Binding nature of judgments of One Bench of the NCLT on another – Adv. Sriram Venkatavaradan & Adv. Saai Sudharsan Sathiyamoorthy

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Binding nature of judgments of One Bench of the NCLT on another

Sriram Venkatavaradan & Saai Sudharsan Sathiyamoorthy
(The authors are advocates at the Madras High Court and can be reached at sriramv21@gmail.com & saaisudharsans@gmail.com)

Introduction

Generally, one bench of a tribunal cannot differ from the view of another co-ordinate bench. When an identical issue, which had earlier arisen before the Coordinate Bench of a tribunal on identical facts and a view has been taken on the issue then judicial discipline would demand that a subsequent bench of the tribunal hearing the same issue should follow the view taken by its earlier Coordinate Bench.[2]

Section 419(5) of the Companies Act, 2013 provides that, if the Members of a Bench differ in opinion on any point or points, the same must be decided according to the majority, if there is a majority. However, if the Members are equally divided, they are required to state the point or points on which they differ, and the case is then to be referred by the President for hearing on such point or points by one or more of the other Members of the Tribunal. On such reference, the points in issue is to be decided according to the opinion of the majority of Members who have heard the case, including those who first heard it.

Similarly, in respect of coordinate benches, it is neither desirable nor permissible by the coordinate Bench to disapprove the earlier judgment and take view contrary to it. The general rule of precedent mandates that a decision of a Division Bench and Third Member Bench is binding on the Single Member and that a decision of a Special Bench is binding on all the Benches of the Tribunal.[3] It further provides that a co-ordinate Bench should follow the view of another co-ordinate Bench or else refer the matter to a larger Bench through the President.[4] The only exception provided to this rule is when a decision of the Special Bench can be distinguished or disregarded, is when there is any contrary view of the jurisdictional High Court or of the Supreme Court taken on the same issue.

The present article seeks to examine the binding nature of judgments and orders of one bench of the National Company Law Tribunal (“NCLT”) on other coordinate benches.

Precedent and judicial discipline

In a multi-Judge Court, the Judges are bound by precedents and procedure and can use their discretion only when there is no declared principle to be found i.e., when there is no rule and no authority on that issue. The judicial decorum and legal propriety demand that where a learned single Judge or a Division Bench does not agree with the decision of a Bench of coordinate jurisdiction, the matter shall be referred to a larger Bench.[5]

The Supreme Court in the matter of Gammon India Ltd. v. Commissioner of Customs,[6] held that the precedent law must be followed by all concerned, deviation from the same should be only on a procedure known to law. Hon’ble Supreme Court held as under:

“35. It needs to be emphasised that if a Bench of a tribunal, in an identical fact situation, is permitted to come to a conclusion directly opposed to the conclusion reached by another Bench of the tribunal on an earlier occasion, that will be destructive of the institutional integrity itself. What is important is the tribunal as an institution and not the personality of the members constituting it. If a Bench of the Tribunal wishes to take a view different from the one taken by the earlier Bench, Propriety demands that it should place the matter before the President of the Tribunal so that the case is referred to a larger Bench, for which provision exists in the Act itself.

In this behalf, the following observations by a three- Judge Bench of this court in Sub- Inspector Rooplal v. Ltd. Governor are quite apposite: (SCC p. 654, para 12) “12. At the outset, we must express our serious dissatisfaction in regard to the manner in which a coordinate Bench of the Tribunal has overruled, in effect, an earlier judgment of another coordinate Bench of the same Tribunal. This is opposed to all principles of judicial discipline. If at all, the subsequent Bench of the Tribunal was of the opinion that the earlier view taken by the coordinate Bench of the same Tribunal was incorrect, it ought to have referred the matter to a larger Bench so that the difference of opinion between the two coordinate Benches on the same point could have been avoided. It is not as if the latter Bench was unaware of the judgment of the earlier Bench but knowingly it proceeded to disagree with the said judgment against all known rules of precedents. Precedents which enunciate rules of law form the foundation of administration of justice under our system. This is a fundamental principle which every presiding officer of a judicial forum ought to know, for consistency in interpretation of law alone can lead to public confidence in our judicial system This Court has laid down time and again that precedent law must be followed by all concerned; deviation from the same should be only on a procedure known to law. A subordinate court is bound by the enunciation of law made by the superior courts. A coordinate Bench of a court cannot pronounce judgment contrary to declaration of law made by another Bench. It canonly refer it to a larger Bench if it disagrees with the earlier pronouncement.”

We respectfully concur with these observations and are confident that all the courts and various tribunals in the country shall follow these salutary observations in letter and spirit.”

Extent of discretion

The doctrine of Stare Decisis, which is derived from the legal maxim ‘stare decisis et non quieta movere’ (meaning ‘to stand by decisions and not to disturb the already settled matters’), is fully applicable on judgments delivered by the NCLT as well as the National Company Law Appellate Tribunal (“NCLAT”). What is binding as a precedent on NCLT and NCLAT is the judgment of jurisdictional Tribunal. Judgment delivered by NCLT in other jurisdiction have only persuasive value.[7]

A Coordinate Bench cannot even comment upon, let alone sit in judgment over the discretion exercised or judgment rendered in a similar cause or matter before another Coordinate Bench.[8] This is so as, the NCLAT in its judgment in Bishal Jaiswal v. Asset Reconstruction Company (India) Ltd., (“Bishal Jaiswal”)[9] noted, judicial indiscipline creates uncertainty and impairs public faith in the rule of Law. Disregarding the binding precedent results in making the legal proposition uncertain and creates confusion. As such, it is clear that a Coordinate Bench cannot even disagree or dissent from the view of law taken but can only express an opinion doubting the correctness of the view taken by the earlier Bench of co-equal strength.[10] If at all, the subsequent Bench of the Tribunal was of the opinion that   the earlier view taken by the Coordinate Bench of the same Tribunal was incorrect, it ought to have referred the matter to a larger Bench so that the difference of opinion between the two Coordinate Benches on the same point could have been avoided.[11]

While making such reference, the nature of infirmity or error would be one of the factors in making a reference. The bench making the reference should also indicate whether patent aspects of the question remained unnoticed or as to whether the attention of Co-ordinate was not drawn to any relevant and material statutory provision or was any previous decision of the NCLAT or the Supreme Court not noticed would be the relevant factors.[12] However, it is not open to the Referral Bench to appreciate the judgment rendered by the earlier Bench as if sitting in appeal to hold that the view is erroneous. Escaping of attention of the earlier Bench as regards a binding judicial precedent or a patent error is of relevance but not evaluation of earlier judgment as if sitting in appeal.

Per incurium and exceptions to the principle

The binding nature of precedent is subject to several well-known exceptions. Some of the recognised exceptions to the rule of stare decision, where a decision will not be binding as a precedent are:

  • when there is a subsequent statutory modification at variance with the decision;
  • a different view being taken by Courts in higher tiers, subsequently;
  • where a decision is found to have been rendered per incuriam, that is, in ignorance or oversight of relevant statutory provisions, or binding decisions of Courts in higher tiers;
  • where a decision which passes sub silentio, that is when the particular point of law involved in the decision is not perceived by the Court or present to its mind.[13]

Thus, it is clear that an otherwise binding precedent will not be binding if it can be held that the decision was rendered per incuriam, that is it was rendered in ignorance of a statute or rule having the force of statute; or having known the statute, it did not have in its mind, the precise terms of the statute or did not appreciate the relevance of the statute to the case on hand.[14] In A.R. Antulay v. R.S. Nayak,[15] the Supreme Court cited with approval the following statement of the principle relating to decisions rendered per incuriam from Morelle Ltd. v. Wakeling:[16]

“As a general rule, the only cases in which decisions shall be held have been given per incuriam’ are those of decisions given in ignorance or forgetfulness of some inconsistent statutory provision or of some authority binding on the Court concerned; so that in such cases some part of the decision or some step in the reasoning on which it is based, is found, on that account, to be demonstrably wrong. This definition is not necessarily exhaustive, but cases not strictly within it which can properly be held to have been decided per incuriam, must in our judgment, consistently with the stare decisis rule which is an essential part of our law, be of the rarest occurrence.” 

In Ambuja Cements Ltd.,[17] the NCLT rejected the request for dispensation of the meeting of the Equity Shareholders and the Creditors of a company for the reason that the company i.e. Transferor Company had large no. of shareholders and creditors and none of them have filed their consent and no objection towards the scheme of merger/amalgamation. Due to want of such written consent by way of ‘Affidavit’ from the shareholder/Creditor and the prayer for dispensation of the meeting was disallowed. On appeal, the NCLAT, noting that the same Bench of the NCLT had allowed for such a request in another matter, held that the order of the NCLT was per incuriam ought to have taken into consideration the order of the coordinate Bench and observed:

“We are of the view that the NCLT Ahmedabad Bench ought to have taken into consideration the order of the coordinate Bench and also the Order passed by it in ‘Vodafone Idea Ltd.’ while dealing with similar facts involved in both the cases. Further, the Learned Counsel relied upon the Judgment of the Hon’ble Supreme Court in the matter of ‘Gammon India Ltd.’ vs. ‘Commissioner of Customs’ Mumbai in (2011) 12 SCC 499, to show that the precedent law must be followed by all concerned, deviation from the same should be only on a procedure known to law.”

In Rajeev R. Jain, Director (Suspended) v. AASAN Corporate Solutions Pvt. Ltd.,[18] the corporate debtor had obtained two loans from the Financial Creditor by means of two deposits agreements, which were secured by a Deed of Mortgage and other security documents. In terms of the First Deposit Agreement, the loan to be repaid on the expiry of three months from the date of disbursal of the loan. The date for payment had later been extended till 31.03.2018, when the corporate debtor would become liable to repay the outstanding principal amount and interest. As the corporate debtor had defaulted on making payments, an application under section 7 of the Insolvency & Bankruptcy Code 2016 (“Code”) was filed by the financial creditor and the same was duly admitted by the NCLT. On appeal, while there was no dispute between the parties regarding debt or default committed by the corporate debtor, the corporate debtor had contended that the Adjudicating Authority should have followed the judgment of the coordinate bench in Beacon Trusteeship Ltd. v. Neptune Ventures & Developers (P.) Ltd.,[19] and that the remedy of the financial creditor was to proceed against the mortgage securities. The NCLAT, noting that the view taken by the Tribunal in Beacon Trusteeship Ltd. (supra) was not inconsonance with section 7 read with section 238 of the Code, held that the financial creditor had full right to initiate action under section 7 for non-payment of dues. It further held that the judgment of the co-ordinate Bench in Beacon Trusteeship Ltd. (supra) was not a binding precedent to be followed by any other co-ordinate Bench as the same was per incuriam.[20]

Conclusion

It is, thus, clear that a co-ordinate Bench of the NCLT should follow the view of another co-ordinate Bench or else refer the matter to a larger Bench through the President. It cannot comment upon, let alone sit in judgment over the discretion exercised or judgment rendered in a similar cause or matter before another Coordinate Bench. As a creature of a statute, the Tribunal is required to follow the view expressed by another Bench of the Tribunal unless the earlier view is per incurious. Pertinently, as held by the Bombay High Court in Hatkesh Co-op Housing Society v. ACIT (Bom.)(HC),[21] before departing from the earlier view of the Tribunal, the reason for the same must be clearly recorded in the order. The order cannot be blissfully silent about the reason why it chooses to ignore the earlier decision of the Tribunal rendered, and take a view contrary to that taken by its earlier Coordinate Bench. In case a subsequent bench of the Tribunal does not agree with the reasons indicated in a binding decision of a coordinate bench, then for reason to be recorded, it must request the President of the Tribunal to constitute a larger bench to decide the difference of view on the issue.

 

Reference

[1] The authors are advocates at the Madras High Court and can be reached at sriramv21@gmail.com & saaisudharsans@gmail.com

[2] Hatkesh Co-op Housing Society v. ACIT (Bom.) (HC), [2016] 243 Taxman 213 (Bombay).

[3] Tribhuvandas Purshottamdas Thakur v. Ratilal Motilal Patel, 1968 (70) BOM LR 73: [1968]1SCR455; Sant Lal Gupta v. Modern Co-operative Group Housing Society Ltd., (2010)13SCC336

[4] See, State of Punjab v. Devans Modern Breweries Ltd., (2014) 11 SCC 26.

[5] Sundaradas Kanyalal Bhathija v. Collector, Thane, AIR 1991 SC 1893.

[6] (2011) 12 SCC 499.

[7] Rajeev R. Jain, Director (Suspended) v. AASAN Corporate Solutions Pvt. Ltd., (2022) ibclaw.in 31 NCLAT.

[8] Sub-Committee of Judicial Accountability v. UOI, 1991 (4) SCC 699.

[9] C.A.(AT)(Ins.) No. 385 of 2020, order dated 22.12.2020, reported at (2020) ibclaw.in 414 NCLAT.

[10] Central Board of Dawoodi Bohra Community v. State of Maharashtra, (2005) 2 SCC 673.

[11] See, Sub-Inspector Rooplal v. Lt. Governor, (2000)1 SCC 644 & Collector of Central Excise, Kanpur v. Matador Foam, (2005) 2 SCC 59).

[12] Keshav Mills Co. Ltd. v. CIT, (1965) 2 SCR 908.

[13] Young v. Bristol Aeroplane Co., [1944] KB 718.

[14] Panchaxari Shidramappa Yeligar v. Shiggaon Taluka Shikshana ILR 1998 KAR 3748; Delhi Municipal Corporation v. Gurnam Kaur, AIR 1989 SC 38.

[15] AIR 1988 SC 1531.

[16] 1955(1) ALL ER 708 (718).

[17] (2021) ibclaw.in 482 NCLAT.

[18] (2022) ibclaw.in 31 NCLAT.

[19] (2021) ibclaw.in 706 NCLT.

[20] Also see, DLF Phase –IV Commercial Developers Limited, (2019) ibclaw.in 548 NCLAT & Emerald Realtors Pvt. Ltd. (Shareholder of Sapphire Land Development Pvt. Ltd.) Vs. Suraksha Asset Reconstruction Ltd., (2021) ibclaw.in 311 NCLAT.

[21] [2016] 243 Taxman 213 (Bombay).

 

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