"Bench of equal strength couldn’t be a ground for review," SC dismisses review pleas against govt as secured creditor

The apex court noted that it is also well settled that a party is not entitled to seek a review of a judgment delivered by this court merely for a rehearing and a fresh decision of the case. “The normal principle is that a judgment pronounced by the court is final," the court stated.

New Delhi:The Supreme Court on Tuesday dismissed a batch of review petitions challenging a 2022 judgment passed by a two-judge bench, which held that a definition of a secured creditor under the Insolvency and Bankruptcy Code included the government. A bench comprising AS Bopanna and Bela M Trivedi said the submission of the counsel for the review petitioners deserves to be out rightly rejected for the simple reason that any passing reference of the impugned judgment made by the bench of the equal strength could not be a ground for review.

“It is a well-settled proposition of law that a co-ordinate bench cannot comment upon the discretion exercised or judgment rendered by another co-ordinate Bench of the same strength," said the bench. The apex court said if a bench does not accept as correct the decision on a question of law of another bench of equal strength, the only proper course to adopt would be to refer the matter to the larger bench, for an authoritative decision, otherwise the law would be thrown into the state of uncertainty because of conflicting decisions.

Last year, a two-judge bench of the apex court ruled in the Rainbow Papers vs Gujarat State Tax Department case that the government was a secured creditor. The appellants filed a review petition earlier this year, urging the court to reconsider its stance. Under IBC, secured creditors such as banks and financial institutions get priority in getting repaid through the resolution process, however, unpaid dues to vendors, suppliers and government dues are treated as operational credit, and they fall lower in the so-called waterfall mechanism.

The apex court said the counsel for the review petitioners has failed to make any mistake or error apparent on the face of the record in the impugned judgment and has failed to bring the case within the parameters laid down by this court in various decisions for reviewing the impugned judgment.

The apex court said as evident from the bare reading of the 2022 judgment, the court had considered not only the waterfall mechanism under Section 53 of IBC, but also the other provisions of the IBC for deciding the priority to distribute the proceeds from the sale as liquidation assets.

The counsel for the review petitioners/intervenors placing heavy reliance on the observations made by a two-judge bench of the apex court in Paschim Anchal Vidyut Vitran Nigam Limited vs Raman Ispat Private Limited and others, delivered on July 17 2023, submitted that the court in the impugned judgment had failed to consider the waterfall mechanism contained in Section 53, as also failed to consider other provisions of the IBC.

The apex court noted that it is also well settled that a party is not entitled to seek a review of a judgment delivered by this court merely for a rehearing and a fresh decision of the case. “The normal principle is that a judgment pronounced by the court is final, and departure from that principle is justified only when circumstances of a substantial and compelling character make it necessary to do so," it noted.

The bench said the submissions made by the counsel for the review petitioners that the court in the 2022 decision had failed to consider the waterfall mechanism as contained in Section 53 and failed to consider other provisions of IBC, are factually incorrect.