Case BriefsHigh Courts

Bombay High Court: The Division Bench of S.V. Gangapurwala and Shrikant D. Kulkarni, JJ., expressed that,

In a welfare State, statutory authorities are bound, not only to pay adequate compensation, but there is also a legal obligation upon them to rehabilitate such persons. The non-fulfilment of their obligations would tantamount to forcing the said uprooted persons to become vagabonds or to indulge in anti-national activities as such sentiments would be born in them on account of such ill-treatment.

Factual Matrix

Petitioners owned agricultural lands adjacent to a National Highway and on the said lands, they had their residential houses, wells, fruit trees, bore-well, etc. which were also adjacent to National Highway.

The said road came to be converted into State Highway without payment of any compensation while expansion of the same.

It has been submitted that, respondents are trying to take forcible possession of the lands of the petitioners and respondent authorities cautioned the petitioners to use police force while taking possession. Though petitioners made it clear that they are not opposing the road widening in question but the authority should acquire their respective lands for up-gradation of the roads as per the due procedure of law.

The said up-gradation is being done in phase wise manner and petitioners are concerned with the phase of Dhangar Pimpri to Wadigodri for which the authorities are attempting to take the forceful possession of their lands under the pretext of resolution regarding adjacent lands of road which need not require acquisition.

Further, it was added that the action initiated by the respondent-authorities thereby taking forcible possession of the lands belonging to the petitioners for road widening by showing the Government Resolution was contrary to the provision of Article 300-A of the Constitution of India.

Respondent authorities stand was that they are expending the road on the existing road of 30 meters. They are upgrading the same and there is no need to acquire the lands of the adjacent land holders as they won’t be affected by the same.

Analysis, Law and Decision

Width of the road – 12 or 30 metres?

As per standards, the width of the State Highway should be 30 meters. The road in question was a District Road. As per standard width of the District Road is 12 meters. By way of notification dated 19th April, 1967, the road in question was declared as State Highway in the year 1967. The question comes when District Road came to be declared as State Highway. How the width of the road is enhanced to 30 meters. Was there any acquisition of lands of adjacent land owners by way of proceedings under the old Land Acquisition Act of 1894? No record is forthcoming from both sides in order to clear the position.

Bench stated that merely, producing maps of certain villages and copies of road development plans, may not be helpful to arrive at a conclusion and record finding to that effect as the said would be an erroneous exercise. Further, it was noted by the Bench that at some places the width of the road of 30 meters and at some, it was less than 30 meters.

The right to property ceased to be a fundamental right by the Constitution (Forty Fourth Amendment) Act, 1978, however, it continued to be a human right in a welfare State, and a constitutional right under Article 300 A of the Constitution.

Article 300 A provides that no person shall be deprived of his property save by authority of law.

 Is there an obligation to pay compensation under Article 300 A?

High Court remarked that obligation to pay compensation, though may not expressly included in Article 300 A, can be inferred from that Article. To forcibly dispossess a person of his private property without following due process of law is certainly violative of human right and so also, constitutional right provided under Article 300 A of the Constitution.

Elaborating more, High Court held that depriving persons of their immovable properties, was a clear violation of Article 21 of the Constitution.

It is not permissible for any welfare State to uproot a person and deprive him of his fundamental/constitutional/human rights, under the garb of industrial development.

In view of the present facts of the case, High Court expressed that, respondents are the State authorities and Central authorities constructing National Highway. They are expected to be model litigants and are expected to respect the rights of petitioners and follow due procedure of law when property is likely to be acquired.

In a society governed by rule of law, there should not be arbitrariness in any decision.

In the instant case, there was no conclusive proof to establish the width of road to be 30 meters and no question of acquiring lands of petitioners.

Hence, there should be a joint measurement of road in presence of the petitioners and respondents under the supervision of District Collector, Jalna and if the width of the road at respective villages is found to be 30 meters, there shall not any question of acquisition of adjacent lands of the petitioners and if otherwise, then Centre and State shall follow due process of law in acquiring the same. [Bhagauji v. State of Maharashtra, 2021 SCC OnLine Bom 982, decided on 3-07-2021]


About the Bench:

JUSTICE SANJAY VIJAYKUMAR GANGAPURWALA

He was born on 24-05-1962.

Stood third in the order of merit in LL.B. examination. Started practice in the year 1985 and joined Chambers of advocate Shri S.N.Loya. Practiced in trial Court, High Court and Debt Recovery Tribunal. Was an advocate for Financial Institutions such as Central Bank of India, Bombay Mercantile Cooperative Bank, Jalgaon Janata Sahakari Bank, many Corporate bodies and Dr.Babasaheb Ambedkar Marathwada University. Also represented Government before Justice Mane Commission. Had privilege to be the advocate of the Hon’ble the Chief Justice of the Bombay High Court.

Extracurricular activities: Is a keen sportsman played lawn tennis at National level. Represented Dr. Babasaheb Ambedkar Marthwada University six times and captained it twice in All India University Tournament. Played Basketball at State level. He was the Honourary part-time lecturer in M.P.Law College since 1991 till date of elevation as Additional Judge of the Bombay High Court on 13-3-2010.

JUSTICE SHRIKANT DATTATRAY KULKARNI

Graduated in Commerce (Hons.) from G.A. College of Commerce, Sangli. Completed LL.B. in the year 1984 from N.S. Law College, Sangli. Did LL.M. from Bharti Vidyapeeth, Pune and Diploma in Cyber Law (D.I.C.L.) from Government Law College, Mumbai and enrolled as an Advocate with Bar Council of Maharashtra & Goa in the year 1985.

Practiced at various places in Sangli District and joined judiciary in the year 1990. Promoted as Addl.District Judge in the year 2002.

Worked as Registrar (Personnel) and Registrar (Judicial) at Principal seat Bombay from 2013 to 2015. Appointed as Principal District & Sessions Judge, Ahmednagar and worked from the year 2015 to 13th July 2017.

Worked as Member Secretary, Maharashtra State Legal Services Authority from 14th July 2017 to 13th January 2020.

Elevated as Judge of Bombay High Court on 14th January 2020.


SOURCE: Bombay High Court Website

Case BriefsHigh Courts

Bombay High Court: The Division Bench of Dipankar Datta, CJ and G.S. Kulkarni, J., while addressing the several questions on reporting by electronic media, expressed that:

“The duty of the press/media to have news items printed/telecast based on true and correct version relating to incidents worth reporting accurately and without any distortion/embellishment as well as without taking sides, cannot, therefore, be overemphasized.”

Genesis of the Several Public Interest Litigations

In the instant matter, several PIL’s cropped from the unnatural death of the actor Sushant Singh Rajput on June 14, 2020.

Insensitive and Disparaging Comments by News Channels

On June 20, 2020, a complaint was lodged against one of the prominent news channels before the Secretary, Ministry of Information and Broadcasting seeking action for insensitive and disparaging comments against the Indian Army and the coverage of the death of the actor, stated to be in defiance with the Programme Code.

Further, it was said that no action against the media channel was taken in regard to the complaint made.

Media Trials

Since the time of death of the actor, several prominent media channels have been literally conducting ‘media trials’ and ‘parallel investigation’ by conducting and broadcasting debates, rendering opinions, exposing the material witnesses, examining and cross-examining the witnesses, chasing the officials of CBI who were investigating the case.

Petitioners added that the above-stated telecast and broadcast are available in the public domain.

Sensationalization and Scandalize the death of the Actor

It is said that the prominent news channels in their attempt to sensationalize the issues have gone as far as displaying the CDR records which is a vital piece of evidence, thereby resulting in the several threat calls and messages sent to the alleged accused.

The petitioners say that to scandalize and sensationalize the death of the actor, irresponsible reporting to implicate one of the prominent ministers of the State of Maharashtra and have been making derogatory, false and distasteful remarks against several ministers.

Further, it was also pointed that the news anchors and reporters were examining and cross-examining all the proposed witnesses exposing the probable evidence to the public which could be examined only by the investigating agency or by the competent courts during the course of the trial.

Press Council of India

PCI had also issued a statement wherein it was stated that the coverage of the alleged suicide of the actor by many media outlets was in contravention of the norms of journalistic conduct.

Undermining the concept of free and fair trial

Petitioners submitted that the freedom of the media, especially of the TV channels, cannot be allowed to super stretch to a point where, by outpouring reprobate information, begins to clog and cloud the pellucid comprehension of ‘facts/news’ in the people’s minds and impinges upon free and fair investigation.

Fundamental Question

Whether the media under the garb of reporting news, can serve their own opinions as facts/news?

Petitioner observed that media works to create or induce opinions by narrating and reporting opinionated and tailored facts as news, which is beyond the scope, power and privilege accorded to the proverbial fourth pillar and a blatant abuse and misuse thereof.

Petitioners assert that media is plagued with the affliction of disproportionate reporting, which may be seen from the undue coverage given to inconsequential and mindless matters, unrelated to the greater good of the people of the country, as opposed to issues of national and international importance which the people are grappling with such as the COVID 19 crisis, mass joblessness, economic downfall, starvation, medical and healthcare structural problems, farmers issues, domestic violence, etc.

Adding to the above, petitioners stated that it is not the media’s domain to prove someone guilty a definitely no question of calling out someone guilty or innocent until the investigation and trial is complete.

Petitioners referred to the Supreme Court decision in Manu Sharma v. State (NCT of Delhi), (2010) 6 SCC 1, wherein the Supreme Court has commented on the danger of serious risk of prejudice if the media exercises unrestricted and unregulated freedom, and stated that people at the helm of affairs should ensure that trial by media does not hamper fair investigation by the investigating agency and more importantly does not prejudice the right of defence of the accused in any manner whatsoever.

Petitioners refer to the decision of the Supreme Court in R.K. Anand v. Delhi High Court, reported in (2009) 8 SCC 106, where the Supreme Court observed that it would be a sad day for the court to employ the media for setting its own house in order and the media too would not relish the role of being the snoopers of the court.

Observation

Contention that media houses have crossed the ‘Lakshman Rekha’

Bench opined that the petitions filed aimed at redressal of genuine public harm or public injury and involve substantial public interest.

Hence, the Court overruled the objections of the media houses to the maintainability of the writ petitions.

Important Legal Questions before the Court

  1. What does the expression “administration of justice in any other manner” in Section 2(c)(iii) of the Contempt of Courts Act, 1971 connote, and whether trial by media/pre-judgment while a police investigation is in progress could lead to interference with/obstruction to “administration of justice”, thereby constituting criminal contempt under the aforesaid section?
  2. Is it necessary to construe “judicial proceedings” in Section 3 of the Contempt of Courts Act, 1971 to have commenced with the registration of an FIR? Also, is it at all necessary to read Section 3 of the Contempt of Courts Act, 1971 in the manner the petitioner in PIL (St.) 2339 of 2020 urges us to read?
  3. Whether media trial in respect of matters pending investigation of a criminal complaint, fall within the restrictions as contained in the Programme Code as postulated under Section 5 of the Cable Television Networks (Regulation) Act, 1995 and the rules framed thereunder?
  4. Whether the regime of self-regulation adopted by the news channels would have any sanctity within the statutory framework?
  5. While emphasizing on the need to strike the right balance between freedom of speech and expression and fair investigation/right to fair trial, to what extent, if at all, should press/media reporting be regulated if the same interferes with or tends to interfere with, or obstructs or tends to obstruct, “administration of justice”?

Further, the Court also proposes to address the following incidental questions:

  1. Are the guidelines for reporting cases of deaths by suicide sufficient? If insufficient, should further guidelines be laid down for reporting cases of deaths by suicide?
  2. Has the media coverage complained of in these writ petitions interfered with/obstructed and/or tends to interfere with/obstruct “administration of justice”, and thus amounts to criminal contempt within the meaning of section 2(c)(iii) of the Contempt of Courts Act, 1971? and whether criticism of Mumbai Police by the electronic media is fair?
  3. Is the accusation that the Ministry of Information and Broadcasting, Government of India, being the Nodal Ministry, has abdicated its statutory functions [under the Cable Television Networks (Regulation) Act and the rules framed thereunder read with the Policy Guidelines of 2011 and the license executed with the broadcaster] of deciding complaints received in respect of offending programmes, by forwarding the same to private bodies like the News Broadcasting Authority (NBA) and the News Broadcasters Federation (NBF), justified?
  4. Should an order be made, on facts and in the circumstances, postponing reporting of events by the media in respect of investigation by the CBI into the FIR registered by it pursuant to the complaint of the actor’s father? Also, is it necessary for the Court to suggest measures for regulating media coverage of incidents such as the one under consideration to address the concerns expressed in these writ petitions?

Analysis

  • Investigative Journalism

The controversy in the instant matter raises questions of contemporary importance touching upon the right of the press/media to express views freely, the right of the deceased to be treated with respect and dignity after death, the need to ensure investigation of the crime to proceed on the right track without being unduly prejudiced by media reports based on “investigative journalism”, and the right of the accused to a free and fair trial as well as the right to not be prejudged by the media.

“Right guaranteed by Article 19(1)(a) of the Constitution is not merely a right of speech and expression but a right to freedom of speech and expression.”

 In Supreme Court’s decision of Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India, (1985) 1 SCC 641 the need to protect the ‘Freedom of Press’ was highlighted, which is the heart of social and political intercourse.

Further, the Court referred to in LIC v. Manubhai D. Shah (Prof.), (1992) 3 SCC 637, wherein the flavour of the right to freedom of free speech and expression was brought out by the Supreme Court.

 “What resonates in our ears now is whether the right guaranteed under Article 19(1)(a) is the most abused right in recent times?”

 To the above stated, Court answered in negative and expressed that “it is a reminder of what has at times been the unsavoury past of the press/media in India crossing the proverbial ‘Lakshman Rekha’.”

Rule of Law

There can be no two opinions that in a society governed by the rule of law, no price is too high to maintain the purity of administration of justice; and, as a Constitutional court, we have the power, nay the duty, to protect not only the Fundamental Rights of the citizens as well as the press/media in the judicious exercise of our jurisdiction under Article 226 of the Constitution but also to secure that the stream of administration of justice flows unsullied and unpolluted, uninfluenced by extraneous considerations.

 Supreme Court’s decision in Harijai Singh, In Re., (1996) 6 SCC 466 held that:

“10. But it has to be remembered that this freedom of press is not absolute, unlimited and unfettered at all times and in all circumstances as giving unrestricted freedom of speech and expression would amount to an uncontrolled licence. If it were wholly free even from reasonable restraints it would lead to disorder and anarchy. The freedom is not to be misunderstood as to be a press free to disregard its duty to be responsible. In fact, the element of responsibility must be present in the conscience of the journalists.”

PCI Guidelines

Electronic media should also be guided by the contents of the guidelines of the PCI on reporting of death cases by suicide for two reasons: first, the said guidelines have a statutory flavour and similar such binding guidelines on reporting cases of death by suicide are non-existent for the electronic media; and secondly, the absence of such guidelines could lead to the dignity of the dead being breached with impunity.

The death of the actor was followed by such crude, indecent and distasteful news reporting by a few of the TV channels that we do not consider it worthy of being referred to here and be a part of this judgment.

Court’s Ruling

“No report/discussion/debate/ interview should be presented by the press/media which could harm the interests of the accused being investigated or a witness in the case or any such person who may be relevant for any investigation, with a view to satiate the thirst of stealing a march over competitors in the field of reporting.”

High Court opined that the press/media ought to avoid/regulate certain reports/discussions/debates/interviews in respect of and/or touching upon any on-going inquiry/investigation into a criminal offence.

Hence, Bench directed the press/ media to exercise restraint and refrain from printing/displaying any news item and/or initiating any discussion/debate/interview of nature, as indicated hereunder:

  1. In relation to death by suicide, depicting the deceased as one having a weak character or intruding in any manner on the privacy of the deceased;
  2. That causes prejudice to an ongoing inquiry/investigation by:

(i)  Referring to the character of the accused/victim and creating an atmosphere of prejudice for both;

(ii)  Holding interviews with the victim, the witnesses and/or any of their family members and displaying it on screen;

(iii)  Analyzing versions of witnesses, whose evidence could be vital at the stage of trial;

(iv)  Publishing a confession allegedly made to a police officer by an accused and trying to make the public believe that the same is a piece of evidence which is admissible before a Court and there is no reason for the Court not to act upon it, without letting the public know the nitty-gritty of the Evidence Act, 1872;

(v)  Printing photographs of an accused and thereby facilitating his identification;

(vi)  Criticizing the investigative agency based on half-baked information without proper research;

(vii)  Pronouncing on the merits of the case, including pre-judging the guilt or innocence qua an accused or an individual not yet wanted in a case, as the case may be;

(viii)  Recreating/reconstructing a crime scene and depicting how the accused committed the crime;

(ix)  Predicting the proposed/future course of action including steps that ought to be taken in a particular direction to complete the investigation; and

(x)  Leaking sensitive and confidential information from materials collected by the investigating agency;

  1. Acting in any manner so as to violate the provisions of the Programme Code as prescribed under section 5 of the CTVN Act read with rule 6 of the CTVN Rules and thereby inviting contempt of court; and
  2. Indulging in character assassination of any individual and thereby mar his reputation.

Role of Media Houses

Bench advised media houses to inform, guide and advise the guest speakers to refrain from making public utterances which are likely to interfere with and/or obstruct the administration of justice and thereby attract contempt.

The role of the anchor, in such cases, is also important. It is for him/her to apply his/her mind and avoid the programme from drifting beyond the permissible limits. Muting the speaker if he flies off or shows the tendency of flying off at a tangent could be one of several ways to avoid embarrassment as well as contempt.

Investigative Agencies

Court also reminded the investigative agencies that they are entitled to maintain secrecy in the course of the investigation and are under no obligation to divulge materials thus collected.

Further, the Court added that:

If indeed there is leakage or disclosure of materials, which has the potential of stifling a proper investigation, it could pave the way for such information being laid before the competent court having powers to punish for cri6minal contempt under Section 2(c) of the CoC Act and in an appropriate case, for being dealt with in accordance with law.

Appointment of an Officer as a Link between the Investigator and Media Houses

Agreeing with Mr Datar’s suggestion Court observed that:

Mumbai Police, as well as the other investigating agencies, may consider the desirability of appointing an officer who could be the link between the investigator and the media houses for holding periodic briefings in sensitive cases or incidents that are likely to affect the public at large and to provide credible information to the extent such officer considers fit and proper to disclose and answer queries as received from the journalists/reporters but he must, at all times, take care to ensure that secret and confidential information/material collected during the investigation, the disclosure whereof could affect the administration of justice, is not divulged.

In case an officer as stated above would be appointed, he would be expected to bear in mind the Supreme Court’s decision in Rajendran Chingaraveluv. R.K. Mishra, (2010) 1 SCC 457.

“Every journalist/reporter has an overriding duty to the society of educating the masses with fair, accurate, trustworthy and responsible reports relating to reportable events/incidents and above all to the standards of his/her profession. Thus, the temptation to sensationalize should be resisted.”

Therefore, in light of the above discussions, the Court disposed of the PIL’s filed.[Nilesh Navalakha v. Union of India, 2021 SCC OnLine Bom 56, decided on 18-01-2021]


Advocates for the Parties:

Mr. Devadatt Kamat, Senior Advocate a/w Mr. Rajesh Inamdar with Mr.Shashwat Anand, Mr. Pankaj Kandhari, Ms. Smita Pandey, Mr.Amit Pai, Mr. Vishal Jagwani, Kevin Gala, Siddharth Naik, Pinky Chainani, Mr. Ankur Azad, Mr. Sarveshwari Prasad, Mr. Rahat Bansal, Mr. Faiz Ahmad. i/b Mr. Pankaj Kandhari for Petitioners.

Mr. Anil Singh, Additional Solicitor General a/w Mr. Sandesh Patil, Mr.Aditya Thakkar, Mr.Amogh Singh, Ms. Apurva Gute, Mr. Chintan, Mr. Mayur Prashant Rane, Mr. Sumedh Sahakari, Mr. D. P. Singh, Ms.Reshma Ravapati, Mr. Saurabh Prabhulkar and Medvita Trivedi for respondent Nos.1, 4, 12 and 13.

Mr. Arvind Datar, Senior Advocate i/by Mr. Bharat Manghani for respondent 3 (NBA)

Mr. P. P. Kakade, Govt. Pleader with Mrs. R. A. Salunkhe, AGP for respondent 5 -State.

Mr. Rajeev Pandey with Mr. Madhur Rai i/by PRS Legal for respondent No.6(The India Today Group).

Mr. Kunal Tandon a/w Ms. Prachi Pandya i/by Corporate Attorneys for respondent No.7 (Times Now).

Ms. Malvika Trivdei a/w Mr. Saket Shukla, Mr. Vasanth Rajshekharan, Mr. Mrinal Ojha, Mr. Debashri Datta, Mr.Rajat Pradhan, Ms. Madhavi Joshi and Mr. Siddhant Kumar i/by Phoenix Legal for respondent 8 (Republic TV).

Mr. Angad Dugal, Mr. Govind Singh Grewal, Shiva Kumar, Tanya Vershney, Raj Surana a/w Rishi Murarka for respondent 9 (NDTV Ltd.).

None for respondent  10 (News 18).

Mr. Ankit Lohiya a/w Mr. Hetal Thakore, Mr. Kunal Parekh, Ms. Bhavika Tiwari i/by Dua Associates AOR Mumbai for respondent 11 (Zee News).

Ms. Hetal Jobhanputra for respondent No. 14 (ABP News).

Mr. Jayant Mehta a/w Mr. Alankar Kirpekar a/w Mr. Tejveer Bhatia, Mr. Rohan Swarop, Mr. Shekhar Bhagat i/by MAG Legal for respondent 15 (India TV).

Mr. Siddhesh Bhole, Mr. Rishabh Dhanuka i/by Alba Law Offices for respondent No. 16 (News Nation).

Mr. Siddharth Bhatnagar, Senior Advocate a/w Mr. Pralhad Paranjape for respondent No. 17 (NBF).

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT), New Delhi: The Bench of Justice Bansi Lal Bhat (Acting Chairperson) and Justice Venugopal M. (Judicial Member), Justice Anant Bijay Singh (Judicial Member), Kanthi Narahari (Technical Member) and Shreesha Merla (Technical member), while addressing the present matter observed that:

“…for purpose of computing the period of limitation under Section 7 of I&B Code, the date of default is NPA.”

Background

The three-member Bench of this Appellate Tribunal had opined that the decision rendered by the 5-member Bench of this Appellate Tribunal in V. Padmakumar v. Stressed Assets Stabilization Fund (SASF),2020 SCC OnLine NCLAT 417required reconsideration.

Issue formulated by the three-member Referral Bench, as noticed in the reference order was 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.”

Facts and Contentions

Corporate Debtor had defaulted in repaying the dues availed as a loan from the Consortium Lenders leading to recalling of the loan facility by the Financial Creditor — State Bank of India and the Consortium Lenders issuing notices under Section 13(2) of the SARFAESI Act, 2002 demanding total amount of Rs 59,97,80,02,973. 
Corporate Debtor failed to discharge its liability.
When the Financial Creditor initiated CIRP under Section 7 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor, Lenders had assigned the debt in favour of ‘Asset Reconstruction Company (India) Ltd. NCLT, Kolkata Bench on being satisfied that debt and default were established, admitted the application. Further on being aggrieved with the same, Ex-Director of Corporate Debtor filed an appeal against the admission order in light of Corporate Debtor’s account being declared as NPA in 2014 and application under Section 7 was filed in 2018 after a delay of around 5 years, hence the same was barred by limitation.
Financial Creditor contended that the right to sue for the first time accrued to it upon the classification of the accounts as NPA in 2013 but thereafter, Corporate Debtor had admitted time and again and unequivocally acknowledged its debt in the Balance Sheets for the years ending 31st March, 2015, 31st March, 2016 and 31st March, 2017.
Hence, the right to sue stood extended in terms of Section 18 of the Limitation Act, 1963.
Referral Bench had declined to accept the argument that Section 18 of the Limitation Act, 1963 is not applicable Insolvency Cases and proceeded to record the reasons for reconsideration of V. Padmakumar’s Judgment.

Analysis, Law and Decision

Bench noted that in ‘V. Padmakumar’s Case’, IDBI had advanced financial assistance of Rs 600 Lakhs by way of Term Loan Agreement dated 02-03-2000 to the Corporate Debtor and the loan was duly secured.
Further, the Corporate Debtor’s account was classified as NPA in 2002, later IDBI initiated recovery proceedings in 2007. Recovery Certification was issued in 2009 which was reflected in the Balance Sheet dated 31-03-2012.
Limitation Period
This Appellate Tribunal noted the decisions delivered by Supreme Court in Jignesh Shah v. Union of India(2019) 10 SCC 750, Gaurav Hargovindbhai Dave v. Asset Reconstructions Company (India) Ltd.  – (2019) 10 SCC 572, Vashdeo R. Bhojwani v. Abhyudaya Co-operative Bank Ltd.(2019) 9 SCC 158, and the decision of this Appellate Tribunal in V. Hotels Ltd. v. Asset Reconstruction Company (India) Ltd.– Company Appeal (AT) (Insolvency) No. 525 of 2019, decided on 11-12-2019, was of the view that for the purpose of computing the limitation period for application under Section 7 the date of default was NPA and hence a crucial date.
5-Member Bench further dealt with the acknowledgement of claim in audited Balance Sheet of Corporate Debtor to arrive at a finding as to whether such acknowledgement would fall within the ambit of Section 18 of Limitation Act, 1963.
Bench expressed that the Referral bench failed to take note of the fact that the 5-Member Bench Judgment rendered in ‘V. Padmakumar’s Case’ with a majority of 4:1 was delivered to remove uncertainty arising out of the conflicting verdicts of Benches of co-equal strength in ‘V. Hotel’s Case’ and ‘ Ugro Capital Ltd.’s Case’.

Once a Larger Bench of this Appellate Tribunal came to be constituted in the wake of two conflicting judgments rendered by Benches of co-equal strength on the issue, one of the two Benches having failed to notice the judgment of the Supreme Court on the subject, the issue raised by the Referral Bench can no more be said to be res integra, in so far as the jurisdiction exercised by this Appellate Tribunal under I&B Code is concerned.

Observations:

  • For purpose of computing, the period of limitation under Section 7, the date of default is NPA.
  • In Supreme Court’s decision of Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries Ltd., Civil Appeal No. 6347 of 2019, it was observed that Section 18 of the Limitation Act, 1963 would have no application to proceedings under the I&B Code. Therefore the issue raised as regards acknowledgement of liability by reflection in the Balance Sheet/Annual Return would be irrelevant.
  • The remedy available under the I&B Code is a remedy distinct from remedy available in civil jurisdiction/ recovery mechanism and since the I&B Code is not a complete Code, provisions of Limitation Act are attracted to proceedings under it before NCLT and NCLAT as far as applicable i.e. in regard to matters not specifically provided for in I&B Code.
  • The whole mechanism of triggering of Corporate Insolvency Resolution Process revolves around the concept of ‘debt’ and ‘default’.
  • There is no room for doubt that the date of default in regard to an application under Section 7 of I&B Code is the date of classification of the account of Corporate Debtor as NPA.
  • The date of default is extendable within the ambit of Section 18 of Limitation Act on the basis of an acknowledgement in writing made by the Corporate Debtor before the expiry of the limitation period.

Whether a reflection of debt in the Balance Sheet/ Annual Return of a Corporate Debtor would amount to acknowledgement under Section 18 of the Limitation Act?

“…the finding has been recorded by the five Member Bench in the context of a judgment or a decree passed for recovery of money by Civil Court/ Debt Recovery Tribunal which cannot shift forward the date of default for purposes of computing limitation for filing of an application under Section 7 of the I&B Code and the fact that filing of Balance Sheet/ Annual Report being mandatory under Section 92(4) of Companies Act, failing of which attracts penal action under Section 92(5) & (6).”

Tribunal also added to its observations that Referral Bench failed to draw a distinction between the ‘recovery proceedings’ and the ‘insolvency resolution process’.

I&B Code provides timelines for resolution of insolvency issues and proceedings thereunder cannot be equated with the ‘recovery proceedings’.

Hence, in view fo the above discussions, Bench opined that :

the order of reference which, in letter and spirit, is more akin to a judgment of an Appellate Court appreciating the findings and judgment in ‘V. Padmakumar’s Case’ is incompetent and deserves to be rejected.

Judicial Indiscipline

Tribunal went on to express that ‘Judicial indiscipline’ creates uncertainty and impairs public faith in the Rule of Law.

Crossing the red line by disregarding the binding precedent results in making the legal proposition uncertain. Such misadventure creates uncertainty as regards the settled position of law.

Cases referred by the Tribunal for the above-stated:

  • Central Board of Dawoodi Bohra Community v. State of Maharashtra, (2005) 2 SCC 673: It was held that a decision delivered by a Bench of larger strength is binding on any subsequent Bench of lesser or coequal strength.

A Bench of co-equal strength can only express an opinion doubting the correctness of the view taken by the earlier Bench of co-equal strength.

  • Keshav Mills Co. Ltd. v. CIT, (1965) 2 SCR 908: It was held that the nature of infirmity or error would be one of the factors in making a reference. Whether patent aspects of question remained unnoticed or was the attention of Court not drawn to any relevant and material statutory provision or was any previous decision of the Supreme Court not noticed would be the relevant factors.
  • In Supreme Court Advocates on Record Association v. Union of India, (2016) 5 SCC 1, it was held that the Court should not, except when it is demonstrated beyond all reasonable doubt that its previous ruling given after due deliberation and a full hearing was erroneous, revisit earlier decision so that the law remains certain.

In CCE v. Matador Foam, (2005) 2 SCC 59, the following was observed:

“….. These being judgments of coordinate benches were binding on the Tribunal. Judicial discipline required that the Tribunal follow those judgments. If the Tribunal felt that those judgments were not correct, it should have referred the case to a larger bench.”

Hence, in light of the above, Tribunal held that:

Following of the judicial precedent of a Bench of equal strength and of a Larger Bench as in the instant case, is a matter of judicial discipline.

While parting with the decision, Bench recorded that

It is not open to the Referral Bench to appreciate the judgment rendered by the earlier Bench as if sitting in appeal to hold that the view is erroneous. Escaping of attention of the earlier Bench as regards a binding judicial precedent or a patent error is of relevance but not an evaluation of earlier judgment as if sitting in appeal.

Referral Bench overlooked all legal considerations. Company Appeal (AT) (Insolvency) No. 385 of 2020 be listed for regular hearing on 11-01-2021.[Bishal Jaiswal v. Asset Reconstruction Company (India) Ltd., Reference made by Three Member Bench in Company Appeal (AT) (Insolvency) No. 385 of 2020, decided on 22-12-2020]

OP. ED.SCC Journal Section Archives

— Indian Supreme Court in the process of transition — Position till early 1970’s and after — Concepts used to avoid change stated — Activist judges — Contribution of Justice Bhagwati — Some highlights of transformation of Indian jurisprudence at the instance of Justice Bhagwati in the judicial process — PIL is a major strategy in the area of legal aid to the poor — Greatest Contribution of Chief Justice Bhagwati — Decisions on Legal Aid — Observations of Justice Bhagwati in Hussainara Khatoon (1980) and Suk Das (1986) — Major thrusts gave to PIL by Justice Bhagwati briefly examined — Observations in Judges transfer case (1981) quoted — Letter petitions in PIL — Contribution of Justice Bhagwati in PIL is certainly enormous — Judicial employment and Human Rights with social justice — Inter-relation of Parts III and IV of the Constitution of India — Case laws referred to and discussed in this regard — Facets of Art. 21 — Case laws cited — Revolutionary interpretation to Art. 21 by Justice Bhagwati — Judicial Reforms and People’s participation — Lok Adalats — Contribution of Justice Bhagwati — Concluding note — Bhagwati era will find a special place for its signal contribution to human rights development and judicial creativity in the cause of social justice

The Indian Supreme Court is in the process of transition. Till early 1970s the Court with few honourable exceptions, acted as an instrument of status quo upholding the traditions of Anglo-Saxon jurisprudence and resisting radical innovations in the use of judicial power to promote social change under the Republican Constitution. The natural inclination of lawyers and Judges was to look for precedents in the “Mother Country” and to interpret a revolutionary document like the Constitution of India in the light of a socio-economic philosophy alien to our freedom movement and the aspirations of a liberated people. Concepts such as “Rule of Law”, “Judicial Restraint”, “Separation of Powers”, “Supremacy of Fundamental Rights over Directive Principles”, “Independence of Judiciary”, “Contempt of Court” and “Certainty in Law” were used conveniently to avoid change wherever possible, delay it whenever inevitable and dilute it as far as practicable. The resultant legal culture was not very different from those of pre-Independence days.

Read more..


Note: This article was first published in Supreme Court Cases Journal  (1987) 1 SCC J-1. It has been reproduced with the kind permission of Eastern Book Company.

Case BriefsForeign Courts

Court of Appeal of the Democratic Socialist Republic of Sri Lanka: The Division Bench of Janak De Silva and N. Bandula Karunarathna, JJ., partly allowed an appeal which was sought In the matter of an application for orders in the nature of a writ of Certiorari and Mandamus under and in terms of the provisions of Article 140 of the Constitution.

The Petitioner was a company limited by guarantee and a non-profit organization with objectives of environmental justice and good governance in the interests of the general public. In the instant PIL, it sought to impugn several acts of the Respondents in the forest complex adjoining Wilpattu National Park.

The counsel for the petitioner, Mr Ravindranath Dabare with S. Ponnamperuma submitted that these areas had been declared as reserved forests in terms of section 3 of the Forest Conservation Ordinance as amended (Forest Conservation Ordinance) and that around 1500 families had been illegally settled in this area contrary to law. The counsel for the respondents, Mr Manohara Jayasinghe SSC in their statement of objections filed that the land forming the subject matter of this application was cleared and several houses and roads had been constructed in order to settle the internally displaced persons (IDP) who were ordered to leave the Northern Province in October 1990 by the Liberation Tigers of Tamil Eelam. The Respondents further stated that the Lessons Learnt and Reconciliation Commission (LLRC) had recommended in its Report that the Government take steps to resettle IDPs and that the Government should access all possible sources of assistance from institutions and individuals both national and international. The evidence before Court established that vast extent of reserved forest land had been cleared and used for the resettlement of IDPs in breach of the provisions of the Forest Conservation Ordinance. The respondents contended that the land forming the subject matter of this application has been used for re-settlement in terms of decisions made by the Presidential Task Force for Resettlement, Development and Security (Northern Province) (1R2) and the Committee appointed by the Task Force to make recommendations to resolve land-related issues in Muslim Villages Displaced in 1990 (1R2 and 1R3). However, there was no documentary evidence before the Court to substantiate this assertion. The Court concluded that the resettlement of the IDPs was made in violation of the provisions of the Forest Conservation Ordinance. The question was of the relief that Court would grant in this application.

The Court observed that relief sought in terms of the writ of certiorari could not be granted as necessary parties had not been made Respondents to this application. It is trite law that all those who would be affected by the outcome of the application for writ of certiorari should be made respondents. The relief sought in terms of a writ of mandamus also failed for the same reasons as the rule of necessary parties applied to this remedy as well. In this application the Court exercised the jurisdiction conferred upon it by Article 140 of the Constitution and the Supreme Court has held that this jurisdiction was not limited to the issuing of prerogative writs such as writs of certiorari, prohibition and mandamus etc, therefore the remaining relief for an order in the nature of mandamus ordering the 1st Respondent to take action against the illegal removal of forest cover, and illegal re-settlement done by the encroachers and re-instate the forest lands to the forest reserve and organize forest replanting programme under and in terms of the provisions of the Forest Ordinance No. 16 of 1907 as amended is one that this Court was permitted to issue.

The Court observed that the Petitioner in this case was not a party to that application. Hence the doctrines of res judicata or issue estoppel do not apply as in both instances it is necessary that the parties to the two cases and the cause of action (or issue estoppel as in this case) must be the same for the two doctrines to apply. The Court further observed that in any event, it was trite law that the rights of the parties must be decided as at the date of the institution of the proceedings or action [Ponnammah v. Arumugam, (8 N.L.R. 223), Sithy Makeena v. Kuraisha, (2006) 2 Sri. L.R. 341]. This application was filed and notice issued in 2015 whereas the fundamental rights application S.C.F.R. 130/2017 was filed in 2017. Hence the outcome of the fundamental rights application cannot be held against the Petitioner in this application.

The Court specifically mentioned the cases of the Supreme Court of India where it has recognized the power vested in the High Court in moulding remedies in the exercise of the writ jurisdiction vested in it by Article 226 of the Indian Constitution to do substantial justice between the parties [C.M. Singh v. H.P. Krishi Vishva Vidyalaya, (1999) 9 SCC 40] and, that an application should not be thrown out simply on the ground that the proper writ or direction has not been prayed for [Chiranjit Lal v. Union of India, AIR 1951 SC 41]. It is open to the Court to mould the relief and to grant the consequential or ancillary relief so as to restore the position to what it was before the impugned action was taken by the concerned authority [State of Gujarat v. Consumer Education and Research Centre, 1981 SCC OnLine Guj 66].

The Court interpreted the Polluter Pays Principle and while partly allowing the appeal held that there was a need to settle down all IDPs who were displaced due to the war in Sri Lanka as far as possible in the areas where they were residing. However, this was subject to other overriding concerns and above all the respect for the rule of law which is the foundation of our Constitution.[Centre for Environmental Justice (Guarantee) Ltd. v. Anura Satharasinghe, 2020 SCC OnLine SL CA 5, decided on 16-11-2020]


Suchita Shukla, Editorial Assistant has put this story together

Op EdsOP. ED.

The National Company Law Appellate Tribunal (“NCLAT”) on 12.03.2020, in Union of India v. Infrastructure Leasing & Financial Services Ltd. [1], (“ILFS”) jumped the wall from West Berlin to East Berlin, despite the law enunciated by the Supreme Court under Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta [2] (“Essar Steel”) and Swiss Ribbons Pvt.  Ltd.  v. Union of India[3] (“Swiss Ribbons”).

The judgment is not only shocking but also calls for profound reflexion on the various glaring issues including:

A. Judicial propriety,

B. constitutional morality,

C. rules of natural justice,

D. rules of law and the manner in which proceedings before the quasi-judicial forums are being conducted in India. 

The  NCLAT, in ILFS[3], held that the Tribunal/Appellate Tribunal has ample power to pass interim order in terms of Section 242(4) of the Companies Act, 2013 (“the CA 2013”). As a consequence of such interpretation, the interim order dated 15.10.2018 requires no modification/ recall as opined by several parties, on the following grounds:

  1. The Tribunal/Appellate Tribunal is required to follow the principles of natural justice alongwith other provisions of the CA 2013 or the Insolvency and Bankruptcy Code, 2016 (“IBC”) and any Rules made thereunder for regulating its own procedure. Since the amendment of Section 424 of the CA 2013 came into effect from 15-11-2016, the Tribunal/Appellate Tribunal is vested with the power to follow the procedure of IBC, in addition to the procedure laid down in the CA 2013 and the Rules framed thereunder. (para 50)
  2.  It cannot be said that the NCLTs while dealing with the winding up matter or a matter under Section 241 read with Section 242 of the CA 2013 particularly in a case under Section 241(2), which relates to public interest cannot follow the principle of IBC. (para 52)
  3. It is true that the power of moratorium under Section 14 of the IBC cannot be exercised under the CA 2013, but the same power can be exercised by the Tribunal under Section 242(4) of the CA 2013 by way of an interim order. Such power shall be exercised only if the Tribunal thinks fit for regulating the conduct of the Company’s affair upon such terms and conditions, which are just and equitable. (para 54)
  4. In India, there is no provision for ‘group insolvency’. Infrastructure Leasing & Financial Services Ltd. (IL&FS”) and its entities (“IL&FS Group Entity(ies)/ IL&FS Group”), being financial service providers, no application under Sections 7,  9 or 10 of IBC can be filed against them. Parties have to move before the Tribunal by filing a petition for winding-up. (para 56)

With regard to the procedure to be followed for resolution of debts, the Tribunal referred to the Resolution Framework dated 25-1-2019 and limited reference to the affidavit dated 7-2-2020 for ‘Public Interest Rationale for Fair and Equitable Distribution to Creditor’ and held that:

  1. It is not inclined to follow the procedure of IBC including Section 53, as this is a case where public interest is involved. (para 64)
  2. It cannot be said that ‘shareholders’ including Life Insurance Corporation, IL&FS Employees’ Welfare Trust, Housing Development Finance Corporation Ltd., Central Bank of India, State Bank of India, UTI-Unit Linked Insurance Plan, etc. should not be paid by following the procedure under Section 53 of IBC. (para 65)
  3. Following Section 53 would be against the public interest as the money invested by purchasing shares by Life Insurance Corporation of India, IL&FS Employees’ Welfare Trust, Central Bank of India, State Bank of India are public money, who are the shareholders and also to protect the interest of IL&FS group entities (who are also creditors). (para 65)
  4. There shall be pro rata distribution as suggested by Union of India for the purpose of completing resolution process. (para 66)
  5. Union of India, the Board of Directors of IL&FS and the ‘Committee of Creditors’ already constituted or which may be constituted were directed to conclude resolution of all the Entities preferably within 90 days.

The NCLAT has not only given contradictory findings, but also has contradicted the settled principles of law. This is apparent from the very fact that NCLAT, on 07-02-2020, directed the matters to be listed on 17-02-2020 for further arguments, however, on 15-02-2020, the matter was notified to have been deleted from the cause list of NCLAT for 17-02-2020. Thereafter, the matter was listed only on 12-03-2020. Upon being informed of the order (yet to be passed at that time), when the parties requested NCLAT to allow them to complete their submissions in all respects, the parties were told that the order is ready and shall be passed as it cannot wait for the parties to finish their submissions and in any way, they can approach the Supreme Court of India. 

The appeal was as a consequence of IL&FS Union of India (“UoI”) challenging the order passed by the  NCLT, Mumbai, whereby the  NCLT declined to pass an order akin to moratorium under Section 14 of IBC. The  NCLAT, while framing the issues on 15-10-2018, imposed a stay inter alia on the lenders to the IL&FS Group from taking any enforcement actions against any entity of the IL&FS Group ‘taking into consideration, the nature of the case; larger public interest; economy of the nation; and interest of the IL&FS entities’.

The first and foremost issue which needs to be pondered upon is whether NCLAT, despite holding that while considering the matter under Section 241 read with Section 242 of the CA 2013, the principles of IBC is to be followed, could have refused to follow the procedure of IBC on the ground that ‘public interest’ is involved? The answer to this issue lies into deeper questions as to –

-whether the provisions of the CA 2013 will override the provisions of IBC.

-whether the entire “corporate insolvency/insolvency resolution/restructure mechanism process” by whatever name be it called as such can be equated with “proceedings arising out or relating to prevention of oppression and mismanagement”;

-whether the mechanical time extension by NCLAT is justifiable in law;

-what does the phrase ‘public interest’ mean in relation to insolvency/restructure mechanism, etc.

Procedure envisaged under the IBC ought to be strictly followed to ensure effective resolution

Section 241 of the CA 2013 lists out the events when an application for relief in case of oppression and mismanagement can be made to the Tribunal. Further, Section 242 of the CA 2013 enlists the nature of relief which can be granted by the Tribunal. Provisions of clauses (a) to (l) to sub-section (2) of Section 242, being exhaustive in nature, specifically mentions the nature of relief which can be granted by the Tribunal and the only residuary provision is clause (m) to sub-section (2)of Section 242, which provides relief for ‘any other matter for which, in the opinion of the Tribunal, it is just and equitable that provision should be made’. The said provision of aforesaid clause (m) cannot be extended beyond its purport and object.

It is relevant to point out that the manner in which the resolution process has been undertaken falls foul of clause (f) to sub-section (2) to Section 242 of the CA 2013, which states that no agreement between the company and any person other than those mentioned in clause (e) i.e. creditors/debenture-holders in the instant case, shall be terminated, set aside or modified except after due notice and after obtaining the consent of the party concerned. Therefore, without obtaining due and appropriate consent of the creditors, the resolution process mechanism including the mechanism of distribution of amount cannot be forced upon creditors, which is apparently done in the instant case.

At the time of consideration of the Companies Bill leading to the enactment of the CA 2013, neither the Bankruptcy Law Reforms Committee Reports nor the Insolvency and Bankruptcy Bill were available before Parliament. The CA 2013 received the assent of the President on 29-8-2013 and the same was published in the Gazette of India. Whereas the Bankruptcy Law Reforms Committee Report was available only on 4-11-2015 and the Insolvency and Bankruptcy Bill, 2015 was introduced in the Lok Sabha on 21-12-2015). It is submitted that in interpreting an Act of Parliament, it is proper, and indeed necessary, to have regard to the state of affairs existing, and known by Parliament to be existing, at the time. Therefore, it was never the intention of Parliament to provide for or deal with the mechanism for resolution plan or plan which would have the effect of re-organisation and/or resolution of stressed entity such as IL&FS Group Entities.

IBC being a special law dealing with mechanism for resolution of the entities in a time-bound manner for maximisation of value of assets of such entity, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders, would have an overriding effect over any other provision of the general law such as Section 242 of the CA 2013. Assuming that the CA 2013 is to be treated as special, even in such a case, provisions of IBC shall have an overriding effect over the CA 2013. It is settled law that in case of an inconsistency arising between two special legislations, the special law enacted later in time would have an overriding effect on the previously enacted law[4]. This rule, read with the non obstante clause enshrined under Section 238 of IBC, makes it clear that IBC shall prevail over the provisions of the CA 2013. In this regard, reference is being made to Innoventive Industries Ltd v. ICICI Bank [5], and Jaipur Metals and Electricals Employees’ Organization v. Jaipur Metals and Electricals Ltd.[6]

At this stage, it is relevant to point out the rationale(s) for enacting the consolidated and complete code dealing with resolution of entities, as set out under the Bankruptcy Law Reforms Committee Report dated 4-11-2015 (“the BLRC Report of 2015”), as follows:

“In such an environment of legislative and judicial uncertainty, the outcomes on insolvency and bankruptcy are poor. World Bank (2014) reports that the average time to resolve insolvency is four years in India, compared to 0.8 years in Singapore and 1 year in London…If we are to bring financing patterns back on track with the global norm, we must create a legal framework to make debt contracts credible channels of financing.

…Yet these game changers and growth drivers are crippled by an environment that takes some of the longest times and highest costs by world 18 standards to resolve any problems that arise while repaying dues on debt. This problem leads to grave consequences: India has some of the lowest credit compared to the size of the economy. This is a troublesome state to be in, particularly for a young emerging economy with the entrepreneurial dynamism of India.

*                           *                                *

Speed is of essence for the working of the Bankruptcy Code, for two reasons. First, while the ‘calm period’ can help keep an organsation afloat, without the full clarity of ownership and control, significant decisions cannot be made. Without effective leadership, the firm will tend to atrophy and fail. The longer the delay, the more likely it is that liquidation will be the only answer. Second, the liquidation value tends to go down with time as many assets suffer from a high economic rate of depreciation. From the viewpoint of creditors, a good realisation can generally be obtained if the firm is sold as a going concern. Hence, when delays induce liquidation, there is value destruction. Further, even in liquidation, the realisation is lower when there are delays. Hence, delays cause value destruction. Thus, achieving a high recovery rate is primarily about identifying and combating the sources of delay. This same idea is found in FSLRC‘s (Financial Sector Legislative Reforms Commission) treatment of the failure of financial firms. The most important objective in designing a legal framework for dealing with firm failure is the need for speed.

  (emphasis supplied)

Relying upon Innoventive Industries Ltd. v. ICICI Bank[7] and ArcelorMittal India Pvt. Ltd.v. Satish Kumar Gupta[8], the Supreme Court, in Swiss Ribbons[9], explained the raison d’être for the IBC, which is set out as under: (SCC paras 27, 28)

“27. …the Preamble gives an insight into what is sought to be achieved by the Code. The Code is first and foremost, a Code for reorganisation and insolvency resolution of corporate debtors. Unless such reorganisation is effected in a time-bound manner, the value of the assets of such persons will deplete. Therefore, maximisation of value of the assets of such persons so that they are efficiently run as going concerns is another very important objective of the Code. This, in turn, will promote entrepreneurship as the persons in management of the corporate debtor are removed and replaced by entrepreneurs. When, therefore, a resolution plan takes off and the corporate debtor is brought back into the economic mainstream, it is able to repay its debts, which, in turn, enhances the viability of credit in the hands of banks and financial institutions. Above all, ultimately, the interests of all stakeholders are looked after as the corporate debtor itself becomes a beneficiary of the resolution scheme—workers are paid, the creditors in the long run will be repaid in full, and shareholders/investors are able to maximise their investment. Timely resolution of a corporate debtor who is in the red, by an effective legal framework, would go a long way to support the development of credit markets. Since more investment can be made with funds that have come back into the economy, business then eases up, which leads, overall, to higher economic growth and development of the Indian economy. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern.

28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the resolution process. The timelines within which the resolution process is to take place again protects the corporate debtor’s assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through its entrepreneurial skills, resuscitate the corporate debtor to achieve all these ends.”

    (emphasis supplied)

As observed by the Supreme Court in Swiss Ribbons (supra), referred to hereinabove, the primary focus of the legislation while enacting the IBC is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from liquidation. Further, the corporate insolvency resolution process is to be completed in a time­bound manner. Therefore, the entire “corporate insolvency/insolvency resolution/restructure mechanism process” by whatever name be it called as such cannot be equated with “proceedings arising out or relating to prevention of oppression and mismanagement”. Considering that IBC was a subsequent Act to the CA, 2013, Section 238 of IBC shall be applicable and the provisions of the IBC shall have an over­riding effect over the CA 2013. Any other view would frustrate the object and purpose of IBC and the settled position of law. In this regard, reliance is placed upon Duncans Industries Ltd. v. A. J. Agrochem[10]. What is more surprising is that NCLAT despite having referred to aforesaid paragraphs of Swiss Ribbons (supra) failed to follow the same in its true spirit.

IBC inter alia provides for the time-limit for completion of corporate insolvency resolution process/resolution process. IBC originally provided that the entire process was to be completed within a period of 180 days from the date of admission of the application and could only be extended beyond 180 days for a further period of not exceeding 90 days if the committee of creditors so decides. Thereafter, through the Insolvency and Bankruptcy Code (Amendment) Act, 2019 (“the 2019 Amendment”), the timelines were changed and CIRP must be completed have now been extended to 330 days, which is 60 days more than the initial stipulated period of 180 days plus 90 days (which is equal to 270 days). But this 330-day period includes the time taken in legal proceedings in relation to such resolution process of the corporate debtor/stressed entity unlike the earlier position. The constitutional validity of the 2019 Amendment was examined by the  Supreme Court, in Essar Steel [11](supra) and it was inter alia held as under: (SCC Online paras 105 & 108)

105. Given the fact that timely resolution of stressed assets is a key factor in the successful working of the Code, the only real argument against the amendment is that the time taken in legal proceedings cannot ever be put against the parties before the NCLT and NCLAT based upon a Latin maxim which sub-serves the cause of justice, namely, actus curiae neminem gravabit.                           

* * *

108. …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. However, 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…It is only in such exceptional cases that time can be extended, the general rule being that 330 days is the outer limit within which resolution of the stressed assets of the corporate debtor must take place beyond which the corporate debtor is to be driven into liquidation.

      (emphasis supplied)

Approximately 481 days (i.e. 1 year, 3 months & 24 days) already stands expired from 15-10-2018 (NCLAT order granting moratorium) until 7-2-2020 (last date of hearing before NCLAT). Therefore, the extension of resolution time period, being the exceptional rule, couldn’t have been mechanically granted. Such mechanical extension of time, without satisfying the test laid in Essar Steel (supra), is in the teeth of the law pronounced by the Supreme Court.

Having regard to the raison d’être for IBC along with the aforesaid observations of the  Supreme Court, any deviations from the principles of IBC would be violative of Articles 14, 19 and 21 of the Constitution of India since this would have an effect of treating similarly placed stressed entities in different manners. IBC exhaustively lays out the process and mechanism, which is to be followed for an effectively and timely resolution process of the stressed entity. Once resolution process is being undertaken following the principles of IBC, it would result into a time bound maximisation of value of assets of such entity. Whereas, another stressed entity for which resolution process is being undertaken dehors the principles of IBC would not be able ensure a time bound maximization of value of assets of such entity. It is undisputed that unless the time bound maximization of value of assets of the stressed entity is achieved, it would not be

possible to keep the entity as a going concern. Therefore, it is not only incomprehensible but also beyond any imagination to even suggest that the resolution process of any entity may be carried out, at its own whims and fancies, without following the IBC and/or principles arising out of IBC, which has been enacted by Parliament, after considering the Bankruptcy Law Reforms Committee Reports, to clear off the environment of legislative and judicial uncertainty and to ensure that average time period for resolution process/insolvency would be much shorter than what existed under the pre-existing state of laws.    

Approbation and reprobation by IL&FS

Further, IL&FS cannot be allowed to approbate and reprobate at the same time. On one hand, it has taken a stand that under the Resolution Framework (which is prepared by IL&FS only and is nothing more than a self-serving document) the provisions of the IBC shall not apply, whereas on the other hand, in the same breath, it has relied upon the provisions of IBC and Regulations framed thereunder, wherever the same is convenient to it. In this regard, reference may be drawn (including but not limited to) to the following:

(a) Payment of financial bid amount to bind stakeholders This principle arises out of sub-section (1) to Section 31 of IBC (p. 10 of Further Affidavit dated 9-1-2020).

(b) Process for admission of claims IBC like process had been followed for inviting, verifying and admitting claims in respect of 70 entities that were identified for sale in Phase-I (p. 40 of Further Affidavit dated 9-1-2020).

(c) Voting percentage required for approval from CoC This principle arises out of sub-section (4) to Section 30 of IBC (p. 98 of Further Affidavit dated 9-1-2020).

(d) Protection to Successful Bidders The Resolution Framework seeks the permission of this Tribunal to grant suitable relief to the successful bidders as contemplated in Section 32-A. It is submitted that the said provision has been recently introduced by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 dated 28-12-2019[12] (p.99 of Further Affidavit dated 9-1-2020).

Invitation for EOIs

Procedure for invitation of Expression of Interest (“EOIs”), as adopted under the Resolution Framework, is contrary to the provisions of the IBC and the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“the CIRP Regulations”) as the same warrants that Information Memorandum (“IM”) and EOIs are to be prepared and published only after due consideration of the same by the CoC. Following the receipt of EOIs from potential investors, a request for proposal (“RFP”) is issued to eligible applicants pursuant to which, binding financial bids are sought after the due diligence exercise, as envisaged under the Resolution Framework is finished, in the form and manner and within the timelines prescribed in the relevant RFP. Whereas in the instant case, CoC (whose composition is not as per law and will be dealt with in the following section) was constituted only after receipt of H1 bid.

In order to ensure transparency in the entire process, it is essential that the CoC be constituted prior to issuance of the EOIs to ensure that the details stated in the EOIs are complete and accurate since the creditors in respect of the sale company have better technical knowledge, know-how of the workings of the sale company and would ensure maximisation of value of assets of the sale company.

Moreover, vide order dated 6-1-2020, NCLAT was constrained to pass a direction in this regard to include details of decrees or awards which have attained finality in the EOIs for the knowledge of the resolution applicants. It goes without saying that IL&FS entities excluded/ignored certain crucial details, even during the pendency of the issue before NCLAT. Only uncertainties lies ahead of us while we move forward with the resolution. 

Constitution of CoC

NCLAT failed to appreciate that the Resolution Framework fails to adhere to Section 21 of the IBC as related party lenders, namely, IL&FS Group Entities have been included in the CoC. By virtue of such inclusion, those related parties have been provided the right of representation, participation and voting in the said CoC meetings. The primary rationale provided for inclusion of related parties in the CoC is to ensure that the rights of the lenders are also protected those who have provided financial debt to the relevant IL&FS Group Creditors of the sale company.

CoC comprises of all financial creditors and authorised representatives of certain categories of persons and classes of creditors under Section 21(6) and Section 21(6-A) and the related parties are excluded from CoC as per first proviso to sub-section (2) of  Section 21[13]. The rationale for only financial creditor handling the affairs of the corporate debtor and resolving them have been deliberated upon by the BLRC Report of 2015, which formed the basis for the enactment of the IBC. The legislative intent under Section  21(2) of IBC in denying rights of representation, participation and voting to related parties is to ensure that the resolution process is driven by only those creditors who are not related to the stressed entity/corporate debtor. Even though related parties may have claims and may even file application for initiation of corporate insolvency resolution process and during such resolution process, may also file their respective claim, such parties cannot drive the resolution process, as that would be rife with conflicts of interest. Such a wholesome intent cannot be rendered infructuous by supplying a narrow or technical interpretation as adopted by the New Board of IL&FS and which has been now blessed by NCLAT.

The Resolution Framework has sought to make the futile attempt to justify the inclusion of related parties by stating that the purported ‘Resolution Framework specifically contemplates that every financial creditor is entitled to be part of the relevant Creditor’s Committee to safeguard interest of creditors at various levels of  Respondent 1 Group’. It has not been able to show as to how the self-serving document/process which is created by IL&FS, passes the scrutiny of settled law. The Resolution Framework prepared by the IL&FS Group for the resolution of IL&FS Group, which is being forced down the throat of the financial creditors, falls foul of the legislative intent and principles of IBC and the regulations framed thereunder. The constitution of the CoC, therefore, as envisaged under the Resolution Framework and blessed by NCLAT is perverse, illegal and bad in law.

Furthermore, the justification given by IL&FS, as mentioned in the affidavits filed before NCLAT, for inclusion of related parties, falls foul of basic principles of law and also compromises the autonomy and wisdom of CoC. It is most unfortunate that IL&FS is acting as the ultimate authority/regulator over the entire process inasmuch as the financial creditors forming part of the CoC have been reduced to a mere rubber stamp.

Related party creditors cannot be treated as ‘similarly situated creditors’ in comparison with other external financial creditors inasmuch as IBC itself deprives such creditors of the rights ordinarily available to other financial creditors. The inclusion of related parties cannot be forced upon the external financial creditors especially when IL&FS, other than specifying its desire and unsubstantiated sweeping assumptions, has not been able to point out any provision of law which enables it to include related parties in the first place, much less a scenario where such related parties have been conferred with the right of representation, participation and/or voting in the meeting of creditors. It defeats the principle of natural justice and leaves a wide scope of misuse of the remaining assets of the distressed corporate entity.

The assumption on the part of the IL&FS that the ‘interest of the creditors at the holding companies cannot be protected if IL&FS Group companies are not members of the COC’ casts aspersions on the integrity of CoC, which are uncalled for.

Such inclusion of related parties not only amounts to causing an inquiry in the commercial wisdom but also tantamount to issuing direction in relation to the exercise of commercial wisdom of CoC. NCLAT has literally adopted ‘equality for all’ approach without appreciating the nature of rights of different classes of creditors and their relationship qua the debtor.

Furthermore, in the recently concluded sale of the 51% shareholding of IWEL to Orix Corporation in the 7 wind SPVs, the CoC comprised solely of related party entities. In this precarious situation as well, IBC provides for a remedy under Section 21(8) which very well could have been adopted. The aforesaid sale is the subject-matter of challenge before NCLAT in Company Appeal (AT) No. 256 of 2019.

The issue of unfollowed principles underlying IBC and objections to Resolution Framework were consistently raised by the creditors prior to granting in-principle acceptance to the bid and a request was made to keep the voting process in abeyance until the issues were/are resolved to the satisfaction of the external creditors. However, no such step was taken by IL&FS and creditors were asked to vote on the bid since its validity was to expire shortly. At this stage, it is relevant to point out that under the Resolution Framework, even if the bid is rejected by the creditors, the IL&FS Board can still approve the same and forward it to the NCLAT for final approval. Therefore, creditors were put under the threat of an invisible gun in granting approval to the bid, wherever the approval has been granted by the creditors.

Given the aforesaid, IL&FS’s stand casting bias upon the CoC by stating that without inclusion of related party, the interest of creditors at the holding companies cannot be protected, is entirely misconceived. I say this since there have been umpteen number of cases of resolution, albeit under the IBC, where the CoC which does not include related party creditors, nevertheless it has offered such creditors a fair bargain under a resolution plan.

NCLAT failed to consider that CoC is not consulted while preparing the EOIs, appointment of valuer(s), consideration of their reports, etc. Furthermore, the CoC also consists of related party entities, who have been unjustifiably conferred upon the right of representation, participation and voting in the CoC meetings. Therefore, appropriate directions should have been issued by NCLAT for constitution of the CoC in accordance with the IBC, by excluding the related parties.

Resolution framework reducing the CoC to rubber stamp

Amongst other things, the resolution framework which was prepared by IL&FS for the resolution of the IL&FS entities specifically mentioned that ‘Approval of CoC will not be required for distribution, which will be as per Revised Distribution Framework’. It is shocking that NCLAT has approved such framework. It would be apt to mention at this stage the order passed by NCLAT lacks clarity especially with regard to resolution. Though the order makes reference to Resolution dated 25-1-2019, it does not make reference to any other amended resolution framework which was filed by IL&FS/UoI, other than making a limited reference to ‘public interest rationale for fair and equitable distribution to creditor’. Therefore, there is no clarity as to which resolution framework was approved by the NCLAT and pertinent to mention that UoI/IL&FS never prayed for pro rata distribution of the amount. It had envisaged for distribution of amount to secured creditor up to liquidation value in terms of Section 53 of IBC. NCLAT has clearly held that principles of Section 53 shall not be applicable. The issue of pro rata distribution has been dealt with in the following section.

The Resolution Framework falls foul of the law laid down in Essar Steel[14] read with the scheme of IBC and Regulations framed thereunder. The Resolution Framework is clearly in teeth of the settled principles of law which require the CoC to consider, evaluate, deliberate and decide, exercising their commercial wisdom, any resolution plan in entirety.

In light of the recent judgment passed by the  Supreme Court in Essar Steel (supra), the principle/procedure for distribution of the sale proceeds by the CoC to the creditors of the relevant sale company shall be in accordance with the same. The Supreme Court has held that it is the commercial wisdom of the CoC, which operates to approve what is deemed by a majority of such creditors to be the best resolution plan[15].  There is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject-matter expressed by them after due deliberations in the CoC meetings through voting is a collective business decision[16].

The legislature, therefore, consciously, has not provided any ground to challenge the “commercial wisdom” of the individual financial creditors or their collective decision before the Adjudicating Authority and accordingly, it is made non-justiciable[17].

What is left to the majority decision of the CoC is the “feasibility and viability” of a resolution plan, which takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. It is the commercial wisdom of this majority of creditors which is to determine, through negotiation with the prospective resolution applicant, as to how and in what manner the corporate resolution process is to take place. Ultimate discretion of ‘what to pay and how much to pay each class or sub-class of creditors’ is with the CoC[18].

NCLT/NCLAT cannot interfere on merits with the commercial decision taken by the CoC, the limited judicial review available is to see that the CoC has taken into account the fact that[19]: (a) the corporate debtor needs to be maintained as a going concern during the resolution process; (b) it needs to maximise the value of its assets; and (c) the interests of all stakeholders including operational creditors has been taken care of[20].

If NCLT/NCLAT finds that the aforesaid parameters have not been kept in view, it may send a resolution plan back to the CoC to re-submit such plan after satisfying the aforesaid parameters[21]. The reasons given by the CoC while approving a resolution plan may be looked at by NCLT/NCLAT only from this point of view, and once it is satisfied that the CoC has paid attention to these key features, it must then pass the resolution plan, other things being equal[22].

As stated earlier, in the present case, IL&FS has called upon the creditors to grant an in-principle approval on the bid, without even knowing, much less evaluating, the relevant particulars of the bid including the proposed manner of payout, the proposed distribution, the schedule of payment etc. CoC cannot be dictated by the IL&FS and be told that the distribution shall be as per the orders passed by the NCLAT, which as per settled law, has a limited jurisdiction in such matters. Such an action being preposterous and being in teeth of the law, is liable to be nipped in the bud itself and should not have been allowed by NCLAT.

Public Interest in insolvency process/restructuring process (by whatever name be it called)

The expressions ‘Public Interest’ cannot be extended beyond its purport and cannot be used to contradict the express provisions of special law i.e. IBC, enacted by Parliament. Public interest is an expression which is wide and amorphous and takes colour from the context in which it is used[23].

In Municipal Corporation of City of Ahmedabad v. Jan Mohd. Usmanbhai[24], the  Supreme Court held that the expression ‘in the interest of the general public’ is of wide import inter alia comprehending economic welfare of the community. In R. v. Bedfordshire[25], it was held that public interest is a matter in which a class of the community have a pecuniary interest, or some interest by which their legal rights or liabilities are affected.

The phrase ‘public interest’ in relation to resolution process commands protection of existing rights of stakeholders and by no stretch of imagination, the ‘public interest’ can be used to create a new right in favour of any of the stakeholders, which never existed in the law. Therefore, to say that for protection of rights of ‘shareholder’ and ‘related party creditors’, pro rata mechanism should be followed for distribution of the amount does not pass the muster of law. Provisions of the company law have treated shareholders differently from the creditors since its inception. Even the Companies Act also provides water fall mechanism and the shareholders and unsecured creditors (i.e. related party creditor in this case) are not treated at par with the other secured creditors. Therefore, at the time of purchasing the share and/or granting the unsecured loan, the respective parties were aware of their rights and such rights cannot be altered/modified under the pretext of ‘public interest’.

It is relevant to point out that the insolvency or resolution process of a stressed entity/ corporate debtor is not a private matter, but falls within the ambit of ‘public interest’[26].

The phrase ‘Public interest’ inter alia includes:

  1. protection of existing rights of stakeholders;
  2. debts would be taken and honored in accordance with the terms thereof[27];
  3. no action is undertaken which would affect the provision of credit in the economy[28]; and
  4. respect and follow the statutory framework for mechanism of distribution of the amount i.e. waterfall mechanism even if it provides for positive discrimination amongst the stakeholders.

Having left with no case law in India dealing with the issue, it would be appropriate to refer the judgments of Courts at Singapore, wherein it has been considered as to pari passu principle has any scope for operation in schemes of arrangement[29]. It has been held that adoption of pari passu principle would be tantamount to turning a blind eye to fundamental aspects of corporate rescue mechanisms outside liquidation in general and of a scheme of arrangement in particular (which in case of resolution process would be resolution framework/resolution plan)[30]. It was further held that a rescue mechanism may need, in order to be effective, to discriminate amongst creditors for example by repaying bigger creditors proportionately less than small creditors are repaid[31]. Dictating that the assets should be distributed in a pari passu manner would not only decrease the flexibility now available to planners of schemes but it may also put a dampener on what the scheme of arrangement could achieve and spell the death knell of the company prematurely[32]. The  Court further held that there are also instances where schemes of arrangement have nothing to do with insolvency at all. In relation thereto, it was held that extending the pari passu principle to such schemes of arrangement which do not lead to insolvency would be to go farther than is necessary[33].

In light of the aforesaid, whether the present IL&FS matter be termed as the one undergoing insolvency resolution process or mere resolution process, the application of pari passu principle falls foul of canons of law in Essar Steel (supra)[34], wherein it was inter alia held that equality principle cannot be stretched to treating unequals equally, as that will destroy the very objective of the IBC – to resolve stressed assets. Equitable treatment has to be accorded to each creditor depending upon the class to which it belongs. Swiss Ribbons[35] referred to the UNCITRAL Legislative Guide which makes it clear that equitable treatment is only for similarly situated creditors.[36]

No power of moratorium under Sections 241 and 242 of CA 2013 especially de hors the principles of IBC

Another aspect to be considered as regards the IL&FS Group Companies is that the premise of Union of India to approach the  NCLT and NCLAT was to seek an order akin to moratorium under the CA 2013, as IL&FS being a financial service provider was excluded from the application of the IBC. Therefore, IL&FS could not avail moratorium under Section 14 of IBC.

The Union of India passed the notification under Section 227 of the IBC, whereby the Financial Service Provider Rules were notified on 15-11-2019. Therefore, the NCLAT erroneously observed at para 56 that ‘IL&FS and its Entities, being financial service providers, no application under Sections 7, or 9 or 10 of the I&B Code can be filed against them’. It is relevant to note that several group companies of IL&FS are not financial service providers and can avail of provisions of IBC. Therefore, the fundamental premise of the Union of India that IL&FS cannot avail of the process under the IBC and therefore an order ought to be passed under the CA 2013, does not apply to several group companies (Ref: Para 20 of NCLT order dated 12-1-2018).

Separate legal personality of IL&FS group entities/companies cannot be obliterated in proceedings under Sections 241/242 of the Act. Sections 241 and 242 of the CA 2013 does not provide for initiation of proceedings against multiple companies and is strictly confined to a single company. The definition of the expression ‘matters’ appearing in Section 242, as set out in Appendix II of the CA 2013, further strengthens this position as the same is limited to matters as regards the company complained of. Though the  Tribunal has the power to regulate its own procedure under Section 424 of the CA 2013, the same is subject to other provisions of the CA 2013, IBC and the Rules/Regulations made thereunder. Therefore, Section 242 of the CA 2013 as well as Rule 11 of the NCLAT Rules, 2016 cannot be construed to unjustifiably enlarge and expand the powers of the NCLAT.

Conclusion

The resolution mechanism, as set out in the Resolution Framework is in blatant violation and non-compliance of several provisions of IBC as well as the CA 2013. By the Resolution Framework, IL&FS proceeded to constitute CoC for the IL&FS Group Entities concerned, in contravention of the IBC and further called upon the CoC to grant an in-principle approval on the bid, without even knowing, much less evaluating, the relevant particulars of the bid including the proposed manner of waterfall mechanism, the proposed distribution, the schedule of payment, etc.

The Resolution Framework, as framed by IL&FS and blessed by NCLAT, has chosen to adopt a procedure as per its whims and fancies without any backing whatsoever in law. It is surprising to note as to how NCLAT while ignoring the aforesaid has gone ahead and blessed the IL&FS’ action, in a hurried manner.

The order dated 15-10-2018 stands challenged before the Supreme Court in L&T Infrastructure Finance Company Ltd.v. Union of India[37], and the  Supreme Court was apprised of the order on jurisdiction was to be passed by NCLAT. The matter was, therefore, adjourned to be listed after the pronouncement of the order. Soon the  Supreme Court would consider the order in the pending matters as well as the fresh appeals which may be listed once the havoc of COVID-19 ends. It is now only with the  Supreme Court to examine the aforesaid issues which would result into setting aside of the order and further passing of stricture/directions, if necessary, to ensure that NCLAT does not jump the wall from West Berlin to East Berlin again.


*Anurag Tripathi, Alumni (2009-14) National Law University Odisha, now working as In-house Counsel at an Indian Conglomerate and may be reached at anuragnluo@gmail.com. The views expressed herein are personal and does not represent views of any organisation. 

[1] Union of India v. Infrastructure Leasing & Financial Services Ltd.., Company Appeal (AT) No. 346 of 2018 with IAs Nos. 3616, 3851, 3860, 3962, 4103, 4249 of 2019, 182 & 185 of 2020, order dated 12.03.2020.

[2] Essar Steel India Ltd. v. Satish Kumar Gupta, 2019 SCC OnLine SC 1478.

[3] Swiss Ribbons  Pvt. Ltd.  v. Union of India, (2019) 4 SCC 17.

[4] Solidaire India Ltd. v. Fairgrowth Financial Services Ltd., (2001) 3 SCC 71.

[5] Innoventive Industries Ltd v. ICICI Bank, (2018) 1 SCC 407.

[6] Jaipur Metals and Electricals Employees’ Organization v. Jaipur Metals and Electricals Ltd., (2019) 4 SCC 227.

[7] Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407.

[8] ArcelorMittal India Pvt. Ltd.  v. Satish Kumar Gupta, (2019) 2 SCC 1.

[9] Swiss Ribbons  Pvt. Ltd.  v. Union of India, (2019) 4 SCC 17, paras 27, 28.

[10] Duncans Industries Ltd.  v. A. J. Agrochem, (2019) 9 SCC 725.

[11] Essar Steel India Ltd. v. Satish Kumar Gupta, 2019 SCC OnLine SC 1478.

[12] The 2019 Ordinance now stands repealed by the Insolvency and Bankruptcy Code (Amendment) Act, 2020. Since the present order was passed on 12-3-2020 March 12, 2020 and the 2020 Amendment was enacted and notified on 13-3-2020 March 13, 2020, reference has been made to the 2019 Ordinance in the body and the 2020 Amendment is mentioned for sake of clarification.

[13] Chitra Sharma v. Union of India, (2018) 18 SCC 575 and Vijay Kumar Jain v. Standard Chartered Bank, 2019 SCC OnLine SC 103.

[14] Essar Steel India Ltd. v. Satish Kumar Gupta, 2019 SCC OnLine SC 1478, paras 33, 41, 42 and 58.

[15] Id.

[16] Id.

[17] Id.

[18] Id.

[19] Id.

[20] Id.

[21] Id.

[22] Id.

[23] Moon Technology Ltd. v. Union of India, CA No.4476 of 2019.

[24] Municipal Corpn. of City of Ahmedabad v. Jan Mohd. Usmanbhai, (1986) 3 SCC 20.

[25] R. v. Bedfordshire, 24 LJ QB 84; Janata Dal v. H.S. Chowdhary, (1992) 4 SCC 305.

[26] U.K., Cork Committee, Insolvency Law and Practice (Cmnd. No. 8558) by Kenneth Cork et al. (London: Her Majesty’s Stationary Office, 1982) (“Cork Report”); In re Pantmaenog Timber Co. Ltd., [2004] 1 A.C. 158 at para 52 (H.L.) and Liquidator of W&P Piling Pte Ltd v. Chew Yin What [2004] 3 SLR  (R) 164 at para 26 (H.C.).

[27] Ian F. Fletcher, “Juggling with Norms: the Conflict Between Collective and Individual Rights Under Insolvency Law” in Ross Cranston, ed., Making Commercial Law: Essays in Honour of Roy Goode (Oxford: Clarendon Press, 1997) at 393.

[28] Fiscal and Financial Policy Sub-Committee, Report of the Fiscal and Financial Policy Sub-Committee by Keith Tay et al. (Singapore: Singapore National Printers Ltd, 1986) at 63 and Cork Report, supra note 26.

[29] Hitachi Plant Engineering & Construction Co. Ltd v. Eltraco International Pte Ltd.,  [2003] 4 SLR (R) 384 (CA); [2003] SGCA 38.

[30] Id., para 79

[31] Id., para 81

[32] Id.

[33].Id., para 85 and followed by Re Wan Soon Construction Pte Ltd., [2005] 3 SLR(R) 375: [2005] SGHC 102.

[34] Steel India Ltd. v. Satish Kumar Gupta, 2019 SCC OnLine SC 1478, paras 49, 51, 54,55, 56, 57, 58.

[35] Swiss Ribbons Pvt. Ltd. v. Union of India, (2019) 4 SCC 17, para 76.

[36] Steel India Ltd. v. Satish Kumar Gupta, 2019 SCC OnLine SC 1478.

[37] L&T Infrastructure Finance Company Ltd. v. Union of India, CAs Nos. 2397-98 of 2019; GHV (India) Pvt. Ltd. v. Union of India, CA (Diary) No. 6403 of 2019.

Case BriefsHigh Courts

Rajasthan High Court: A Division Bench of Sabina and Goverdhan Bardhar, JJ., while dismissing the appeal upheld the judgment passed by the trial court.

In the instant case, respondent Nafisa in her dying declaration stated that her husband Amin who is the appellant, in this case, used to beat her out of matrimonial home under the influence of liquor. On 14-08-2011 Amin under the influence of liquor gave beatings to her and poured kerosene oil on her and set her on fire around 8-9 pm. The children were sleeping at that time so she raised an alarm she was taken to the hospital by her neighbours. Meanwhile, the appellant fled away from the spot. Respondent’s statement was recorded under Section 164 of the Code of Criminal Procedure, 1973. Respondent died on 15-08-2011 at 3:30 am so the offence under Section 302 of the Penal Code, 1860 was added. 

During the investigation, appellant said he was falsely framed in this case and said his wife had prepared meals and had served to children and he had no knowledge of how the fire was caught. Moreover, he said he tried to extinguish the fire and suffered injuries on his hands and face. When children were examined they didn’t support prosecution case and said their father tried to extinguish fire. Medical examination of the appellant said he suffered burn injuries on his hands and forearm. Even the parents of the deceased also admitted that she never complained about her husband to them. 

Therefore, the question before Court was that the statement recorded as dying declaration under Section 164 of the Code of Criminal Procedure, 1973 recorded by the magistrate the entire case should rest upon it.

The Court relied on the case Muthu Kutty v. State of T.N., (2005) 9 SCC 113 where Supreme Court laid down that though the dying declaration is of great value and importance, the accused is left with no power of cross-examination. The Court has to be on guard “that the statement of deceased was not as a result of either tutoring, or prompting or a product of imagination”. In another case of Munnu Raja v. State of M.P., (1976) 3 SCC 104, the Supreme Court laid down that there is neither rule of law nor of prudence that dying declaration cannot be acted upon without corroboration.

The Court opined that the dying declaration in this case was obtained by all legal means as it was recorded by magistrate under Section 164 of the Code of Criminal Procedure, 1973 and the doctor deemed her fit to give statement and it was also signed by doctor and moreover no reason was established of her to such a thing in her death bed. The appellant neither took her wife to the hospital and nor was present in the hospital during the time of treatment. Moreover, the medical examination of the appellant happened on 28-09-2011 and the incident took place on 14-08-2011. Delay of so many days further questions the credibility of the medical report. This establishes guilt in the mind of appellant. [Amin v. State of Rajasthan, 2019 SCC OnLine Raj 3945, decided on 23-10-2019]

Case BriefsHigh Courts

Jharkhand High Court: The instant writ petition entertained by Sujit Narayan Prasad, J. was filed under Article 226 of the Constitution of India for quashing the Memo issued by the respondent whereby the water reservoirs in the urban area has been directed to be handed over in favor of the municipality.

The petitioner had contended that certain water reservoirs had been settled in favor of the petitioner for the year 2016-17 and in terms of the contract the petitioner carried out the fishing work in the aforesaid tanks but all of a sudden the impugned decision was taken on by which the tank was transferred in favor of the municipality therefore, the ground was raised that when the terms and conditions of the contract was in subsistence during the course when the impugned order was passed, the same cannot be done in the course of subsistence period of the contract, hence the impugned order was not sustainable in the eyes of law.

Counsel for the State-respondent Gautam Kumar, submitted that the impugned decision was taken in terms of the Cabinet decision which was issued by the appropriate authorities and the said Cabinet decision was taken in pursuance to the provision of Section 126 of the Jharkhand Municipal Act, 2011 wherein the provision was made about vesting of property which includes public tanks/reservoirs also, therefore, if the Cabinet took a decision to follow the statue and in terms thereof any decision which was taken, the same cannot be interfered with.

The Court observed that the tanks in question were settled in favor of the petitioner in the year 2016-17 by the order in that regard by the competent authority but in course of subsistence period of the contract the impugned decision was taken to transfer the tanks in favor of the municipality by taking aid of the decision by the State of Jharkhand. It further found no dispute about the settled position of law that if any Act has been acted upon, it was to be followed in its strict sense and there cannot be any deviation otherwise it will be said that the rule of law was not prevailing. It held, “It is a settled legal proposition that Article 14 of the Constitution is not meant to perpetuate illegality or fraud, even by extending the wrong decisions made in other cases. The said provision does not envisage negative equality but has only a positive aspect.” Hence, the petition was dismissed.[Somath Haldar v. State of Jharkhand, 2019 SCC OnLine Jhar 683, decided on 13-06-2019]

Case BriefsHigh Courts

Madras High Court: A Bench of S.M. Subramaniam, J. while addressing a writ petition stated that “If a deity in a temple commits an act of encroachment, that is also to be dealt with, in accordance with law and because it is a deity, the Rule of Law cannot be diluted.”

The present writ petition was filed in regard to the removal of the unauthorised construction in the name of Vinayagar Temple in Revenue Divisional Office, Coimbatore.

For the above-stated concern, the High Court was of the opinion that various temples on public roads, Government Poramboke areas, Water bodies and Water resources are being constructed by few land mafias and greedy men for personal gains and for unlawful enrichments. The reason behind the construction of these temples at such places is either to grab land or personal unlawful enrichment. It has also been stated by the Court that these temples are constructed without obtaining the required permissions from the authorities concerned.

“Even Deity as a legal person, cannot commit an act of encroachment.”

Therefore, taking into consideration the issues as stated above, the High Court stated that, Temples, Churches, Mosques or any other religious institutions, if constructed by encroaching public roads causing inconvenience to vehicular traffic or if any constructed in water resources and water bodies, depriving the citizen to get water resources, then all to be dealt in accordance with law as stated earlier.

Thus the bench concluded the order by stating the need to implead the “State” as the party for consideration of issues appropriately. Learned counsels were requested to file counter affidavit and statistics regarding the existence of all such Temples, Churches, and Mosques in an encroached public land, Poramboke lands, water bodies, and water resources. Further, the matter was posted for 21-01-2019. [K. Ramakrishnan v. District Collector, 2019 SCC OnLine Mad 36, Order dated 04-01-2019]

Case BriefsHigh Courts

Kerala High Court: A Division Bench comprising of P.R. Ramachandra Menon and N. Anil Kumar, JJ. allowed a petition challenging the obstruction caused by Auto Rickshaw Union of Irrity area to the driver who was stopped from plying his vehicle despite possession of a valid permit.

Petitioner, owner of a contract carriage (auto rickshaw) obtained a contract carriage permit to ply the said vehicle in the place mentioned therein, subject to the condition that he shall not park it or pick up passengers in it from/within the city. However, he was forcefully obstructed from parking the vehicle at Iritty by the Irrity Auto Rickshaw Union stating that the same could be done only by members of their Union. Petitioner’s representations to the police yielded no results which prompted him to file the instant petition contending that the actions of Irrity Auto Rickshaw Union were contrary to the provisions of law and his vested rights.

The Court held that in so far as the petitioner was plying the vehicle strictly in terms of contract carriage permit obtained by him, there could not be any forceful obstruction from any corner. The petition was disposed of opining that in case of any such obstruction, the same be brought to the notice of Sub Inspector of Police who was directed to intervene then and there and take appropriate remedial measures to abate the threat to the rule of law. [Sumesh M.G. v. District Collector, Collectorate, Kannur, 2018 SCC OnLine Ker 5795, decided on 20-12-2018]

Legislation UpdatesRules & Regulations

Under Rule 5 of the Noise Pollution (Regulation and Control) Rules, 2000 use of loudspeakers/public address system is restricted in the following manner:

A) They can only be used after obtaining permission from any authority or officer authorised by the Central Government, or as the case may be, the State Government in accordance with the laws in force and includes a District Magistrate, Police Commissioner, or any other officer, not below the rank of the Deputy Superintendent of Police, designated for the maintenance of the ambient air quality standards in respect of noise under any law for the time being in force.

B) The loudspeaker or a public address system shall not be used at night (between 10.00 p.m. to 6.00 a.m.) except in closed premises for communication within, e.g. auditoria, conference rooms, community halls and banquet halls.

C) The State Government may, subject to such terms and conditions as are necessary to reduce noise pollution, permit use of loudspeakers or public address systems during night hours (between 10.00 p.m. to 12.00 midnight) on or during any cultural or religious festive occasion of a limited duration not exceeding fifteen days in all during a calendar year.

Further the Supreme Court of India has passed the following directions in Noise Pollution (V), In re, (2005) 5 SCC 733 at page 782:

1. The noise level at the boundary of the public place, where loudspeaker or public address system or any other noise source is being used shall not exceed 10 dB(A) above the ambient noise standards for the area or 75 dB(A) whichever is lower.

2. No one shall beat a drum or tom-tom or blow a trumpet or beat or sound any instrument or use any sound amplifier at night (between 10.00 p.m. and 6 a.m.) except in public emergencies.

3. The peripheral noise level of privately-owned sound system shall not exceed by more than 5 dB(A) than the ambient air-quality standard specified for the area in which it is used, at the boundary of the private place.