NCLAT refuses to reconsider verdict

Why in the News

The NCLAT refused to reconsider the verdict in V. Padmakumar, referring the five-member bench ‘inappropriate’ and ‘incompetent’.


...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 inV. 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 inV. Padmakumar’s Case’ as ‘so very incorrect’..."

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".

What was the case

Calling it "inappropriate", “incompetent "and" misdemeanor ", a five-member bench of the National Company Law Appellate Tribunal has rejected a reference by a three-member bench to reconsider the decision in V. Padamkumar v. Stressed Assets Stabilization Fund. SASF) and Unr. [Bishal Jaiswal vs ARC LTD and ORS]

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.

What was the Reference by a three-member bench?

A three-member Bench of this Appellate Tribunal, which heard Company

Appeal (AT) (Insolvency) No. 385 of 2020, was of the view that the judgment

rendered by a five-member Bench of this Appellate Tribunal in “V. Padmakumar

Vs. Stressed Assets Stabilization Fund (SASF) & Anr.”, in Company Appeal (AT)

(Insolvency) No. 57 of 2020, requires reconsideration.

The issue formulated by the Three Member Referral Bench is as follows: -


“Hon’ble Supreme Court and various Hon’ble High Courts
have consistently held that an entry made in the Company’s
Balance Sheet amounts to an acknowledgement of debt
under Section 18 of the Limitation Act, 1963, in view of the
settled law, V. Padmakumar’s Case requires
reconsideration.

What is NCLAT

The National Company Law Appellate Tribunal (NCLAT) is a tribunal, which was created by the Central Government of India under Section 410 of the Companies Act, 2013 for hearing appeals against the orders of the National Company Law Tribunal (NCLT) from June 1, 2016.

The NCLAT is also the appellate tribunal for hearing appeals against orders passed by the NCLT (s) under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) with effect from December 1, 2016. The NCLAT is also the Appellate Tribunal for Appeal of Hearing. Against orders passed by the Insolvency and Bankruptcy Board of India under Section 202 and Section 211 of the IBC.

The NCLAT is also the Appellate Tribunal as per the amendment to Section 410 of the Companies Act, 2013 brought in Section 172 of 2013, any instructions or orders issued or given by the Competition Commission of India (CCI) Listens to appeals against. The Finance Act, 2017 will come into effect from May 26, 2017.

The Companies Act, 2013

The Companies Act, 2013 is an Act of the Parliament of India on Indian Company Law which regulates the regulation of a company, the responsibilities of a company, directors, dissolution of a company.


The 2013 Act is divided into 29 chapters with 4 chapters and 7 schedules against 658 sections in the Companies Act, 1956. However, at present the Act has only 438 clauses.

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