Mr. Patan Ayub Khan, Mrs. Jameela Ayub Khan vs Southern Bakeries Private Limited, Dream Bake Private Limited, Mr. Aseem Soni, Mr. Martand Singh Major

(Hybrid Mode)

Oral Judgment: Justice Sharad Kumar Sharma, Member (Judicial)

In the instant Company Appeal, the Appellant puts a challenge to the impugned order dated 29.10.2025, that was rendered in CA No.80/2025, which was preferred in CP No.131/BB/2022.

The Company Appeal has been reported by the Registry to be defective and it was listed today under the defects head. According to the report of the Registry there is a delay of 11 days, that has chanced in refiling the Company Appeal. Having considered the arguments extended by the learned counsel for the Appellant for justifying the delay in refiling, and being satisfied with the same, coupled with the fact that, the aspect of delay in refiling being exclusively an issue between the Appellant and the Tribunal, the delay of 11 days that has chanced in refiling the Company Appeal would stand ‘condoned’.

Heard the Appellant on merits of the Company Appeal. By virtue of the impugned order under challenge, an application preferred by the Appellant, by invoking the provisions contained under Section 420 of the Companies Act, 2013, has been rejected. The said application was preferred by the Appellant, contending thereof that, the applicant, in the capacity of being the founder director of 1^st Respondent Company, was said to have been involved in manufacturing of bakery products and has been successfully running the business of 1^st Respondent Company, till the Respondent No.1 is said to have filed a proceedings under Section 241 & 242 of the Companies Act, which was numbered as CP No.131/BB/2022.

During the pendency of the said company proceedings before the learned NCLT, Bengaluru Bench, CA No.114/2023 was preferred in the Company Petition, whereby the Applicants to the said application, by invoking the provisions contained under Rule 11 to be read with Rule 34 of the NCLT Rules, had sought for the following reliefs: -

The nature of relief, which was sought therein was that, the so-called purported act of fraud alleged in the application, a direction was sought for the disclosure of the movable and immovable assets including the bank accounts, lockers, deposits, etc., and further a prayer was made for attachment, that was sought to be made to continue attachment during the pendency of the Company Petition pursuance to the disclosure as sought for in prayer (a) and simultaneously there was also a prayer for grant of an injunction thereby restraining the Respondents from alienating or creating any third party interest in respect of the movable and immovable properties and assets disclosed by the Respondents, in terms of prayer (a) to the application. The learned Tribunal after considering the rival contentions and hearing the parties including the opposite side had proceeded to allow the application by an order that was passed by the learned Tribunal on 04.10.2024.

The Appellant on 24.04.2025, had filed the CA No.80/2025 before the learned NCLT thereby praying for recall of the order dated 04.10.2024. The said application thus preferred on 24.04.2025, was filed by the Appellant, by invoking the provisions contained under Section 420 of the Companies Act, the same has been rejected by the impugned order. Hence, the instant Company Appeal.

Section 420 of the Companies Act reads as under: -

If the provisions as extracted above is taken into consideration, the said provision could be invoked:

What could be derived from the provisions contained under Section 420 of the Companies Act is that, it is an inherent power, which is exclusively vested with the Tribunal to invoke its jurisdiction, to pass an order, for the purposes of rectifying the defects, if any, which has been found by the Tribunal itself to be requiring rectification, and that too the scope of its enforcement is subject to the condition that, the nature of error as identified by the Tribunal, is only rectification of apparent arithmetical mistakes, any rectification on merits is not permissible. It does not entail or grant an authority to the Tribunal to go into the merits of the order, which the Tribunal intends or feels necessary to rectify by invoking Section 420 of the Companies Act. Thus, what could be said that, as per provisions contained under Section 420 of the Companies Act is not a choice of a party to the proceedings to invoke Section 420 and file an application, rather it is a authority that has been vested with the Tribunal itself only to invoke its inherent powers to rectify an order, which the Tribunal itself finds it necessary to be corrected, based upon its own determination made to justify the rectification, and that too, the said rectification and its scope has been limited to be made applicable where the nature of defect, which has been sought to be rectified by the Tribunal, while exercising its inherent powers is only having a superficial effect on the orders and that too within the restricted period of limitation for the Tribunal would be that, the Tribunal could exercise the power on its own under Section 420 of the Companies Act only within 2 years after passing the order.

The application under Section 420 of the Companies Act was filed by the Appellant on 24.04.2025, seeking rectification of an order dated 04.10.2024. The question that will fall for consideration is that, as to whether at all Section 420 application, could be invoked by a party to the proceedings. The answer would be “No”, as Section 420, is not a provision which is made available to a party to the petition or proceedings, to seek a rectification of an order rather it is an exclusive prerogative vested with the Tribunal to correct its own order while exercising powers under Section 420. Hence, the law does not contemplate filing of any application as such under Section 420 to correct its own order, and that too on an application to be filed by the party. Thus, on this count itself the application preferred by the Appellant would not be maintainable, since, it was not open for the Appellant to invoke Section 420 and the Appellant couldn’t have stepped into the shoes of exercising the powers, that under law are vested with the Tribunal, which are of inherent nature for correcting its own order.

Secondly, what will be the ambit of exercise of powers under Section 420 of the Companies Act, as already been observed by us in the preceding paragraphs. The ambit of exercise of powers, even if it is to be adopted by the Tribunal to be applied only when the nature of rectification sought is a mistake, which is apparent from the records and is of a cosmetic nature. The mistake which is apparent does not entails a detailed deliberation or the grounds, which may take the shape of making the proceedings under Section 420, has to be reviewing of an order passed on merits, as that is not an intention aimed at to be achieved by the provisions contained under Section 420 of the Companies Act.

Looking into the nature of application and grounds taken therein by the Appellant, seeking a rectification of the order it will not amount to be a correction of mistakes, rather it is in the nature of reviewing of an order already passed on merits, and that is what the expression has been given by the Appellant himself in para 3 of the Application, where the Appellant admits that the Application was in the shape of a review. Para 3 of the application is extracted hereunder: -

Section 420 of the Companies Act, is not a substitute or an alternative provision to the provision of review and since, the power of review is not statutorily vested with the Tribunals, those are created under the Companies Act, the alternative provisions contained under Section 420, cannot be utilized as a platform for seeking review of an order, and that too on an application filed by the party to the proceedings, under the garb of seeking a rectification. Thus, because the application was preferred by the Appellant, who is a party to the proceedings, Section 420 will not be available to the Appellant and the application was not maintainable, because that is a choice or the prerogative that is vested with the Tribunal under Section 420, to invoke its inherent powers and it cannot be invoked otherwise by filing an application by a party. Besides that, the said provision cannot be alternatively utilized in the shape of a review on the order, which has been passed on merits, which is intended to be adopted by the Appellant by filing an application of the said nature.

Apart from it since the nature of order, which was sought in the application, that was in itself takes the shape of reviewing the order, it will not be falling within the ambit of exercising of powers, for the purpose of rectifying any mistake apparent from the record, the application would not be maintainable. Thus, the application preferred by the Appellant in the shape of a review, to review an order dated 04.10.2024, that was passed on merits would not be maintainable and the rejection of the same by the impugned order dated 29.10.2025 does not call for any interference by this Appellate Tribunal, owing to the ratios which has been considered by the Tribunal with regards to the scope of exercise of powers of review under the garb of invocation of the provisions contained under Section 420 of the Companies Act and that too in the context of, as to how the ambit of apparent error on record to be considered in the light of the ratio of the judgment reported in AIR 1971 Supreme Court page 2204, T.S Balaram, Income Tax Officer, Company Circle IV, Bombay v. M/S Volkart Brothers, Bombay, wherein it has been considered that, any order where it is required to be reconsidered on merits to take a different view, it will not amount to be a patent apparent error, to exercise a power of review, even what to say about the exercise of powers under Section 420, which has been exclusively reserved under the statute to be exercised by the Tribunal and not by a party to the proceedings. Thus, the application has been rightly dismissed by the learned Tribunal.

The Company Appeal lacks merits and hence, the same is accordingly ‘dismissed’.