, 1963 would have no application to proceedings under I&B Code. Therefore, the issue raised as regards acknowledgement of liability by reflection in the Balance Sheet/ Annual Return would be irrelevant...
It is, therefore, preposterous to hold that the judgment of five Member Bench ‘is so incorrect that the same can in no circumstances be followed’. The Referral Bench has failed to draw a distinction between the ‘recovery proceedings’ and the ‘insolvency resolution process’..the order of reference which, in letter and spirit, is more akin to a judgment of an Appellate Court appreciating the findings and judgment in ‘V. Padmakumar’s Case’ is incompetent and deserves to be rejected."
The NCLAT further opined that "such misadventures" weaken the authority of law, dignity of institution as also shake people’s faith in rule of law and hoped that the members of the Referral Bench would "exhibit more serious attitude towards adherence of the binding judicial precedents and not venture to cross the red line".
Advocates Abhijeet Sinha, Sandeep Bajaj, Devansh Jain appeared for the Appellant, Bishal Jaiswal.
Bajaj is the Founder & Managing Partner and Jain is Senior Associate at PSL Advocates & Solicitors.
Respondent, ARC Ltd was represented by Senior Advocate Ramji Srinivasan with Advocates Abhirup Dasgupta, Ishaan Duggal.
Read the Order: