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2025 (5) TMI 861 - AT - IBCRectification of inadvertent typographical error - impermissible review of the earlier order which the Adjudicating Authority is not empowered to undertake - HELD THAT - The Appellant failed to refer to any material on record on the basis of which it can be held that Appellant was entitled for extinguishment of personal guarantees including third party guarantees. The present was a sale of CD in liquidation as a going concern. There being no foundation for grant of relief of extinguishment of personal guarantees the same was obviously held to be a typographical error by the Adjudicating Authority. The Adjudicating Authority passed the earlier order dated 10.05.2024 and is fully empowered to correct any typographical error by using its inherent powers. When a Court is satisfied that inadvertent typographical error has been committed the Court is fully empowered to correct such inadvertent typographical error. The Appellant cannot be allowed to take advantage or benefit of any error in judgment which has occurred inadvertently. Conclusion - There is no error in the order dated 04.10.2024 rectifying the inadvertent typographical error in the order dated 10.05.2024. Appeal dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in these appeals are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Competence of the Adjudicating Authority to rectify the alleged inadvertent typographical error Relevant legal framework and precedents: The Tribunal examined Rule 11 and Rule 154 of the NCLT Rules, 2016. Rule 11 preserves the inherent powers of the Tribunal to make orders necessary to meet ends of justice or prevent abuse of process. Rule 154 empowers the Tribunal to correct clerical or arithmetical mistakes or errors arising from accidental slips or omissions in any order at any time, either on its own motion or on application by a party, within two years from the date of the final order. Court's interpretation and reasoning: The Adjudicating Authority, in the impugned order dated 04.10.2024, held that the word "GRANTED" appearing in Sl. No.12 of the reliefs and waivers table in the order dated 10.05.2024 was an inadvertent typographical error and should have been "NOT GRANTED." It reasoned that this correction did not amount to a review of the earlier order but was a permissible rectification under Rule 154 read with Rule 11 of NCLT Rules. Key evidence and findings: The Liquidator filed an application specifically pleading that the relief for assignment/extinguishment of personal guarantees was never granted and that the inclusion of the word "GRANTED" was an inadvertent error. The Liquidator's pleadings referred to the hearing record where this relief was objected to and even conceded by the Successful Auction Purchaser's counsel as contrary to settled law. The Adjudicating Authority relied on these pleadings and hearing notes to find that the error was inadvertent and clerical in nature. Application of law to facts: Given the pleadings and hearing record, the Adjudicating Authority was justified in invoking Rule 154 and Rule 11 to correct the typographical error. The correction did not alter the substantive rights or review the merits but merely rectified a clerical slip. Treatment of competing arguments: The Appellant contended that the correction was tantamount to an impermissible review and that no inadvertent error was pleaded or established. The Tribunal rejected this, noting the clear pleadings by the Liquidator and the hearing record showing the relief was not granted and was opposed. The Tribunal held that the Adjudicating Authority was conscious of its lack of power to review but was exercising its rectification powers. Conclusion: The Adjudicating Authority was competent to rectify the inadvertent typographical error under Rule 154 read with Rule 11, and such correction did not constitute a review of the order dated 10.05.2024. Issue 2: Legality of the relief concerning extinguishment or assignment of personal guarantees Relevant legal framework and precedents: The Tribunal extensively referred to the Supreme Court's decision in Lalit Kumar Jain v. Union of India & Others (2021) 9 SCC 321, which held that approval of a resolution plan does not ipso facto discharge a personal guarantor of liabilities under the contract of guarantee. Further, the judgment in Maharashtra State Electricity Board Bombay v. Official Liquidator High Court, Ernakulam was cited, which clarified that liquidation of the principal debtor does not absolve the surety of liability under the Indian Contract Act, 1872. Court's interpretation and reasoning: The Tribunal noted that the relief of assignment or extinguishment of personal guarantees was not approved by the Stakeholders Consultation Committee (SCC) or the Committee of Creditors (CoC). The auction was conducted on an "as is where is" basis without any condition for extinguishment of personal guarantees. The Adjudicating Authority observed that the legal position is settled that personal guarantees survive the liquidation or insolvency of the principal debtor. Key evidence and findings: The minutes of the SCC meetings and the pleadings on record showed no approval for such relief. The hearing notes and submissions confirmed that the Successful Auction Purchaser's counsel conceded the relief was contrary to settled law. The Tribunal found no material on record supporting entitlement to extinguishment of personal guarantees. Application of law to facts: Applying the settled legal principles, the Adjudicating Authority correctly held that the relief of extinguishment or assignment of personal guarantees was not legally tenable and thus its grant in the order dated 10.05.2024 was a clerical error. Treatment of competing arguments: The Appellant argued that the relief was rightly granted and did not require correction. The Tribunal rejected this, emphasizing the absence of any foundation for such relief and reliance on binding Supreme Court precedents. Conclusion: The relief of extinguishment or assignment of personal guarantees was not legally permissible and was correctly held to have been inadvertently granted in error. Issue 3: Whether the impugned order amounted to an impermissible review Relevant legal framework and precedents: It is a settled principle that the Adjudicating Authority under the Insolvency and Bankruptcy Code does not possess power to review its own orders. However, correction of clerical or typographical errors is permissible under Rule 154 and inherent powers under Rule 11. Court's interpretation and reasoning: The Adjudicating Authority expressly stated that the impugned order dated 04.10.2024 was not a review but a correction of an inadvertent typographical error. The Tribunal concurred with this view, holding that the correction did not revisit the merits or re-decide the relief but merely rectified a slip. Key evidence and findings: The pleadings and hearing record showed that the relief was never granted substantively and that the correction merely aligned the order with the actual decision taken during the hearing. Application of law to facts: The correction was within the scope of rectification powers and did not amount to review. Treatment of competing arguments: The Appellant contended that the correction was a disguised review and deprived it of remedy. The Tribunal rejected this contention, holding that the remedy against the original order dated 10.05.2024 was lost due to the error, and correction was necessary to prevent miscarriage of justice. Conclusion: The impugned order did not amount to an impermissible review but was a valid correction of an inadvertent error. 3. SIGNIFICANT HOLDINGS "A 'going concern sale' of the corporate debtor in liquidation does not absolve the liability of the guarantor, and the guarantor shall remain liable for any outstanding debts owed by the debtor to the creditor." "Approval of a resolution plan does not ipso facto discharge a personal guarantor (of a corporate debtor) of her or his liabilities under the contract of guarantee. As held by this court, the release or discharge of a principal borrower from the debt owed by it to its creditor, by an involuntary process, i.e. by operation of law, or due to liquidation or insolvency proceeding, does not absolve the surety/guarantor of his or her liability, which arises out of an independent contract." "The fact that the principal debtor had gone into liquidation would not have any effect on the Bank's liability as guarantor. Under section 128 of the Indian Contract Act the liability of the surety is co-extensive with that of the principal debtor unless it is otherwise provided by the contract. A surety is no doubt discharged under section 134 of the Indian Contract Act by any contract between the creditor and the principal debtor by which the principal debtor is released or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. But a discharge which the principal debtor may secure by operation of law in bankruptcy or in liquidation proceedings in the case of a company does not absolve the surety of his liability." "We are conscious of the legal position that the Adjudicating Authority is not vested with any power to review its own decisions. We make it clear that this order is being issued only to rectify that inadvertent typographical error in the Order dated 10.05.2024 in SL No. 12 at page 17, under Rule 154 read with 11 of the NCLT Rules, 2016." Core principles established include:
Final determinations on each issue:
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