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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 ..... against the Impugned Order dated 09.05.2024 passed by National Company Law Tribunal, Mumbai Bench-I ('Adjudicating Authority') in application being IA No. 1011/2024 in Company Petition (IB) No. 2205/MB/2019. Mr. Ashish Chawchharia is the Respondent No. 1 who is the Resolution Professional of Jet Airways (India) Limited ('Corporate Debtor') Spicejet Limited is the Respondent No. 2, Union of India (through Directorate General of Civil Aviation) is the Respondent No. 3 and Commissioner of Customs (import) is the Respondent No. 4. 2. Heard the Counsel for the Parties and perused the records made available including the cited judgements. 3. The Appellant submitted that its earlier name Klaatu Aircraft Leasing (Ireland) Ltd. was changed to Aircastle (Ireland) Ltd. on 23.12.2021. 4. The Appellant submitted that he has entered into a Lease Agreement of aircraft on 25.06.2015 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver utilised by the Appellant. The Appellant stated that since, he acquired APU in dispute through a separate independent transaction by paying to Honeywell, this APU belongs to him and therefore did not return the same to the Corporate Debtor. 13. The Appellant brought out that the Respondent No. 1 filed an IA No. 615/2021 before the Adjudicating Authority seeking reliefs of returning the engine and APU in disputes along with claiming rental charges for the use of the Engine in dispute and APU in dispute which were in possession of the Appellant. 14. It is the case of the Appellant that there was a clear understanding between the Appellant and the Corporate Debtor in terms of Lease Agreement that if APU or engine was removed from any of the aircrafts and replaced, the replaced APU and/or engine would become property/ assets of the Appellant. The Appellant cited the terms of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the pendency of IA No. 615/2021, the Resolution Plan had been approved on 22.06.2021 and the CIRP stood concluded. Therefore, the Resolution Professional became functus officio. The Appellant elaborated and submitted that the CIRP commenced on 20.06.2019; Original Application was filed on 24.02.2021; Resolution Plan was approved on 22.06.2021; First Judgment was delivered on 04.12.2023; Recall application was filed on 23.12.2023 and the Impugned Order was passed 09.05.2024. The Appellant stated in background of these date and events, as per Section 23 and 31 of the Code, the Respondent No. 1 could have continued only till approval of Resolution Plan, therefore, the Respondent No. 1 became functus officio. 21. The Appellant submitted that Engine in dispute and APU in dispute were acquired prior to CIRP. The Appellant stated that in Neesa Leisure Ltd. v. RSIIC this Appellate Tribunal held that 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 O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding engine that was worn out, beyond repair or permanently rendered unfit for use and title of such repaired part was to vest with Respondent No. 1 free and clear of all claims. In this connection, the Respondent No. 1 cited Clause 1.3 of Schedule 3 of the Agreements (Part A of Schedule 2) and Clause 1.3.2 of the Lease Agreements. 31. The Respondent No. 1 submitted that during the normal course of operations, the Corporate Debtor routinely interchanges engines and other parts between its various aircrafts taken on lease for the purposes of repairs and maintenance. The Respondent No. 1 submitted that the APU Nos. 7440 was fitted on Aircraft 2 in replacement of then existing APU, and later, an APU being APU P-5121 belonging to the Corporate Debtor was fitted on the Aircraft 2 in replacement thereof. The Respondent No. 1 stated that Engine No. ESN 962829 was removed and Engine No. ESN 803473 belonging to the Corporate 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 Schedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Debtor Engine and either of the APUs to the Corporate Debtor. The Respondent No. 1 alleged that the Appellant and has continued to monetise not only the Corporate Debtor Engine, but also both the Corporate Debtor's APU as well as Appellant Original APU, thereby unjustly enriching the Appellant to the detriment of the Corporate Debtor. 36. The Respondent No. 1 further submitted that on 04.12.2023, the Adjudicating Authority passed the Impugned Order containing certain inadvertent errors which caused grave prejudice to the Respondent No. 1 and therefore the Respondent No. 1 sought the Adjudicating Authority's intervention for correcting the same vide his application for recall of the order dated 04.12.2023. 37. The Respondent No. 1 refuted the Appellant's allegations that the recall Application was not maintainable since the Respondent No. 1 (i.e, the Resolution Professional) was no longer in-charge of the affairs 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 perfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djudicating Authority conclusion in original order dated 04.12.2023 that " we do not find any submission from the Resolution Professional in relation to status of Original APU...." was a mistake by the Adjudicating Authority and because of this mistake, the Adjudicating Authority did not consider the Respondent No. 1 submissions in relation to Original APU, which prejudiced the Corporate Debtor. The Respondent No. 1 emphasised that the Appellant's Original APU was no longer in the possession, custody or control of the Respondent No. 1 and in fact both Appellant's and the CD's APU were in the custody and control of Appellant since January 2020, which was illegal action on part of the Appellant. 41. The Respondent No. 1 clarified that no reliefs were sought in relation to Appellant's Original APU and the Respondent was only seeking return of the CD's APU and usage charges for period January 2020 till date i.e. the 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 ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that under no circumstances or the Agreements, the Appellant was entitled to be in possession of and commercially exploit both APUs and the mistake by the Adjudicating Authority in relation to the factual position qua the CD's APU and consequent decision based thereon, including qua usage charges, caused prejudice to the Corporate Debtor and all its stakeholders and therefore the Respondent No. 1 requested the Adjudicating Authority to recall the order dated 04.12.2023. 45. The Respondent No. 1 contended that since the APUs on the aircrafts were "parts" as defined in the Lease Agreements, title to the APUs passed the Respondent No. 1 when the APUs were installed on the aircrafts (which Appellant repossessed) as in terms of Clause 1.3.2, the replaced APU's title passes to the Corporate Debtor. 46. The Respondent No. 1 stated that on February 20, 2019, Engine No. ESN 962829 was removed and the CD's Engine came to be installed 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 8941 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h are not permissible as per laid down law and judicial precedents. Since, all these issues are inter-related, inter-connected and inter-dependent, we shall deal with these issues in conjoint manner in subsequent discussions. 52. As regards, the issue of maintainability of the appeal filed by the Respondent No. 1 in the capacity of Resolution Professional who has become allegedly functus officio as claimed by the Appellant, we find that similar issue was decided in the judgment of Tata Steel BSL Ltd. (Supra), and the relevant portion of the same reads as under :- 70. A perusal of the said amendment demonstrates that the authorities were aware that many a times a company was driven to insolvency due to dubious transactions which are extremely complicated. The Resolution Professional has a very limited time to unearth these transactions by which time the period of resolution process gets over and the Committee of Creditors are forced to take a haircut. 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 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation 38(2) requires that a resolution plan "shall" contain whatever is listed under sub-clauses (a) to (d). Therefore, the understanding is that Regulation 38(2)(d) necessitates a resolution plan to provide for the manner in which the resolution applicant seeks to deal with a pending avoidance application and the proviso sets a cut-off date for the applicability of the new regulation. Therefore, all resolution plans submitted before the NCLT for approval on or after 14.06.2022 must mandatorily provide for the manner in which they seek to deal with a sub-judice avoidance application and resolution plans submitted for approval before 14.06.2022 are not necessitated to provide for the manner in which the resolution applicant seeks to deal with such claims. Therefore, the provision only deals with what ought to be in resolution plans and cannot be interpreted to extinguish proceedings pertaining avoidable transactions in resolution plans submitted before 14.06.2022 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 adjudicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ursue such application. ... (Emphasis Supplied) 53. We are conscious of the fact that the above judgement of Tata Steel BSL Ltd. (Supra), was in context of avoidance application filed by the Resolution Professional which were allowed to be continued and in this context, the Hon'ble Delhi High Court held that the Resolution Professional cannot be treated as functus officio and was allowed to continue. The present case is on its own facts where the Resolution Professional was pursuing his prayers during CIRP was authorised to file Interlocutory Application on behalf of the Monitoring Committee for the benefit of the Corporate Debtor. The rationale for the ratio remains the same and applicable in this case i.e., the Resolution Professional should not be treated as functus officio and therefore the argument of the Appellant that the appeals are not maintainable does not hold any ground. 54. Incidentally, we held the similar position in order passed by this Appellate Tribunal dated 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 Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction but was not done or where a proper remedy in some other proceeding such as by way of appeal or revision was available but was not availed. The right to seek vacation of a judgment may be lost by waiver, estoppel or acquiescence. 59. Generally speaking, review can be permitted, if found in the statute by the competent judicial forum. Review can be filed, if there is discovery of New and Important matter or evidence, which, after the exercise of due diligence was not within the knowledge of the person seeking review or could not be produced by him at any time when the decree was passed or order made or some mistake or error apparent on the face of the record or any other sufficient reason. 60. We consciously note that the NCLT & NCLAT have inherent powers to recall order but have no power to review its order. 61. We further note that in the case of Action Barter Pvt. Ltd. Vs Srei Equipment Finance Ltd., in IA Nos. 811/2020, 917/2020, 962/2020 & 1587/2020in Company Appeal (AT) (Ins.) No. 1434 of 2019, this Appellate Tribunal held 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 ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The power to review is not conferred upon this Tribunal but power to recall its judgment is inherent in this Tribunal since inherent power of the Tribunal are preserved, powers which are inherent in the Tribunal as has been declared by Rule 11 of the NCLAT Rules, 2016. 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 of a review of a judgment 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 Reference in I.A. No. 3961 of 2022 in Company Appeal (AT) (Ins.) No 729 of 2020 scope of a review of a judgment. Power of recall of a judgment can be exercised by this Tribunal when any procedural error is committed in delivering the earlier judgment, for example, necessary party has not been served or necessary party was not before the Tribunal when judgment was delivered adverse to a party. There may be other grounds for recall of a judgment. Well known ground on which a judgment can always be recalled by a Court is ground of fraud played on the Court in obtaining judgment from the Court. We, for the purpose of answering the questions refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant repossessed both its leased Aircrafts. When the Appellant repossessed its Aircrafts, the CD's Engine and CD's APU remained attached to the Aircrafts. Subsequently, Appellant leased these Aircrafts to Respondent No. 2 who has been operating the same with the CD's Engine and CD's APU fitted thereon. 72. Thus, the Appellant is in possession of Original APU (7243), CD's APU (5121) and CD's Engine (803473). Further, both the aircrafts were re-leased to SpiceJet (R2) and they too were utilising the fitted engine (803473) and APU (5121) which belonged to CD. 73. There were some factual inaccuracies and error in the order dated 04.12.2023 in IA no. 615 of 2023, which has been corrected in the Impugned Order dated 09.05.2024 in IA 1011/2024. We note following differences in both the orders : - Para Order dated 04.12.23 Changes made by substitution vide Order dated 09.05.24 7.6 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in possession of Corporate Debtor, we not find any merit in the claim for usage of charges for such engine. In the alternate, the parties may choose to make claim for the differential in price, if it is ascertainable, and agreeable to the Parties. 7.8 As regards return of APU E-5121 ("APU"), we do not find any submission from the Resolution Professional in relation to 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. Since, the said APU was in replacement of original APU, we do not find any force in the contention of the Resolution Professional for usage charges of said APU as well as return of said APU. 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, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant and should be returned to Corporate Debtor as it is of greater value. This was corrected in the order of the Adjudicating Authority dated 09.05.2024 mentioning that the Appellant should return Corporate Debtor's engine which is of greater value and the original engine of the Appellant shall be returned them by Corporate Debtor. Thus, we find the correction in nature of recall. 76. We note that in Para 7.7 of the Impugned Order dated 09.05.2024 as well as in order dated 04.12.2023 the Adjudicating Authority had discussed regarding return of Engine No. ESN No. 803473 (disputed engine) and regarding entitlement of the Appellant to make claims for the job work charges paid to Honeywell. However, it is noted that in both the orders i.e., order dated 04.12.203 and the Impugned Order dated 09.05.2024 the Adjudicating Authority erred in mentioning that the original Engine was sent to M/s Honeywell for repair and later retrieved by the Appellant from Honeywell. Based on documents made available to us, this position is not true as engine was never sent to Honeywell for repair and only APU was sent to Honeywell for repair. As such the Appellant could not have claimed for the alleged wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riginal appeal before the Adjudicating Authority 24.02.2021, following was specifically pleaded by the Appellant. "28. The Applicant states that, as on the date of filing the present Application, the Respondents are liable to pay a sum of INR 12,79,29.115/- (Ruposs Twelve Crores Seventy Nine Lakhs Twenty Nine Thousand One Hundred and Fifteen Only) towards fixed lease rent of the Engine from June 20. 2019 to February 22, 2021 (@USD 3000 per day) along with variable lease rentals at the rate of USD 220 per hour and USD 180 per cycle against usage of the Engine during the aforesaid period. Further, the Respondents are liable to pay a sum of INR 8.52.86.077/- (Rupees Eight Crores Fifty Two Lakhs Eighty Six Thousand and Seventy Seven Only) towards fixed lease rent of the APU from June 20. 2019 to February 22. 2021 (@USD 2000 per day) alongwith variable lease rentals of at the rate of USD 220 per hour and USD 180 per cycle against usage of the APU during the aforesaid period." 80. Similarly, in relief under Para 34 (e) the same relief was specifically sought : - "34. In view of the above. the Resolution Professional prays that this Hon'ble Tribunal be pleased to:- (e) Direct R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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