Recently, NCLAT in Madhusudan Tantia v. Amit Choraria has dealt with the issue relating to nature of the Notification dated 24.03.2020 (“the Notification”) issued by the Central Government under Section 4 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), whereby the threshold amount of default for applicability of Part II was enhanced from Rs 1 lakh to Rs 1 crore. While in the present article we do not comment on the correctness of the conclusion arrived at by NCLAT, the following reasons for arriving at the conclusion that the Notification is prospective in nature begs a fresh assessment:
- The Notification does not in express terms clarify if it was intended to have ‘retrospective’ or ‘retroactive’ operation;
- An inference of intention is not warranted when the relevant words evincing such intention are conspicuously absent;
- In the absence of a clear indication of a contrary intention, the substantive rights of individuals to an action are to be decided by the law in existence.
Power to issue notification in terms of Section 4 and for that matter, even making of rules or regulations under the other provisions of IBC, is an exercise of delegated legislative power conferred under the IBC.
A bare perusal of the judgment of NCLAT clearly shows that for the purpose of arriving at the conclusion, reliance has been placed upon the provisions of the General Clauses Act, 1897 (“the General Clauses Act”) for deciding whether the Notification is prospective or retrospective. The said reliance, is in itself, misplaced and renders the judgment per incuriam. Application of the General Clauses Act is restricted to ‘Central Act’ or ‘Regulation’. The expressions ‘Central Act’ and ‘Regulation’ are defined under the General Clauses Act by using the expressions “shall mean” and “shall include”. It is settled law that usage of these expressions suggest an inference that the definition is exhaustive. Insofar as is relevant, the expression ‘Central Act’ is defined to mean an Act of Parliament and ‘Regulation’ is defined to mean a regulation made by the President under Articles 240/243 of Constitution of India and regulation made by the Central Government under the Government of India Act, 1870/1915/1935.
Adverting to Section 4 of IBC, the Central Government acting as a delegate of the legislature has been entrusted with the authority to issue such a notification. Pertinently, the said power to issue such notification, does not elevate the notification, being an exercise of power of delegated legislation, to the status of an Act of Parliament. Further, the expression ‘Regulation’ has also been given a constricted definition under the General Clauses Act and its contours are confined to specific species of regulations and will not include all subordinate legislations or notifications issued by a delegate of the legislature acting in pursuance of a statutory authority. Further, it is also important to note that under IBC, the regulation-making power is vested in Insolvency and Bankruptcy Board of India, being the regulatory authority established under IBC.
Re: The cut-off time of a notification coming into force
Another issue which needs to be analysed is regarding the law governing the e-publication of legislation including delegated legislation. The following have to be borne in mind while analysing this aspect:
- The issue becomes more critical having regard to the fact that on 30.09.2015, the Ministry of Urban Development issued an Office Memorandum bearing No. O-17022/1/2015-PSP-l, whereby the practice of physical printing was discontinued and replaced it with the electronic gazette. It further specifies that the date of publishing shall be the date of e-publication on official website by way of electronic gazette in respect of Gazette notification.
- Equally important is the issue whether the notification which is uploaded in the e-Gazette at the particular time of the day would come into effect from 0000 hours on that day itself i.e. be applicable during that entire day or it would into force at the precise time of its publication. Legislature being aware of Section 8 of the Information Technology Act, 2000 creates a legal basis for the publication of laws through e-gazettes.A notification issued by the government pursuant to the conferment of statutory power is distinct from an act of the legislature. Administrative notifications, even when they are issued in pursuance of an enabling statutory framework, are subject to the statute. Delegated legislation does not lose its character even when it has the same force and effect as if it is contained in the statute.
With the change in the manner of publishing gazette notifications from analog to digital, the precise time when the gazette is published in the electronic mode assumes significance. The Notification, which is akin to the exercise of delegated legislative power, cannot operate retrospectively, unless authorised by statute. Section 4 does not contain language indicative of a legislative intent to authorise the Central Government to issue notifications with retrospective or retroactive operation, either expressly or by implication. Since the parent statute i.e. IBC does not contain the language enabling the Central Government to issue retrospective or retroactive notifications, NCLAT ought not to have entered into the exercise of looking into such wordings in the Notification. Such language/ power, wherever envisaged, forms part of the delegated power under the parent statute. Accordingly, NCLAT ought to have looked at the provisions of parent statute i.e. IBC to determine whether the legislature intended to confer the power on the central government to issue a notification with retrospective or retroactive effect. Importantly, Section 4 of IBC has clearly delineated the confines of the delegated power by prescribing the maximum amount within which the minimum default amount could be specified by a notification.
Further, it is well settled that Parliament and the State Legislatures possess the power to enact legislation, with prospective and retrospective effect, subject to due observance and compliance of constitutional requirements. Therefore, the hunch of NCLAT of locating the words of retrospective operation in the Notification was not appropriate and it should have limited its enquiry to the language of Section 4 itself.
**Naman Singh Bagga (2010-15) National Law University Odisha, now working as Senior Associate at L&L Partners Law Offices and may be reached firstname.lastname@example.org.
[The views expressed herein are personal and does not represent views of any organisation.]
Ministry of Corporate Affairs, Government of India.
Union of India v. G.S. Chatha Rice Mills, 2020 SCC OnLine SC 770.
K.I. Shephard v. Union of India, (1987) 4 SCC 431;
Hukum Chand v. Union of India, (1972) 2 SCC 601;
Union of India v. G.S. Chatha Rice Mills, 2020 SCC OnLine SC 770, para 114.
Union of India v. G.S. Chatha Rice Mills , 2020 SCC OnLine SC 770, para 113.