Financial Creditor
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal, Mumbai: The coram of H.V. Subba Rao, Judicial Member and Chandra Bhan Singh, Technical Member, declared that the auction purchaser of the Corporate Debtor company, as a going concern is responsible for any claims/ liabilities/ obligations of the Corporate Debtor.

An interlocutory application was filed by the applicant to resolve the issue whether the sale of the Corporate Debtor as a going concern under Section 60(5) of Insolvency and Bankruptcy Code, 2016 [IBC] and Regulation 32-A of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 [IBBI Regulations] includes both assets and liabilities or assets alone without any liabilities. The applicant prayed for not making him responsible for any claims/ liabilities/ obligations payable by the Corporate Debtor, (Gajanan Industries Limited) to the Financial Creditors (Harsh Vinimay Pvt. Ltd) or any other stakeholders including Government dues.

After becoming a successful auction purchaser, the applicant, in respect of an e-auction dated 03-03-2021 conducted by Liquidator, , he was declared as the highest bidder of the Corporate Debtor. Further, a letter of intent was issued by the liquidator as per the requirements of the banker and on the request of the applicant. On 31-05-2021, the applicant made the full payment to which the liquidator confirmed the amount of interest and communicated- “on the payment of the full amount, the sale shall stand completed, the liquidator shall execute certificate of sale or sale deed to transfer such asset and the assets shall be delivered to him in the manner specified in terms of sale”.

Further, the applicant wanted to know about the process to be followed for completion of the deal and to clarify certain issues. The liquidator in reply to this said that the procedure must be followed as per the law and indicated that the entire responsibility of the Corporate Debtor falls on the applicant.

The Tribunal relied on a similar matter in Visisth Services Limited v. S.V. Ramani, 2022 SCC OnLine NCLAT 24, where the same bench held that the sale of Corporate Debtor as a going concern as is where basis under Regulation 32-A of IBBI Regulations and the IBC includes that where the committee of creditors has not identified the assets and liabilities, the liquidator has to do the same and group the assets and liabilities.

The Tribunal held that the applicant is not entitled for the relief sorted in his prayer. Therefore, the above application was dismissed.

[Gaurav Agarwal v. CA Devang P Sampat, 2022 SCC OnLine NCLT 182, decided on 06-05-2022]


Advocates who appeared in this case :

Nausher Kohli, Amey Hadwale and Geeta Lundwani, Advocates, for the Applicant;

Rohaan Cama, Kunal Mehta and Gauri Joshi, Advocates, for the Respondents.

Financial Creditor
Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal, New Delhi: In a case where a Resolution Professional (RP) had submitted a report even prior to the order by the Adjudicating Authority that had appointed him, the bench of of H. V. Subba Rao, Judicial Member and Chandra Bhan Singh, Technical Member, has asked him to submit a fresh report.

The petition was filed by Bank of Baroda for initiation of Insolvency Resolution Process under Section 95(1) of Insolvency and Bankruptcy Code, 2016. It was passed against Mr. Pawan V Kikavat, Personal Guarantor of Mahavir Roads and Infrastructure Pvt. Ltd.

The counsel for the Bank of Baroda mentioned the demand notice dated 06-11-2020 invoking the Guarantee against the Personal Guarantor. He also gave proof of delivery of the demand notice. The deed of Guarantee dated 26-04-2012 executed by Bank of Baroda was also brought to the notice of the Bench. The petitioner also suggested the name of RP, Mr. Kairav Anil Trivedi, to conduct the Insolvency Resolution Process.

The counsel for the Personal Guarantor opposed the maintainability of the Petition pointing out that the RP has already filed his report without there being any order passed by the Adjudicating Authority appointing him and directing him to do so.

The issue was whether the report filed by RP without him receiving directions can be taken on record or a separate order should be filed by RP on the directions given.

The Bench appointed Kairav Anil Trivedi to submit a fresh report after examining the petition within 10 days of the date of this order.


[Bank of Baroda Limited v Pawan V Kikavat, 20 C.P. (IB)-140(MB)/2022, decided on 29-06-2022]


Counsels:

For Petitioner: Kairav Trivedi, PCA

For Personal Guarantor: Advocate Nausher Kohli


'Lex Mercatoria' by Hasit SethExperts Corner


A.    Introduction


Complex disputes are not easy to define as a class. But they do occur frequently in court litigation or arbitrations. Hallmarks of complex disputes are multiplicity of parties and issues, both legal and factual. Various jurisdictions have built mechanisms to deal with complex disputes through special rules and procedures. This article focuses on litigation and arbitration as methods for resolving complex disputes, though other methods like mediation are also useful. In particular, this article analyses the need for improving Indian legal system’s tools and capacities to resolve complex disputes by adapting global best practices.


B.    Nature of Complex Dispute Resolution


Black’s Law Dictionary, defines complex litigation[1] as, “litigation involving several parties who are separately represented, and usually involving multifarious factual and legal issues”. Right below the definition, the same dictionary quotes from Tidmarsh and Trangsrud’s 2002 book titled, Complex Litigation. The quote partly states, “complex civil litigation has an ‘I know it when I see it’ quality. Nearly everyone agrees that matters like the massive asbestos litigation, the AT&T anti-trust suit, or the remedial phase of a school desegregation case are complex”.

 

Complex litigation is now taught in several US law schools as a formal course[2]. Alternative methods of resolving complex disputes exist, for example, mediation, which may be very effective in a given factual matrix. Many mass tort or class action litigation of a complex nature end in a conciliation expressed as a settlement with payouts to the victims.

 


C.   Difficulties of Resolving Complex Disputes in India


Post-independence, India’s first brush with complex dispute was the Bhopal gas leak disaster (1984) related litigation. The leak of methyl isocyanate (MIC) poisonous gas killed thousands (est. 3,000-5,000) of people and with thousands more disabled. In 1985, Indian Government joined a claim against the American company, Union Carbide, in the United States District Court,  Southern District of New York[3] (US Bhopal Case). The core issue raised in a motion filed by Union Carbide was forum non conveniens. Union Carbide argued that Indian courts were a more appropriate forum rather than US courts for claims by gas leak victims. Indian Government’s position in the case was that US courts were appropriate forum to assert their claims.

 

The underlying strategy of parties in Bhopal gas disaster’s US litigation was simple. Union Carbide wanted Bhopal gas leak claims to be not litigated in US courts before juries as that would result in multi-billion dollar judgments or settlements. The track record of US juries for mass torts was pro victim having granted multi-billion dollar verdicts — one of those could have bankrupted Union Carbide. While, Indian Governments, at least initially, and victims wanted substantial damages for their injuries which could only be possible in US courts’ jury trials.

 

In the US Bhopal case, Prof. Marc Galanter filed an affidavit pointing out severe handicaps of Indian legal system in handling complex personal injury litigation involving mass torts[4]. One problem that his affidavit highlighted was at Para VII.C tilted, “Indian Civil Procedure Contains no Special Provisions or Devices for the Conduct or Management of Complex Cases.”

 

In response, the eminent Indian lawyer, Mr Nani Palkhivala, and others legal experts had filed affidavits asserting the competence of Indian legal system to handle mass tort claims. Mr Palkhivala’s affidavit detailed how Indian Bar and judiciary was capable of handling complex litigation including mass torts[5]. Which opinion turned out to be true after nearly 38 years can be seen from Government’s own data: of the 1,029,517 claims only 574,366 were awarded a mere Rs 3,840 crores in total while 455,151 claims were rejected[6]. And the litigation to demand more compensation still continues[7]. Clearly, India legal system needs tools to manage complex litigations that compensate claimants adequately and within a short time.

 

Ultimately, Union Carbide got away easily with a relatively small payment of US $470 million as settlement to Indian Government, though they have given explanations for the same on a specially created website[8]. The trial(s) where Indian courts could have granted multi-billion dollar equivalent award for the Bhopal mass torts and execution of that judgment or judgments in US never arrived due to the paltry settlement by Union Carbide accepted by the Indian Government.

 

In current times, a new category of complex arbitrations has arisen in India. As there are no specialised constructions courts across India (exceptions exist in a few States as tribunals), construction disputes now are invariably arbitrated rather than being litigated in courts. As India constructs infrastructure like roads, high speed rails, airports, etc. inevitably disputes arise between contractors and the public sector. Construction disputes has become a large category of complex disputes in India in last two decades. But the conduct of construction arbitrations in India can be made much more efficient. The delays in arbitration process involving thousands of documents of any construction project are common. Later in this article, recommendations are made to speed up complex arbitrations in India.

 


D.   Current Dispute Resolution Methods in India


The core statute that defines civil litigation in India is the venerable Civil Procedure Code, 1908 (CPC). All other judicial and quasi-judicial procedures in India are derivatives of the CPC. For a country as vast as India, to have a common country-wide Civil Procedure Code for Federal or State Courts in the CPC is a magnificent achievement. Contrast this with the United States, the only nearest comparable common law jurisdiction in its scope to the Indian legal landscape. The United States of America has a Federal Rules of Civil Procedure for Federal Court litigation and as many State Civil Procedure rules as there are States in the United States[9].

 

The CPC has a core set of 158 sections that are enacted by the Central Government and rules (organised in groups of 51 “orders”) that can be modified by the High Court of State with State wide applicability[10]. The CPC is flexible in its legislative design but due to a complex set of factors it is somehow always blamed for delays in courts. But when one generally compares the broad structure of England and Wales’ Civil Procedure Rules or US’s Federal Rules of Civil Procedure, they are pari materia to the CPC except that the CPC includes a detailed execution mechanism.

 

The CPC in its original design was to be the minimum common code for all courts, for disputes small or large, lacks tools for managing complex litigation.The Commercial Courts Act, 2015’s amendments to the CPC are a step in right direction for resolving complex commercial disputes. The CPC’s basic tool for multiparty representative litigation is the Order 1 Rule 8 (one person may sue or defend on behalf of all in same interest) that permits a “representative suit”. The requirements for applying Order 1 Rule 8 are: (i) parties are numerous; (ii) parties have same interest; and (iii) necessary permission is obtained, and a notice is given[11].

 

Arbitration is the preferred option for commercial dispute resolution in India, particularly for construction disputes. As a country building large scale infrastructure, construction disputes are increasing. But efficiency of arbitrating these disputes is questionable. Several reasons exist for inefficiencies in arbitrating construction disputes. Some causes of these inefficiencies are: inability of parties to narrow down disputes to a few key issues, lack of proper documentation and correspondence, inadequately experienced tribunals, archaic evidentiary methods, etc. This article offers some suggestions to remove inefficiencies in commercial and construction litigation through better practices.

 

While the Companies Act, 2013 includes a Section 245 for class action litigation and the Consumer Protection Act has a class action provision, these remain largely unused being untested by litigants[12]. Some class actions are asserted via public interest constitutional writ litigation. In a nutshell, class action or mass tort actions that grant substantial damages to victims are virtually absent in India.

 

There is no doubt that some judicial administrative policy work is happening in India too. But it is all ad hoc. Some examples of judicial policy innovation exist. For example, like the Restatement of Values of Judicial Life,  adopted by Full Court meeting of the Supreme Court of India in 1997[13]. But ad hoc nature of these efforts is illustrated by an observation in a recent case concerning electronic evidence: Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal[14]. Here, the Supreme Court hoped that authorities will take notice of effort put in by a committee of Judges to create a set of rules for electronic evidence:

 

  1. 65. … A five-Judge committee was accordingly constituted on 28-7-2018. After extensive deliberations, and meetings with several police, investigative and other agencies, the Committee finalised its report in November 2018. The report suggested comprehensive guidelines, and recommended their adoption for use in courts, across several categories of proceedings. The report also contained draft rules for the reception, retrieval, authentication and preservation of electronic records. In the opinion of the court, these draft rules should be examined by the authorities concerned, with the object of giving them statutory force, to guide courts in regard to preservation and retrieval of electronic evidence.[15]

 


E.    Global Best Practices for Complex Dispute Resolution


The United States of America’s Federal Rules of Civil Procedure includes provisions for complex litigation. For example, Rule 16 concerns, “Pretrial Conferences; Scheduling; Management”. Specifically, Rule 16(c)(2)(L) permits the trial Judge to adopt special procedures for , “managing potentially difficult or protracted actions that may involve complex issues, multiple parties, difficult legal questions, or unusual proof problems”. This provides flexibility to a federal court’s trial Judge to customise procedures in complex litigation to manage  issues related to multiplicity of parties, legal challenges, or evidence.

 

The Federal Judicial Centre has published a “Manual for Complex Litigation”[16]. This manual has excellent guidance on managing judicial supervision, role of counsel, pretrial issues like discovery, trials, settlement, and class actions as a specific type of complex litigation. The Judicial Conference of the United States has published a “civil litigation manual”[17]. This manual has detailed guidance for Judges to execute a case management plan, pretrial discovery, electronic discovery, pretrial motions, alternative dispute resolution methods, trial planning and actual trial itself. Of specific interest is its Chapter 7, “special case matters”, that deals with complex litigation. The Chapter 7 includes general guidance on complex cases, mass torts cases, class action litigation and expert evidence. Further guidance is given on high profile cases. Interestingly, there is guidance on media management in high profile cases, an increasing need in India too.

 

There is academic guidance on complex litigation available too through dedicated research centres in American universities. For example, George Washington Law School’s James F. Humphreys Complex Litigation Centre has published “Guidelines and Best Practices in Class-Action Litigation” for public comments[18].

 

The Business and Property Courts of England and Wales’ publishes various litigation guides, for example, commercial court guide[19] (incorporating the admiralty court guide) and the technology and construction court guide[20] and the intellectual property enterprise court guide[21]. While these are non-binding and litigation guides for specific courts, they include elements of managing complex litigations.

 

Arbitral rules or guidance notes from arbitral institutions provide specific guidance to manage key aspects of complex disputes. There is guidance available for discovery best practices in construction arbitration specially[22]. Specialised arbitration centres and their rules for complex disputes like construction are also emerging fast[23]. There is ongoing research by arbitral institutions to streamline document production[24].

 


F.    Suggested Remedies for Efficient Dispute Resolution in India


A few suggestions for improving methods of complex dispute resolution in India are describe next:

 

(a) A dedicated body for judicial procedural innovation. India needs a permanent judicial body with a statutory basis that is focussed on process innovation in judiciary from District Court to Supreme Court level. An example of this is the Judicial Conference of the United States, a century old body, that includes Judges across Full Federal judiciary from District Court upwards that makes direct recommendations to the US Congress on federal judicial issues[25]. The Judicial Conference of the United States does useful work through its sub-committees. Integration of trial and tribunal judiciary is critical in any such body. Some innovations have happened in Indian judicial meetings held at times but there is no institutional basis to these nor any regular published outputs of such ad hoc efforts.

 

(b) A guide for best practices in implementing Commercial Courts Act, 2015 is much needed. While a few high courts have amended their original side rules for commercial courts, but much needs to be done to separate conventions and practices of the ordinary civil trials from commercial court trials. There needs to be a scale of sanctions that include fines for violating case management timelines. These can be implemented by amendments to the law or through rules to make the commercial courts effective.

 

(c) A great opportunity exists for arbitration centres with their dedicated set of rules to innovate on complex arbitrations. Indian arbitral institutes can create dedicated construction or complex arbitration rules to expedite construction arbitrations considering the industry practices in India. In particular, voluntary disclosure of documents is a much required feature in expediting construction arbitration in India. Guidance in form of how to claim and prove common heads of construction claims would be very useful. Further, guidance on how to effectively produce and manage massive documentary evidence by building a common correspondence index and a statement of jointly agreed facts can be done.

 


G.   Conclusion


Indian legal system needs to build its complex litigation capabilities by continuous research in rules, training for lawyers and Judges, and creating non-binding court guides. The Commercial Courts Act, 2015 provides a great opportunity to build a new system within the existing courts that can handle complex litigation. But it seems there is more emphasis on aligning commercial courts with existing court practices and conventions than a radical rethink in the method and speed of conducting commercial trials. A parallel opportunity exists for arbitration centres in India to innovate on complex disputes by providing industry specific rules, particularly for construction disputes.

 


† Hasit B. Seth practices as a counsel in the Bombay High Court, India and in arbitrations.

[1] Black’s Law Dictionary, (9th Edn.) p. 1017.

[2] For example, See Harvard Law School’s Prof. Richard Clary’s Spring 2022 course titled “Complex Litigation: Legal Doctrines, Real World Practice”. See HERE.

[3] See, Union Carbide Corpn. Gas Plant Disaster, In re, 634 F Supp 842 (SDNY 1986).

[4] See, Prof. Marc Galanter’s Affidavit, Law School Digital Repository, University of Wisconsin, HERE .

[5] See, Affidavit of N.A. Palkhivala In Support of Defendant’s Motion for Dismissal on Forum Non Conveniens Grounds.  See HERE (Part of Baxi, et al., Mass Disasters and Multinational Liability: The Bhopal Case, 1986, Indian Law Institute).

[6] Facts and Figures, Bhopal Gas Tragedy Relief and Rehabilitation, Government of Madhya Pradesh. See HERE.

[7] See, “Bhopal Gas Tragedy: New SC Bench to Hear Compensation Case”. See HERE .

[8] See, Union Carbide’s Bhopal Website. See HERE .

[9] See, Civil Procedure – State Laws, Legal Information Institute, Cornell. See HERE .

[10]Civil Procedure Code, 1908, S.122.

[11] Mulla, The Code of Civil Procedure: Abridged (12th Edn.) p. 421.

[12] Consumer Protection Act, 2019, S. 2(5)(v).

[13] See, Restatement of Values of Judicial Life. See HERE .

[14] (2020) 7 SCC 1, 57.

[15] The draft of these rules cannot be found online as there is not even a website collating such efforts, though good effort has gone into creating these electronic evidence rules can be seen from this note on Centre for Development of Advanced Informatics (C-DAC) website: HERE .

[16] Federal Judicial Center, Manual for Complex Litigation, Fourth, 2004. See HERE

[17] The Judicial Conference of the United States Committee on Court Administration and Case Management, Civil Litigation Management Manual (2nd Edn.) 2010. See HERE .

[18] See, James F. Humphreys Complex Litigation Center, Guidelines and Best Practices In Class-Action Litigation, See: HERE .

[19] See, The Commercial Court Guide, (11th Edn.) 2022. See HERE .

[20] See, The Technology and Construction Court Guide, (2nd Edn.) 2005. See  HERE .

[21] See, The Intellectual Property Enterprise Court Guide, 2019. See HERE

[22] See, American Arbitration Association, Construction Discovery Best Practices. See HERE .

[23] See, American Arbitration Association’s Construction Industry Arbitration Rules and Mediation Procedures (Including Procedures for Large, Complex Construction Disputes). See: HERE. JAMS Construction Arbitration Rules. See HERE . International Institute for Conflict Prevention & Resolution’s Rules for Expedited Arbitration of Construction Disputes. See HERE .

[24] See, ICC Arbitration Commission Report on Managing E-Document Production. HERE .

[25] Judicial Conference of the United States. See HERE . Note that this is very different from Indian judicial academies which are roughly comparable to the Federal Judicial Center (FJC) in United States that focuses on policy-making and training: HERE , though Indian judicial academies have no formal role in judicial policy-making. The FJC produces excellent research as seen Here

Case BriefsHigh Courts

Delhi High Court: Mukta Gupta, J., decided that mere use of word ‘Arbitration’ in the heading of an Agreement would not mean the existence of an arbitration agreement.

Petitioner sought appointment of an Arbitrator for solving the disputes in relation to the software development arising out of the agreement between the parties and costs.

As per the petitioner, petitioner and respondent had entered into a Master Service Agreement and after the start of the project, the petitioner raised concerns due to the delay on part of the respondent.

Respondent introduced a new person for communication with the petitioner and showed no intention of resolving the issues flagged by the petitioner. Hence, the petitioner sent a legal notice to the respondent invoking arbitration.

The response by the respondent to the legal notice was that, there was no arbitration agreement between the parties.

Clause 11 of the Master Service Agreement dated 29th July 2021 between the parties reads as under:-

“11. Jurisdiction, Arbitration & Dispute Resolution

This Agreement and any dispute or claim relating to it, its enforceability or its termination shall be governed and interpreted according to the laws of India Subject to this Clause 11, the Courts at Delhi, shall have exclusive jurisdiction over any disputes under this Agreement”.

 It was submitted that the above-said clause did not provide that the parties agreed to refer their disputes for resolution through arbitration, just on the basis of noting the word ‘Arbitration’ the petitioner claimed resolution of disputes arising between the parties through arbitration.

Issue for Consideration

Whether the use of the word ‘Arbitration’ in the heading of an Agreement would entail existence of an arbitration agreement?

The said issue was dealt with by this Court in Avant Garde Clean Room & Engg. Solutions (P) Ltd. v. Ind Swift Ltd., (2014) 210 DLT 714.

High Court, in view of the above decision, held that,

Mere use of the word ‘Arbitration’ in the heading in Clause 11 of the Agreement between the parties would not lead to inference that there exists an agreement between the parties seeking resolution of disputes through arbitration.”

Therefore, in view of the above, no ground to appoint an arbitrator was found. The petition was dismissed. [Foomill (P) Ltd. v. Affle (India) Ltd., 2022 SCC OnLine Del 843, decided on 25-3-2022]


Advocates before the Court:

For the Petitioner: Mr. Rajiv Kr.Choudhary, Advocate with Mr.Manash Barman, Advocate.

For the Respondent: Mr .Kapil Madan, Advocate with Ms. Ramya Verma, Advocate.

Case BriefsSupreme Court

Supreme Court: In a case were the Division Bench of Sanjay Kishan Kaul and M.M. Sundresh*, JJ., was sought to provide judicial interpretation of Section 29A(h) of the IBC, as amended by the Act, 2018, the Bench held that ineligibility has to be seen from the point of view of the resolution process. It can never be said that there can be ineligibility qua one creditor as against others. Rather, the ineligibility is to the participation in the resolution process of the corporate debtor. The Bench remarked,

“…what is required to earn a disqualification under the said provision is a mere existence of a personal guarantee that stands invoked by a single creditor, notwithstanding the application being filed by any other creditor seeking initiation of insolvency resolution process subject to further compliance of invocation of the said personal guarantee by any other creditor.”

An application was filed by RBL Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016 to initiate corporate insolvency resolution process (CIRP) against Respondent 1. Pursuant to which a resolution plan, after certain modifications was submitted by the respondent 3 on 22-11-2017. Meanwhile, by way of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, Section 29A was introduced to the Code. It was specifically under 29A (h) that the CoC held a meeting to deliberate upon the impact of the amendment qua the eligibility of the Respondent 3 in submitting a resolution plan in the CIRP proceedings.

It was in the above backdrop that respondent 3 approached the NCLT praying for a declaration that he was not disqualified from submitting a resolution plan under sub-section (c) and (h) of Section 29A of the Code. NCLT, vide its order held that the Respondent 3 was eligible to submit a resolution plan, notwithstanding the fact that he did extend his personal guarantees on behalf of the Respondent 1 which were duly invoked by some of the creditors, on it. It was against the order; the Punjab National Bank approached the NCLAT. However, the Bank later sought to withdraw its appeal to change in circumstances, i.e.  the resolution plan gathered 78.50% vote share. The NCLAT allowed the withdrawal request without any liberty to challenge the same very impugned order.

Consequently, the NCLT approved the resolution plan submitted to it inter alia holding that there is a marked difference between extension and exclusion and therefore, the rigor of Section 12(1) of the Code would not get attracted on the facts of the case particularly when there were pending proceedings with interim orders, notably an interim order was issued by the NCLAT directing the adjudicating authority not to act on resolution plan until the final order of NCLAT. Further, the plan having received 75% vote share, having considered the techno-economic viability and feasibility of the plan, the application filed for approval of the resolution plan was allowed with a direction that the approved resolution plan shall come into force with immediate effect. The appeals against the said order of NCLT were dismissed on the ground that it cannot sit in appeal over the decision of the adjudicating authority or the CoC in the absence of any apparent discrimination.

Grounds for Challenge

Noticeably, the appellant had approached before NCLAT seeking to be impleaded as a party to the proceedings initiated by Punjab National Bank with an intention to continue the lis, however, the same was not favourably considered. The appellant even raised its objection to the withdrawal of appeal. The appellant had approached the Court with the following grievances:

  • The respondent 3, a promoter of the corporate debtor, was ineligible to submit a resolution plan under Section 29A(h) of the Code, as several personal guarantees executed by the Respondent 3 in favour of various creditors of the Respondent 1-corporate debtor stood invoked, prior commencement of CIRP.
  • The law which was prevailing on the date of the application has to be seen, therefore, the disqualification gets attracted on the date of filing of the application and on the same analogy not only Section 29A(h) but also Section 30(4) has to be interpreted.
  • The approval of the resolution plan was made after the mandatory period of 270 days, i.e. after the expiry of the CIRP period. Since there is clear infraction of Section 12, the 12 orders passed are liable to be interfered with.

Hence, the instant case was filed for seeking judicial interpretation of Section 29A(h) of the Insolvency and Bankruptcy Code, 2016, as amended by the Act, 2018.

Interpretation of Section 29A (h) of the Code

The idea of the Insolvency and Bankruptcy Code, 2016 being to facilitate a process of rehabilitation and revival of the corporate debtor with the active participation of the creditors, the Bench opined that there are two principal actors in the entire process, viz., (i) the committee of creditors and, (ii) the corporate debtor. Therefore, there can never be any other interest than that of the committee of creditors and the corporate debtor.

Observing that the objective behind Section 29A of the Code is to avoid unwarranted and unscrupulous elements to get into the resolution process while preventing their personal interests to step in, and to prevent certain categories of persons who may not be in a position to lend credence to the resolution process by virtue of their disqualification, the Bench relied on Ebix Singapore Pvt. Ltd. vs. COC of Educomp Solutions Ltd., 2021 SCC OnLine 707, to hold that the CoC even with the requisite majority, while approving the Resolution Plan must consider the feasibility and viability of the Plan and the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53 of the IBC. And that the CoC cannot approve a Resolution Plan barred under Section 29A of the IBC.

Rejecting the contention of the respondents that Section 29A(h) had to be literally interpreted to the extent that a personal guarantor is barred from submitting a resolution plan only when the creditor invoking the jurisdiction of the adjudicating authority has invoked a personal guarantee executed in favour of said creditor by the resolution applicant and no personal guarantee stood invoked by RBL Bank at the time of application to the adjudicating authority under Section 7 of the Code, the Bench emphasised that ineligibility has to be seen from the point of view of the resolution process. It can never be said that there can be ineligibility qua one creditor as against others. Rather, the ineligibility is to the participation in the resolution process of the corporate debtor. The manner of invocation can never be a factor for the adjudicating authority to adjudge, as against its existence. Adequate importance will have to be given to the latter part of the provision which also disqualifies a person whose liability under the personal guarantee executed in favour of a creditor, remains unpaid in full or in part for the amount due from him, upon invocation.

Difference between Extension and Exclusion

On the question of limitation, the Bench affirmed the views of adjudicating authority as confirmed by the appellate tribunal, noticing that there were earlier rounds of litigation with the interim orders. Therefore, the Bench held that delay of 106 days had been rightly condoned and excluded by the adjudicating authority by invoking Section 12(3) of the Code.

Hence, the Bench opined, the adjudicating authority was right in holding that there is a marked difference between extension and exclusion. Exclusion would come into play when the decision is challenged before a higher forum. Extension is one which is to be exercised by the authority constituted.

Factual Analysis

Admittedly, the Respondent 3 had executed personal guarantees which were invoked by three of the financial creditors even prior to the application filed. Therefore, the Bench held that rigor of Section 29A(h) of the Code obviously got attracted and the plan submitted by the Respondent 3 ought not to have been entertained. Accordingly, the Bench concluded, the adjudicating authority and the appellate tribunal were not right in rejecting the contentions of the appellant on the ground that the earlier appeals having been withdrawn without liberty, the issue qua eligibility cannot be raised for the second time, particularly when the appellant was not a party to the decision of the adjudicating authority on the first occasion.

Though the resolution plan submitted by the Respondent 3 was held ineligible and not maintainable, the Bench opined that much water had flown under the bridge as the requisite percentage of voting share had been achieve, majority of the creditors had given their approval to the resolution plan and the plan was also put into operation since 18-04-2018. The Bench remarked,

“We need to take note of the interest of over 23,000 shareholders and thousands of employees of the Respondent 1. Now, about Rs. 300 crores has also been approved by the shareholders to be raised by the Respondent 1. It is stated that about Rs. 63 crores has been infused into the Respondent No.1 to make it functional. There are many on-going projects of public importance undertaken by the Respondent No.1 in the nature of construction activities which are at different stages.”

Conclusion

Hence, considering the ultimate object of the Code, i.e. to put the corporate debtor back on the rails, and noticing that no prejudice would be caused to the dissenting creditors as their interests would otherwise be secured by the resolution plan itself, which permits them to get back the liquidation value of their respective credit limits, the Bench refused to disturb the resolution plan leading to the on-going operation of the Respondent 1. The appeal was dismissed.

[Bank of Baroda v. Mbl Infrastructures Ltd., 2022 SCC OnLine SC 48, decided on 18-01-2022]


*Judgment by: Justice M.M. Sundresh


Appearance by:

For the Appellant: Tushar Mehta, Solicitor General and Bishwajit Dubey, Advocate

For Respondent 1: Ranjit Kumar, Senior Advocate

For Respondent 3: Parag P. Tripathi, Senior Advocate


Kamini Sharma, Editorial Assistant has put this report together 


 

Case BriefsHigh Courts

Himachal Pradesh High Court: The Division Bench of Narayana Swami, CJ and Jyotsna Rewal Dua, J., disposed of an appeal in the proceeding for shutting down/shifting of liquor vend from Gram Panchayat, Beri, to Gram Panchayat, Jangal, District Hamirpur.

The counsel for the petitioner, Ajay Sharma and Anandita Sharma, stated that the liquor vend was just 20-30 meters from ‘Shani dev temple’ and the Gram Sabha had passed a resolution requesting the authorities to shift the vend from Gram Panchayat Beri to Gram Panchayat Jangal.

The counsel for the defendants, Ajay Vaidya and Surinder Saklani, contended that the vend was allotted in accordance with the existing Excise Policy also the liquor vend confirms the distance requirement and the temple was not visited by the public at large thus it would not fall under the category of place of worship by public at large. In addition to that, the temple was built just around six months back whereas the liquor vend existed from a prior period than the temple. The period of operation of liquor vend was from 01-04-2019 to 31-03-2020. The liquor vend was already operational for the past eight months then.

The Court while disposing of the petition explained that only after the allotment of liquor vend in favor of respondent they were running the same w.e.f 1-4-2019 and said allotment was valid only till 31-3-2020, the said liquor vend could run till 31-3-2020. The Court also issued directions to the State Government to make conscious decisions in such matters. [Arun Thakur v. State of Himachal Pradesh, 2019 SCC OnLine HP 1923, decided on 15-11-2019]

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of RF Nariman, Surya Kant and V. Ramasubramanian, JJ has set aside the NCLAT order dated 04.07.2019 in the Essar Steel India insolvency case and has held,

“The NCLAT judgment which substitutes its wisdom for the commercial wisdom of the Committee of Creditors and which also directs the admission of a number of claims which was done by the resolution applicant, without prejudice to its right to appeal against the aforesaid judgment, must therefore be set aside.”

NCLAT had, in the impugned order, held that in a resolution plan there can be no difference between a financial creditor and an operational creditor in the matter of payment of dues, and that therefore, financial creditors and operational creditors deserve equal treatment under a resolution plan. Accordingly, the NCLAT has re-distributed the proceeds payable under the approved resolution plan as per the method of calculation adopted by it so that all financial creditors and operational creditors be paid 60.7% of their admitted claims.

The present appeals and writ petitions were an aftermath of this Court’s judgment dated 04.10.2018 in ArcelorMittal India Private Limited v. Satish Kumar Gupta, (2019) 2 SCC 1.

The Court also answered some important questions which have been elaborated as follows:

Role of Resolution Professional

Resolution professional is a person who is not only to manage the affairs of the corporate debtor as a going concern from the stage of admission of an application under Sections 7, 9 or 10 of the Code till a resolution plan is approved by the Adjudicating Authority, but is also a key person who is to appoint and convene meetings of the Committee of Creditors, so that they may decide upon resolution plans that are submitted in accordance with the detailed information given to resolution applicants by the resolution professional.

“Another very important function of the resolution professional is to collect, collate and finally admit claims of all creditors, which must then be examined for payment, in full or in part or not at all, by the resolution applicant and be finally negotiated and decided by the Committee of Creditors.”

Role of the prospective resolution applicant

The prospective resolution applicant has a right to receive complete information as to the corporate debtor, debts owed by it, and its activities as a going concern, prior to the admission of an application under section 7, 9 or 10 of the Code. For this purpose, it has a right to receive information contained in the information memorandum as well as the evaluation matrix mentioned in Regulation 36-B.

Role of Committee of Creditors

Since it is the commercial wisdom of the Committee of Creditors that is to decide on whether or not to rehabilitate the corporate debtor by means of acceptance of a particular resolution plan, the provisions of the Code and the Regulations outline in detail the importance of setting up of such Committee, and leaving decisions to be made by the requisite majority of the members of the aforesaid Committee in its discretion.

“The Committee of Creditors does not act in any fiduciary capacity to any group of creditors. On the contrary, it is to take a business decision based upon ground realities by a majority, which then binds all stakeholders, including dissentient creditors.”

The decisions relating to management of the corporate debtor cannot be taken without the prior approval of at least 66% of the votes of the Committee of Creditors.

Constitution of a sub-committee by the Committee of Creditors

Sub-committees cannot be constituted for:

  • Exercising of the Committee of Creditors’ powers on questions which have a vital bearing on the running of the business of the corporate debtor.
  • approving a resolution plan.

However, sub-committees can be appointed for the purpose of negotiating with resolution applicants, or for the purpose of performing other ministerial or administrative acts, provided such acts are in the ultimate analysis approved and ratified by the Committee of Creditors.

Jurisdiction of the Adjudicating Authority and the Appellate Tribunal

The Adjudicating Authority generally cannot interfere on merits with the commercial decision taken by the Committee of Creditors. However, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of.

If the Adjudicating Authority finds, on a given set of facts, that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the Committee of Creditors to re-submit such plan after satisfying the aforesaid parameters. The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal.

Secured and unsecured creditors; the equality principle

Financial creditors are in the business of lending money who are capital providers for companies, who in turn are able to purchase assets and provide a working capital to enable such companies to run their business operation. Whereas operational creditors are beneficiaries of amounts lent by financial creditors which are then used as working capital, and often get paid for goods and services provided by them to the corporate debtor, out of such working capital. Hence,

“If an “equality for all” approach recognising the rights of different classes of creditors as part of an insolvency resolution process is adopted, secured financial creditors will, in many cases, be incentivised to vote for liquidation rather than resolution, as they would have better rights if the corporate debtor was to be liquidated rather than a resolution plan being approved.”

This would defeat the entire objective of the Code which is to first ensure that resolution of distressed assets takes place and only if the same is not possible should liquidation follow.

Constitutional validity of Sections 4 and 6 of the Insolvency and Bankruptcy Code (Amendment) Act, 2019

Section 4

So far as Section 4 is concerned, it is clear that the original timelines under Section 12 of the Code in which a CIRP must be completed have now been extended to 330 days, which is 60 days more than 180 plus 90 days. The proviso to Section 12 reads:

“the corporate insolvency resolution process shall mandatorily be completed within a period of three hundred and thirty days from the insolvency commencement date, including any extension of the period of corporate insolvency resolution process granted under this section and the time taken in legal proceedings in relation to such resolution process of the corporate debtor.”

The Court, hence, while leaving the provision otherwise intact, struck down the word “mandatorily” as being manifestly arbitrary under Article 14 of the Constitution of India and as being an excessive and unreasonable restriction on the litigant’s right to carry on business under Article 19(1)(g) of the Constitution. The effect of this declaration is that ordinarily the time taken in relation to the corporate resolution process of the corporate debtor must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings.

It was, however, explained that on the facts of a given case, if it can be shown to the Adjudicating Authority and/or Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond 330 days, and that it would be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and that the time taken in legal proceedings is largely due to factors owing to which the fault cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal, the delay or a large part thereof being attributable to the tardy process of the Adjudicating Authority and/or the Appellate Tribunal itself, it may be open in such cases for the Adjudicating Authority and/or Appellate Tribunal to extend time beyond 330 days.

Section 6

Section 30(2)(b) of the Code as substituted by Section 6 of the Amending Act is in fact a beneficial provision in favour of operational creditors and dissentient financial creditors as they are now to be paid a certain minimum amount, the minimum in the case of operational creditors being the higher of the two figures calculated under sub-clauses (i) and (ii) of clause (b), and the minimum in the case of dissentient financial creditor being a minimum amount that was not earlier payable. As a matter of fact, pre-amendment, secured financial creditors may cramdown unsecured financial creditors who are dissentient, the majority vote of 66% voting to give them nothing or next to nothing for their dues. In the earlier regime it may have been possible to have done this but after the amendment such financial creditors are now to be paid the minimum amount mentioned in sub-section (2).

It was also noticed that the discretion given to the Committee of Creditors by the word “may” again makes it clear that this is only a guideline which is set out by this sub-section which may be applied by the Committee of Creditors in arriving at a business decision as to acceptance or rejection of a resolution plan.

[Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, 2019 SCC OnLine SC 1478, decided on 15.11.2019]

OP. ED.Practical Lawyer Archives

The approval of Board of Directors and modes of obtaining such approval is one of the most critical aspects of corporate compliance management. The Companies Act, 2013 (“the Act”) provides for certain decisions to be taken by the Board of Directors in its meeting. The Act also provides for passing of resolution by circulation by the Board of Directors of the company.

According to Section 179 of the Act, the Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do. However, in exercising such power or doing such act or thing, the Board of Directors shall be subject to the provisions contained in that behalf in the Act, or in the memorandum of association or articles of association, including regulations made by the company in general meeting. Sub-section (3) of Section 179 of the Act provides for certain transactions or resolutions, wherein the Board of Directors of a company shall exercise by means of resolutions passed at Board meetings.

Section 175 of the Act relates to “passing of resolution by circulation”. This article analyses the provisions of Section 175 of the Act and provides for compliance checklist for passing of resolution by circulation. Necessary references are made to the secretarial standards issued by the Institute of Company Secretaries of India (ICSI).

  1. Meaning of “Circular Resolution”.—It is an alternative method of obtaining the approval of the Board of Directors. Section 175 of the Act creates an exception to the general rule that the Board of Directors of the company shall exercise their powers collectively by means of resolution passed at its meeting.
  2. Certain Resolutions that Cannot be Passed by Circulation.—Sub-section (3) of Section 179 of the Act and Rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014 provides for certain transactions or resolutions, wherein the Board of Directors shall exercise by means of resolutions passed in its meetings. Such transactions/resolutions are: (a) to make calls on shareholders in respect of money unpaid on their shares; (b) to authorise buy-back of securities; (c) to issue securities, including debentures, whether in or outside India; (d) to borrow monies; (e) to invest the funds of the company; (f) to grant loans or give guarantee or provide security in respect of loans; (g) to approve financial statement and the Board’s report; (h) to diversify the business of the company; (i) to approve amalgamation, merger or reconstruction; (j) to take over a company or acquire a controlling or substantial stake in another company; (k) to make political contributions; (l) to appoint or remove key managerial personnel; and (m) to appoint internal auditors and secretarial auditor. For companies incorporated under Section 8 of the Act, the board of directors may decide the following matters by circular resolution (instead of meeting): (a) to borrow monies; (b) to invest the funds of the company; (c) to grant loans or give guarantee or provide security in respect of loans. [MCA Notiifcation No. GSR 466 (E)] dated June 5, 2015].
  3. Resolutions that can be Passed by Circulation.—Any resolution other than the abovementioned resolutions can be passed by circulation by Board of Directors. The Act has not prescribed for list of transactions that can be approved by passing a circular resolution. However, the Company Secretary or Chairman of the company shall ensure the nature of resolution before proposing before the Board of Directors or Committee.
  4. Applicability.—The Board of Directors or any committee (e.g. Audit Committee, Nomination and Remuneration Committee, Corporate Social Responsibility Committee, etc.) can pass a resolution by circulation.
  5. Decision to Pass a Resolution by Circular or Not.—According to the Secretarial Standard 1, the Chairman of the Board or in his absence, Managing Director or in their absence, any director other than an interested director, shall decide whether the approval of the Board for a particular business shall be obtained by means of a resolution by circulation.
  6. Explanation of Business by Note.—According to the Secretarial Standard 1, each business proposed to be passed by way of resolution by circulation shall be explained by a note setting out the details of the proposal, relevant material facts that enable the directors to understand the meaning, scope and implications of the proposal, nature of concern or interest, if any, of any director in the proposal, which the director had earlier disclosed and the draft of the resolution proposed. The note shall also indicate how a director shall signify assent or dissent to the resolution proposed and the date by which the director shall respond.
  7. Serial Numbering of Circular Resolution.—Secretarial Standard 1 mandates serial numbering of every circular resolution.
  8. Modes of Sending Necessary Documents.—The draft resolution together with necessary papers, if any, to all the directors, or members of the committee, as the case may be, shall be sent at their addresses registered with the company. The said documents can be sent by hand delivery or by post or by courier, or through such electronic means as may be prescribed [Section 175(1) of the Act]. A resolution in draft form may be circulated to the directors together with the necessary papers for seeking their approval, by electronic means which may include e-mail or fax [Rule 5 of the Companies (Meetings of Board and its Powers) Rules, 2014].
  9. Time-Limit for Approval.—The Act has not prescribed the time-limit for providing the approval of directors or committee members. However, according to the secretarial standards, not more than 7 days from the date of circulation of the draft of the resolution shall be given to the directors to respond. Additional 2 days may be provided, where the resolution and documents have been sent by the company by speed post or by registered post or by courier. However, in certain cases, the articles of association of the company may provide for such time-limits.
  10. Approval.—The?circular resolution shall be approved by a majority of the directors or committee members, who are entitled to vote on the resolution. After the time-limit is over, it is desirable that the outcome of resolution is communicated to the directors (i.e. whether the resolution is passed or not).
  11. Voting by Interested Director.— Section 175 of the Act does not provide for any reference to a situation wherein a director is interested in a circular resolution. However, according to the Secretarial Standard 1, an interested director shall not be entitled to vote on such resolutions.
  12. Recording the Resolution in Minutes of Meeting.—Where a resolution is passed by circulation, the same shall be noted in the minutes of the subsequent meeting of the Board of Directors. As a good corporate secretarial practice, it is desirable that following points are included in the minutes of the meeting: (i) date of circulation of draft resolution and papers; (ii) cut-off date for receiving the decision of directors; (iii) names of directors giving assent/dissent or abstain from voting; (iv) names of directors, if interested in the resolution; and (v) decision –whether the resolution is passed or not.
  13. Validity of Resolution by Circulation.—According to the secretarial standards, the passing of resolution by circulation shall be considered valid as if it had been passed at duly convened meeting of the Board of Directors. However, the said compliance shall not dispense with the requirement for the Board to meet at the specified frequency as prescribed under Section 173 of the Act.
  14. Discussion at Meeting, in Exceptional Cases.—In certain cases, where not less than one-third of the total number of directors of the company for the time-being require that any resolution under circulation must be decided at a meeting, the Chairperson shall put the resolution to be decided at a meeting of the Board. As a good corporate secretarial practice, such decision taken by the directors is noted in the minutes of the subsequent board meeting.
  15. Maintenance of Certain Documents.—The Company Secretary or the Chairman may maintain records of communication received from directors of company (i.e. with respect to assent/dissent or abstain from voting).

Generally, important matters are discussed at the meetings of Board of Directors and accordingly resolutions are passed. A resolution by circulation is passed when such approval is urgent in nature and cannot be kept on hold for passing such resolution in the ensuing Board meeting. Sometimes such matters are discussed in the earlier Board meetings but a resolution to that effect is not passed. Such decisions may include extension of lease agreement, opening bank account, changing signatories of the bank account, appointing consultants, etc. The passing of circular resolution and maintenance of corporate secretarial documents in relation to the resolution is important from the perspective of secretarial audit process, statutory audit process, internal audit process and issuance of certificate by practising Company Secretary under Section 92(2) of the Act.


*Gaurav N Pingle, Practising Company Secretary, Pune. He can be reached at gp@csgauravpingle.com.

Hot Off The PressNews

The Security Council called upon Member States to step up efforts to combat and criminalize the financing of terrorists and their activities, adopting a resolution on the issue before holding a day-long open debate that placed the spotlight on international cooperation, capacity-building and respect for international law.

Unanimously adopting resolution 2462 (2019) under Chapter VII of the United Nations Charter, the Council reaffirmed its resolution 1373 (2001) — adopted in the wake of the 11 September 2001 attacks in the United States — which requires all States to prevent and suppress the financing of terrorist acts and to refrain from providing support to those involved in them.

It demands that Member States ensure that their counter-terrorism measures are in compliance with their obligations under international law, including international humanitarian law, international human rights law and international refugee law.  The resolution also calls upon Member States to conduct financial investigations into terrorism-related cases and to more effectively investigate and prosecute cases of terrorist financing, applying criminal sanctions as appropriate.

India’s representative said that, while many Council resolutions call for regular reporting on the implementation of sanctions, a cursory look at publicly available information reveals that implementation reports have not been updated for more than a decade.  No effective action has been taken on reported instances of non-compliance with sanctions measures, he added, emphasizing that the Council must do a better job of overseeing implementation of its resolutions.  Terrorists will be ever more creative in finding ways to violate the rulebook and States that support them will continue to justify their inaction, as was done by a serial offender earlier today, he pointed out.

[For the detailed document of the above stated, please refer the link: Document]

United Nations

Appointments & TransfersNews

Proposal for appointment of following six Additional Judges of the Madras High Court, as Permanent Judges of that High Court:

1. Mrs Justice V. Bhavani Subbaroyan
2. Mr Justice A.D. Jagadish Chandira
3. Mr Justice G.R. Swaminathan
4. Mr Justice Abdul Quddhose
5. Mr Justice M. Dhandapani and
6. Mr Justice P.D. Audikesavalu

The Committee constituted in terms of the Resolution dated 26th October, 2017 of the Supreme Court Collegium to assess the Judgments of the above-named recommendees, has submitted its report.

In view of the above, the Collegium comprising of Ranjan Gogoi, CJ and S.A. Bobde and N.V. Ramana, JJ.,  resolved to recommend that (1) Mrs. Justice V. Bhavani Subbaroyan, Mr. Justices (2) A.D. Jagadish Chandira, (3) G.R. Swaminathan, (4) Abdul Quddhose, (5) M. Dhandapani, and (6) P.D. Audikesavalu, Additional Judges, be appointed as Permanent Judges of the Madras High Court.

Collegium Resolutions

[Dated: 11-03-2019]

Supreme Court of India

Kerala High Court
Case BriefsHigh Courts

Kerala High Court: A Single Judge Bench comprising of Raja Vijayaraghavan V, J. invoked its extraordinary powers under Section 482 of the Code of Criminal Procedure, 1973 and quashed criminal proceedings pending against the petitioners in view of resolution of dispute between the warring parties.

The petitioners herein were accused of committing offences punishable under Section 420 of the Indian Penal Code, 1860. Since the disputes between parties to the case had been amicably resolved, the instant petition was filed praying for quashing of proceedings pending against petitioners. It was urged on behalf of the petitioners that the dispute was purely personal in nature and would not affect public peace or tranquility; and the respondents stated that they had no subsisting grievance.

The Court took note of Apex Court’s rulings in Gian Singh v. State of Punjab, (2012) 10 SCC 303 and Narinder Singh v. State of Punjab, (2014) 6 SCC 466 where it had been laid down that in appropriate cases, the High Court can take note of amicable resolution of disputes between the victim and wrongdoer to put an end to the criminal proceedings.

It was observed that the offence committed by petitioners was not grave or serious having ingredients of extreme mental depravity. It appeared that the offence would not have a serious impact on society. Persisting with the prosecution would be nothing but a waste of time as the prospects of conviction were bleak; while on the other hand quashing of proceedings on account of compromise would bring about peace and secure the ends of justice. In view thereof, the petition was allowed.[Narayanan Nair v. Station House Officer, 2018 SCC OnLine Ker 5067, Order dated 28-11-2018]

Case BriefsSupreme Court

Supreme Court: Dismissing the petition filed by former Supreme Court judge Markandey Katju against the resolutions passed by Rajya Sabha and Lok Sabha condemning the statements made by him in Facebook posts where he termed Mahatma Gandhi a British Agent and Netaji Subhash Chandra Bose an agent of Japanese fascism, the Court said that for the free functioning of Houses of Parliament or Legislatures of State, the representatives of people must be free to discuss and debate any issues or questions concerning general public interest. It is entirely left to the discretion of the Presiding Officer to permit discussion so long as it is within the confines of Rules of Procedure.

The Court explained that as far as debates or discussion in the Houses of Parliament are concerned, the only substantive restriction found in the Constitution is in Article 121 of the Constitution which specifically mandates that no discussion shall take place in Parliament in respect of the conduct of any Judge of the Supreme Court or of a High Court in the discharge of his duties. Barring such provision under Article 121, the Constitution has placed no restriction on what can be debated or discussed in Parliament. It is completely left to the wisdom or discretion of the individual Houses and the presiding authorities in terms of the Rules of Procedure of each House.

The 3-judge bench of T.S. Thakur, CJ and R. Banumathi and U.U. Lalit, JJ noticed that both the resolutions made reference to the offices held by the petitioner as a Judge of this Court and Chairman of the Press Council and show that both Houses were conscious of the fact that the remarks about Mahatma Gandhi and Netaji Subhash Chandra Bose were made not by an ordinary person but by one who had occupied high public office. Hence, if both Houses thought it fit to pass resolutions in the form of a declaration, it was certainly within their competence to do so as the nature of remarks regarding Mahatma Gandhi and Netaji Subhash Chandra Bose pertain to general public interest. It was further noticed that the resolutions had no civil consequences in so far as the conduct and character of the petitioner is concerned. [Justice (Retd.) Markandey Katju v. The Lok Sabha, 2016 SCC OnLine SC 1484, decided on 15.12.2016]