TaxTMI 
TaxTMI 
2021 (4) TMI 613
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....54 OF 2021 [ARISING OUT OF SPECIAL LEAVE PETITION NO.11232 OF 2020] WRIT PETITION (CIVIL) NO.1177 OF 2020 CIVIL APPEAL NOS. 1550-1553OF 2021 [ARISING OUT OF SPECIAL LEAVE PETITION NOS.7147-7150 OF 2020] JUDGMENT B. R. GAVAI, J. 1. Leave granted in Special Leave Petition (Civil) Nos. 11232 of 2020 and 7147-7150 of 2020. 2. The short but important questions, that arise for consideration in this batch of matters, are as under: (i) As to whether any creditor including the Central Government, State Government or any local authority is bound by the Resolution Plan once it is approved by an adjudicating authority under subsection (1) of Section 31 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'I&B Code')? (ii) As to whether the amendment to Section 31 by Section 7 of Act 26 of 2019 is clarificatory/declaratory or substantive in nature? (iii) As to whether after approval of resolution plan by the Adjudicating Authority a creditor including the Central Government, State Government or any local authority is entitled to initiate any proceedings for recovery of any of the dues from the Corporate Debtor, which are not a part of the Resolution Plan approved by....
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....reafter proceeded for negotiations with the H2 Bidder i.e. GMSPL. However, the resolution plan of GMSPL was also found to be unacceptable to CoC and therefore, in its 10th meeting held on 3.4.2018, it decided to annul the existing process and initiate a fresh process for invitation of Resolution Plan only from the applicants, which had earlier submitted their EOI. Accordingly, a communication was sent to the applicants, which had submitted their EOI. In response to the said invitation, three Resolution Plans were received each from GMSPL, EARC and Srei Infrastructure Finance Limited (hereinafter referred to as "SIFL") respectively. These Resolution Plans were considered by CoC in its 11th meeting held on 13.4.2018. After evaluation of the Resolution Plans, CoC ranked GMSPL as the H1 bidder. 8. Further negotiations were held by CoC with GMSPL. After several rounds of negotiations, the Resolution Plan of GMSPL was considered by CoC for its approval. In its 12th meeting held on 21.4.2018, CoC unanimously took a decision to convene a meeting of CoC on 25.4.2018 at 6 PM, for voting on the Resolution Plan proposed by GMSPL. After being satisfied, that the Resolution Plan submitted by GM....
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....ion of claims of EARC as Financial Creditor and thereby its noninclusion in CoC. Company Appeal (AT) (Insolvency) No. 444/2018 came to be filed with the grievance, that RP and CoC had erroneously held, that the plan of GMSPL was better than that of EARC. One more Company Appeal being Company Appeal (AT) (Insolvency) No. 500/2018 came to be filed by Sundargarh Mines & Transport Workers Union (hereinafter referred to as "SMTWU") on behalf of the workmen of the Corporate Debtor. One another Company Appeal being Company Appeal (AT) (Insolvency) No.438/2018 came to be filed by one Deepak Singh, an employee of APNRL, claiming dues of his salary. 12. By the impugned judgment and order dated 23.4.2019, NCLAT while holding, that RP was justified in not accepting the claim of EARC and that NCLT had rightly rejected the application filed by EARC, however, observed that the rejection of the claim for the purpose of collating and making it part of the Resolution Plan will not affect the right of EARC to invoke the Bank Guarantee against the Corporate Debtor, in case the principal borrower failed to pay the debt amount, since the moratorium period had come to an end. NCLAT on comparison of the ....
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....f cement and allied products. 17. On 19.12.2015, the Additional Commissioner, Commercial Tax, Ghaziabad passed an order in the appeal preferred by M/s Binani Cement Limited, thereby, allowing the appeal filed by Binani Cement and setting aside the order of imposition of fine of Rs. 24,71,885/. Vide another order dated 22.12.2015, passed in the appeal filed by Binani Cement, the order of imposition of fine of Rs. 59,61,445/also came to be set aside. Vide order dated 2.8.2017, the Deputy Commissioner, Commercial Tax, Division10, Ghaziabad held, that Binani Cement was liable to pay Entry Tax of Rs. 40,47,344/for the Assessment Year 2003-2004. By another order dated 2.8.2017, the Deputy Commissioner, Commercial Tax, Division10, Ghaziabad further held, that Binani Cement was liable to pay Entry Tax of Rs. 43,06,715/for the Assessment Year 2004-2005. 18. Since the said Binani Cement was unable to pay the debt to Bank of Baroda, the Bank of Baroda filed an application being C.A. (IB) No. 359/KB/2017 before NCLT, Kolkata Bench under Section 7 of I&B Code. Vide order dated 25.7.2017, NCLT admitted the petition for initiating the CIRP process. Vide the said order, NCLT also declared morato....
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....ments came to be made by the authority on 29.4.2019: " After consideration on application presented by you, it is found that, by Hon'ble NCLT/NCLAT after transfer, neither stay is imposed on tax assessment nor on creation of demand. So the created demand is payable by you. If you are not agree with it, preferring appeal before higher authority, present its copy to us. Disposal is done of application presented by you." 22. The Commercial Tax Department of the State of Rajasthan filed Civil Appeal No. 5889/2019 challenging the Resolution Plan. However, the said appeal came to be dismissed vide order of this Court dated 26.7.2019. The appeals being Civil Appeal Nos. 630634/ 2020 were also preferred by the Commissioner of Central Excise, Goods and Services Tax, Jodhpur challenging the Resolution Plan. The same also came to be dismissed by this Court vide order dated 24.1.2020. 23. The appellant therefore filed a Civil Miscellaneous Writ Petition No. 354/2020 before the High Court of Allahabad challenging the order passed by the Additional Commissioner Grade 2 (Appeal) dated 30.1.2020, to the effect, that the proceedings in the State of U.P. would remain unaffected irrespective of ....
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.... initiated by the SBI. Vide order dated 21.7.2017 of NCLT, the application filed by SBI was admitted and Mr. Dhaivat Anjaria was appointed as Interim Resolution Professional (IRP). In its meeting dated 21.8.2017, CoC approved the appointment of IRP as RP. In response to the invitation for submission of resolution plans, four applicants had submitted their Resolution Plans. CoC had approved the Resolution Plan of Vedanta Limited by 100% voting share. NCLT vide order dated 17.4.2018 approved the Resolution Plan of Vedanta Limited. The appeal being Company Appeal (AT) (Insolvency) No. 175/2018 filed by one Renaissance Steel India Private Limited challenging the order of NCLT came to be dismissed by NCLAT vide order dated 10.8.2018. Challenging the notices issued by the respondent State Authorities and the order of SBI asking it to pay an amount of Rs. 37,41,41,602/on account of tax penalty due under the Jharkhand VAT Act for the period 2011-12 and 201213, the appellant approached the High Court of Jharkhand. The appellant had also challenged the letter dated 22.11.2019 issued by State Tax Officer, Bokaro to deposit the amount of Rs. 75,57,000/. As in the other matters, it is contended....
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....pon the resolution applicant, the total resolution plan itself would be unworkable. 30. Dr. Singhvi further submitted that NCLT has found the conduct of EARC not to be bona fide. He submitted, that NCLT has categorically found, that the application filed by EARC was a deliberate attempt to stage manage an objection against the approval of Resolution Plan submitted by an entity, other than it. He submitted, that as a matter of fact, NCLT has imposed costs of Rs. 1 lakh on EARC taking into consideration its conduct. 31. Dr. Singhvi relied upon the judgments of this Court in the cases of K. Shashidhar vs. Indian Overseas Bank and Others (2019) 12 SCC 150, Committee of Creditors of Essar Steel India Limited through Authorised Signatory vs. Satish Kumar Gupta & Ors. (supra) Maharashtra Seamless Limited vs. Padmanabhan Venkatesh and others (2020) 11 SCC 467, Karad Urban Cooperative Bank Ltd. vs. Swwapnil Bhingardevay & Ors. (2020) 9 SCC 729 and Kalpraj Dharamshi and Another vs. Kotak Investment Advisors Limited and Another 2021 SCC OnLine SC 204. 32. Mr. Prashant Bhushan, learned Counsel appearing on behalf of the EARCrespondent No.1 submitted, that by the impugned order, NCLAT ....
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....mendment, which amends Section 31 is clarificatory in nature and only declares and clarifies the position of law, which has already been in existence i.e. the Central Government, any State Government and local authorities are bound by the CIRP. He submitted, that this Court in the cases of State Bank of India vs. V. Ramakrishnan and Another (2018) 17 SCC 394 and B.K. Educational Services Private Limited v. Parag Gupta and Associates (2019) 11 SCC 633 has held the amendment to certain provisions of the I&B Code to be clarificatory in nature. The learned Senior Counsel submitted, that upon perusal of the provisions of the I&B Code, it is clear, that once NCLT grants approval to the Resolution Plan, all proceedings pending insofar as the Corporate Debtor is concerned, which are not included in the Resolution Plan shall stand automatically stayed. He submitted, that perusal of the chart pertaining to the dues of the respondents, clearly reveal that all of the said dues are prior to the admission of the Company Petition filed under Section 7 of I&B Code and therefore, the respondents are not entitled to continue the proceedings in respect thereof since the same do not form p....
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....ority and therefore, the High Court was justified in observing that the petition was not maintainable, in view of the availability of alternative remedy of filing a second appeal. 41. The learned Senior Counsel submitted, that the adjudicatory authorities acting under the relevant statutes being not a part of CoC are not bound by the decision of CoC, which is approved by NCLT. He further submitted, that merely continuation of the adjudicatory proceedings cannot be a part of coercive action. 42. Shri V. Shekhar submitted, that 2019 Amendment cannot be said to be clarificatory in nature and as such, the proceedings, which were pending prior to the date of the amendment to Section 31, would not be affected by the 2019 Amendment to Section 31. He therefore prayed for dismissal of the appeal. SUBMISSIONS IN WRIT PETITION (CIVIL) NO. 1177 OF 2020 [M/s Monnet Ispat & Energy Limited and Another v. State of Odisha and Another] 43. Shri Kaul, learned Senior Counsel appearing on behalf of the writ petitioner submitted, that in spite of clear legal position as enunciated in various judgments of this Court, various authorities in different parts of the country are continuing with the proce....
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....pplicant. The Resolution process is in respect of the present appellantwrit petitioner, which is the Corporate Debtor and as such, the petition at the behest of the present appellant was very much tenable in law. Insofar as the second ground of the High Court is concerned, he submitted, that if such a view is accepted, it will frustrate the entire object of I&B Code and the revival of the Debtor Companies would be impossible if the successful resolution applicants are sprung with the surprise debts, which are not part of the Resolution Plan. 45. Shri Gurukrishna Kumar, learned Senior Counsel appearing on behalf of the respondent submitted, that the entire process conducted by RP and CoC is fraudulent. He submitted, that in accordance with Section 29 and specifically, clause H of Regulation 36, RP was required to furnish the details of the material litigation and an ongoing investigation or proceedings initiated by Government and Statutory Authorities in the information memorandum. However, the Resolution Applicant had fraudulently used I&B Code by suppressing the vital information with regard to the same and thereby, denying the legitimate dues of public exchequer. 46. Dr. Singhv....
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....resolving insolvency based on various indicia." [emphasis supplied] 51. This Court thereafter in paragraph 16 reproduced the relevant paragraphs contained in the report of the Bankruptcy Law Reforms Committee Report of 2015. Thereafter, this Court reproduced all the relevant provisions of I&B Code in paragraphs 18 to 26. 52. This Court in the case of Innoventive Industries Ltd. (supra) thereafter elaborately discussed the scheme of the various provisions of the I&B Code in paragraphs 27 to 32, which read thus: "27. The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. Default is defined in Section 3(12) in very wide terms as meaning nonpayment of a debt once it becomes due and payable, which includes nonpayment of even part thereof or an instalment amount. For the meaning of "debt", we have to go to Section 3(11), which in turn tells us that a debt means a liability of obligation in respect of a "claim" and for the meaning of "claim", we have to go back to Section 3(6) which defines "claim" to mean a right to payment even if it is disputed. The Code gets triggered ....
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....debt", which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under subsection (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be. 29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in subsection (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, whi....
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....ry out the resolution process, is then given wide powers to raise finances, create security interests, etc. subject to prior approval of the committee of creditors." [emphasis supplied] 53. After discussing the relevant provisions of I&B Code, this Court observed thus: "33. Under Section 30, any person who is interested in putting the corporate body back on its feet may submit a resolution plan to the resolution professional, which is prepared on the basis of an information memorandum. This plan must provide for payment of insolvency resolution process costs, management of the affairs of the corporate debtor after approval of the plan, and implementation and supervi42 sion of the plan. It is only when such plan is approved by a vote of not less than 75% of the voting share of the financial creditors and the adjudicating authority is satisfied that the plan, as approved, meets the statutory requirements mentioned in Section 30, that it ultimately approves such plan, which is then binding on the corporate debtor as well as its employees, members, creditors, guarantors and other stakeholders. Importantly, and this is a major departure from previous legislation on the subject, t....
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....rn until a resolution plan is drawn up. Once the resolution plan is approved, the management is handed over under the plan to the successful applicant so that the Corporate Debtor is able to pay back its debts and get back on its feet. 55. This Court recently in the case of Kalpraj Dharamshi and another vs. Kotak Investment Advisors Ltd. and another (supra) has, in detail, considered the provisions of Sections 30 and 31 of I&B Code, the Bankruptcy Law Reforms Committee (BLRC) Report of 2015 and the judgments of this Court in the case K. Sashidhar (supra), Committee of Creditors of Essar Steel India Limited through Authorised Signatory vs. Satish Kumar Gupta & Ors. (supra) and Maharashtra Seamless Limited vs. Padmanabhan Venkatesh and others (supra) and observed thus: "139. It is thus clear, that the Committee was of the view, that for deciding key economic question in the bankruptcy process, the only one correct forum for evaluating such possibilities, and making a decision was, a creditors committee, wherein all financial creditors have votes in proportion to the magnitude of debt that they hold. The BLRC has observed, that laws in India in the past have brought arms of the Gov....
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....authority/appellate authority to reckon any other factor other than specified in Sections 30(2) or 61(3) of the I&B Code as the case may be which, according to the resolution applicant and the stakeholders supporting the resolution plan, may be relevant?" (emphasis supplied) 142. After considering the judgment of this Court in the case of Arcelormittal India Private Limited v. Satish Kumar Gupta46 and the relevant provisions of the I&B Code, this court further observed in K. Sashidhar (supra) thus: "52. As aforesaid, upon receipt of a "rejected" resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under Section 33(1) of the I&B Code. The legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyse or evaluate the commercial decision of CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the background in which the I&B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt du....
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....nge the "commercial wisdom" of the individual financial creditors or their collective decision before the Adjudicating Authority and that the decision of CoC's 'commercial wisdom' is made nonjusticiable. 144. This Court in Committee of Creditors of Essar Steel India Limited through Authorised Signatory (supra) after referring to the judgment of this Court in the case of K. Sashidhar (supra) observed thus: "64. Thus, what is left to the majority decision of the Committee of Creditors is the "feasibility and viability" of a resolution plan, which obviously takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. As an example, take the case of a resolution plan which does not provide for payment of electricity dues. It is certainly open to the Committee of Creditors to suggest a modification to the prospective resolution applicant to the effect that such dues ought to be paid in full, so that the carrying on of the business of the corporate debtor does not become impossible for want of a most basic and essential element for the carrying on of such business, namely, electricity. This may, in turn, be ac....
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....cating authority can reject the resolution plan is in reference to matters specified in Section 30(2), when the resolution plan does not conform to the stated requirements. Reverting to Section 30(2), the enquiry to be done is in respect of whether the resolution plan provides : (i) the payment of insolvency resolution process costs in a specified manner in priority to the repayment of other debts of the corporate debtor, (ii) the repayment of the debts of operational creditors in prescribed manner, (iii) the management of the affairs of the corporate debtor, (iv) the implementation and supervision of the resolution plan, (v) does not contravene any of the provisions of the law for the time being in force, (vi) conforms to such other requirements as may be specified by the Board. The Board referred to is established under Section 188 of the I&B Code. The powers and functions of the Board have been delineated in Section 196 of the I&B Code. None of the specified functions of the Board, directly or indirectly, pertain to regulating the manner in which the financial creditors ought to or ought not to exercise their commercial wisdom during the voting on the resolution plan under Secti....
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....ve not been provided for in the resolution plan in the prescribed manner. Fourth, the insolvency resolution plan costs have not been provided for repayment in priority to all other debts. Fifth, the resolution plan does not comply with any other criteria specified by the Board. Significantly, the matters or grounds- be it under Section 30(2) or under Section 61(3) of the I&B Code -are regarding testing the validity of the "approved" resolution plan by CoC; and not for approving the resolution plan which has been disapproved or deemed to have been rejected by CoC in exercise of its business decision." [emphasis supplied] 150. It will therefore be clear, that this Court, in unequivocal terms, held, that the appeal is a creature of statute and that the statute has not invested jurisdiction and authority either with NCLT or NCLAT, to review the commercial decision exercised by CoC of approving the resolution plan or rejecting the same. 151. The position is clarified by the following observations in paragraph 59 of the judgment in the case of K. Sashidhar (supra), which reads thus: "59. In our view, neither the adjudicating authority (NCLT) nor the appellate authority (NCLAT....
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....l of a resolution plan, the adjudicating authority has to be satisfied that the requirement of subsection (2) of Section 30 of the Code has been complied with. The proviso to Section 31(1) of the Code stipulates the other point on which an adjudicating authority has to be satisfied. That factor is that the resolution plan has provisions for its implementation. The scope of interference by the adjudicating authority in limited judicial review has been laid down in Essar Steel [Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta, (2020) 8 SCC 531], the relevant passage (para 54) of which we have reproduced in earlier part of this judgment. The case of MSL in their appeal is that they want to run the company and infuse more funds. In such circumstances, we do not think the appellate authority ought to have interfered with the order of the adjudicating authority in directing the successful resolution applicant to enhance their fund inflow upfront." 155. This Court observed, that the Court ought to cede ground to the commercial wisdom of the creditors rather than assess the resolution plan on the basis of quantitative analysis. This Court clearly held, that the appell....
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....nsolvency resolution process costs, provision for payment of debts of operational creditors, which shall not be less than the amount to be paid to such creditors in the event of liquidation of the Corporate Debtor under section 53; or the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in subsection (1) of section 53, whichever is higher. The resolution plan is also required to provide for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, which also shall not be less than the amount to be paid to such creditors in accordance with subsection (1) of section 53 in the event of a liquidation of the Corporate Debtor. Explanation 1 to clause (b) of subsection (2) of Section 30 of the I&B Code clarifies for the removal of doubts, that a distribution in accordance with the provisions of the said clause shall be fair and equitable to such creditors. The resolution plan is also required to provide for the management of the affairs of the Corporate Debtor after approval of the resolution plan and also the implementation and su....
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.... by the resolution professional and by the Adjudicating Authority/ Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. A successful resolution applicant cannot suddenly be faced with "undecided" claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove. For these reasons, NCLAT judgment must also be set aside on this count." 63. In view of this legal position, we could have very well stopped here and held, that, the observation made by NCLAT in the appeal filed by EARC to the effect, that EARC was entitled to take recours....
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....erwise, the amendment will have to be held to be prospective in nature, having force from the date on which the amendment is effected in the statute. 70. It will be relevant to refer to the "Statement of Objects and Reasons" (hereafter referred to as "SOR") of the Insolvency and Bankruptcy Code (Amendment) Bill, 2019, which read thus: "The Insolvency and Bankruptcy Code, 2016 (the Code) was enacted with a view to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a timebound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order or priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India. 2. The Preamble to the Code lays down the objects of the Code to include "the insolvency resolution" in a time bound manner for maximisation of value of assets in order to balance the interests of all the stakeholders. Concerns have been raised that in some cases extensive litigation is causing undue delays, which may ha....
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....de (Amendment) Bill, 2019 would amply make it clear, that the legislative intent in amending subsection (1) of Section 31 of I&B Code was to clarify, that the resolution plan approved by the Adjudicating Authority shall also be binding on the Central Government, any State Government or any local authority to whom a debt is owed in respect of payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, including tax authorities. 72. In the Rajya Sabha debates, on 29.7.2019, when the Bill for amending I&B Code came up for discussion, there were certain issues raised by certain Members. While replying to the issues raised by certain Members, the Hon'ble Finance Minister stated thus: "IBC has actually an overriding effect. For instance, you asked whether IBC will override SEBI. Section 238 provides that IBC will prevail in case of inconsistency between two laws. Actually, Indian courts will have to decide, in specific cases, depending upon the material before them, but largely, yes, it is IBC. [...] There is also this question about indemnity for successful resolution applicant. The amendment now is clearly making it bindi....
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....ing the reason for the introduction of the Bill could be referred for the purpose of ascertaining the mischief sought to be remedied by the legislation. This Court observed thus: "Now it is true that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the Mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation is enacted. This is in accord with the recent trend in juristic thought not only in western countries but also in India that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible. In fact there are at least three decisions of this Court, one in Loka Shikshana Trust v. CIT [(1976) 1 SCC 254 : 1976 SCC (Tax) 14 : 101 ITR 234 : 1976 LR 1] , the other in Indian Chamber of Commerce v. Commissioner of Income Tax [(1976) 1 SCC 324 : ....
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....f Statutory Interpretation", 14th Edition, Revised by Justice A.K. Patnaik, former Judge of this Court, it is observed thus: "(i) Declaratory Statutes The presumption against retrospective operation is not applicable to declaratory statutes. As stated in CRAIES and approved by the Supreme Court: "For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word 'declared' as well as the word 'enacted'. "- CRAIES : Statute Law, 7th Edition, p. 58, approved in Central Bank of India v. Their Workmen, AIR 1960 SC 12, p. 27 : (1960) 1 SCR 200. See Jones v. Bennet, (1890) 63 LT 705, p. 708 (LORD COLERIDGE, C.J.); Madras Marine & Co. v. State of Madras, (1986) 3 SCC 552, p. 563 : AIR 1986 SC 1760; Satnam Overseas (Export) v. State of Haryana, AIR 2003 SC 66, p. 84 : (2003) 1 SCC 56....
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....ended provision was clear and unambiguous - Sakuru v. Tanoji, (1985) 3 SCC 590, p. 594 : AIR 1985 SC 1279. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law when the constitution came into force, the amending Act also will be part of the existing law - Punjab Traders v. State of Punjab, AIR 1990 SC 2300, p. 2304 : 1991 (1) SCC 86. The above statement of the law relating to the nature and effect of a declaratory statute has been quoted with approval by the Supreme Court from earlier editions of this book in a number of cases - R. Rajgopal Reddy v. Padmini Chandrasekharan, 1995 (1) Scale 692, p. 704 : AIR 1996 SC 238, p. 246 : (1995) 2 SCC 630; Allied Motors (P. ) Ltd. v. CIT, AIR 1997 SC 1361, pp. 1366, 1367 : 1997 (3) SCC 472; CIT v. Podar Cement Pvt. Ltd., AIR 1997 SC 2523, pp. 2537, 2538 : 1997 (5) SCC 482; Shyam Sunder v. Ram Kumar, AIR 2001 SC 2472, p. 2487 : (2001) 8 SCC 24; Zile Singh v. State of Haryana, (2004) 8 SCC 1, p. 9 : AIR 2004 SC 5100, pp. 5103, 5104; Commissioner of....
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.... (iiib) which redefined the expression 'owner of house property', in respect of which there was a sharp divergence of opinion amongst the High Courts, was clarificatory and declaratory in nature and consequently retrospective. Similarly, in Brij Mohan Das Laxman Das v. Commissioner of Income - tax - AIR 1997 SC 1651, p. 1654 : 1997 (1) SCC 352; Affirmed in Suwalal Anandlal Jain v. Commr. Of Incometax, AIR 1997 SC 1279 : (1997) 4 SCC 89 and Commissioner of Incometax Bombay v. Kanji Shivji and co., AIR 2000 SC 774 : (2000) 2 SCC 253. See further cases in note 42, supra. Explanation 2 added to section 40 of the Income-tax Act, 1961 from 1.4.1985 on a question on which there was a divergence of opinion was held to be declaratory in nature and, therefore, retrospective. And in Zile Singh v. State of Haryana, (2004) 8 SCC 1 : AIR 2004 SC 5100 substitution of the word 'upto' for the word 'after' in the proviso to section 13A (added in 1994) in Haryana Municipal Act, 1973 by the Haryana Municipal (Second Amendment) Act, 1994 was held to be correction of an obvious drafting error to bring about the text in conformity with the legislative intent and, therefore, retrospective. Even without th....
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....nded.... An amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect (ibid., pp. 46869). 15. Though retrospectivity is not to be presumed and rather there is presumption against retrospectivity, according to Craies (Statute Law, 7th Edn.), it is open for the legislature to enact laws having retrospective operation. This can be achieved by express enactment or by necessary implication from the language employed. If it is a necessary implication from the language employed that the legislature intended a particular section to have a retrospective operation, the courts will give it such an operation. In the absence of a retrospective operation having been expressly given, the courts may be called upon to construe the provisions and answer the question whether the legislature had sufficiently expressed that intention giving the statute retrospectivity. Four factors are suggested as relevant: (i) general scope and purview of the statute; (ii) the remedy sought to be applied; (iii) the former state of the law; and (iv) what it was the legislature cont....
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..... Union of India [(2003) 5 SCC 23] it has been held that there is no fixed formula for the expression of legislative intent to give retrospectivity to an enactment. Every legislation whether prospective or retrospective has to be subjected to the question of legislative competence. The retrospectivity is liable to be decided on a few touchstones such as: (i) the words used must expressly provide or clearly imply retrospective operation; (ii) the retrospectivity must be reasonable and not excessive or harsh, otherwise it runs the risk of being struck down as unconstitutional; (iii) where the legislation is introduced to overcome a judicial decision, the power cannot be used to subvert the decision without removing the statutory basis of the decision. There is no fixed formula for the expression of legislative intent to give retrospectivity to an enactment. A validating clause coupled with a substantive statutory change is only one of the methods to leave actions unsustainable under the unamended statute, undisturbed. Consequently, the absence of a validating clause would not by itself affect the retrospective operation of the statutory provision, if such retrospectivity is otherwise....
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....manifest object and purpose of the Act. The rule of reasonable interpretation should apply. "A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole." (SCC pp. 47980, para 13) 22. The State Legislature of Haryana intended to impose a disqualification with effect from 541995 and that was done. Any person having more than two living children was disqualified on and from that day for being a member of a municipality. However, while enacting a proviso by way of an exception carving out a fact situation from the operation of the newly introduced disqualification the draftsman's folly caused the creation of trouble. A simplistic reading of the text of the proviso spelled out a consequence which the legislature had never intended and could not have intended. It is true that the Second Amendment does not expressly give the amendment a retrospective operation. ....
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.... one of which was: "(iv) to clear the confusion regarding treatment of assets of guarantors of the corporate debtor visàvis the moratorium on the assets of the corporate debtor, it has been recommended to clarify by way of an explanation that all assets of such guarantors to the corporate debtor shall be outside scope of moratorium imposed under the Code;" (emphasis supplied) 32. The Committee insofar as the moratorium under Section 14 is concerned, went on to find: "5.5. Section 14 provides for a moratorium or a stay on institution or continuation of proceeding, suits, etc. against the corporate debtor and its assets. There have been contradicting views on the scope of moratorium regarding its application to third parties affected by the debt of the corporate debtor, like guarantors or sureties. While some courts have taken the view that Section 14 may be interpreted literally to mean that it only restricts actions against the assets of the corporate debtor, a few others have taken an interpretation that the stay applies on enforcement of guarantee as well, if a CIRP is going on against the corporate debtor." *** "5.7. The Allahabad High Court subsequen....
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.... of guarantee, the general principle of such contracts is that the liability of the principal debtor and the surety is coextensive and is joint and several (Bank of Bihar Ltd. v. Damodar Prasad [Bank of Bihar Ltd. v. Damodar Prasad, AIR 1969 SC 297] ). The Committee noted that this characteristic of such contracts i.e. of having remedy against both the surety and the corporate debtor, without the obligation to exhaust the remedy against one of the parties before proceeding against the other, is of utmost importance for the creditor and is the hallmark of a guarantee contract, and the availability of such remedy is in most cases the basis on which the loan may have been extended. 5.10. The Committee further noted that a literal interpretation of Section 14 is prudent, and a broader interpretation may not be necessary in the above context. The assets of the surety are separate from those of the corporate debtor, and proceedings against the corporate debtor may not be seriously impacted by the actions against assets of third parties like sureties. Additionally, enforcement of guarantee may not have a significant impact on the debt of the corporate debtor as the right of the credito....
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....oratorium prescribed by Section 14 was held not to apply to guarantors, was held to be clarificatory, and therefore, retrospective in nature, the object being that an overbroad interpretation of Section 14 ought to be set at rest by clarifying that this was never the intention of Section 14 from the very inception. 86. As discussed hereinabove, one of the principal objects of I&B Code is, providing for revival of the Corporate Debtor and to make it a going concern. I&B Code is a complete Code in itself. Upon admission of petition under Section 7, there are various important duties and functions entrusted to RP and CoC. RP is required to issue a publication inviting claims from all the stakeholders. He is required to collate the said information and submit necessary details in the information memorandum. The resolution applicants submit their plans on the basis of the details provided in the information memorandum. The resolution plans undergo deep scrutiny by RP as well as CoC. In the negotiations that may be held between CoC and the resolution applicant, various modifications may be made so as to ensure, that while paying part of the dues of financial creditors as well as operat....
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....on to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decreeholder'. "Operational creditor" has been defined to mean a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred. "Operational debt" has been defined to mean a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority. 91. It is a cardinal principle of law, that a statute has to be read as a whole. Harmonious construction of subsection (10) of Section 3 of the I&B Code read with subsections (20) and (21) of Section 5 thereof would reveal, that even a claim in respect of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority would come within the ambit of 'operational debt'. The Central Government, any State Government or any local authority to whom an operational debt is owed would come within ....
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....ral Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan; (ii) 2019 amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which I&B Code has come into effect; (iii) Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued. 96. In the light of what has been held by us hereinabove, we now proceed to decide individual matters. CIVIL APPEAL NO.8129 OF 2019 97. In the said appeal, admittedly, the Company Petition filed by the SBI under Section 7 of I&B Code in respect of OMML/....
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....iled CA (IB) No. 470/KB/2018, challenging the decision of RP in not admitting its claim. One Application being CA(IB) No.509/KB/2018 came to be filed by the District Mining Officer, Department of Mining and Geology, Jharkhand challenging the nonadmission of its claim to the tune of Rs. 93,51,91,724/and Rs. 760.51 crores. 99. By common order dated 22.6.2018, application being CA(IB) No.402/KB/2018 filed by RP, came to be allowed thereby, granting approval under the provisions of Section 31(1) of the I&B Code and declaring that the same will be binding on the Corporate Debtor, its employees, members, creditors, guarantors and other stakeholders involved in the resolution Plan. Application being CA (IB) No.398/KB/2018 filed by EARC challenging the approval granted by CoC to the resolution plan submitted by GMSPL was dismissed. Vide same order dated 22.6.2018, application being CA (IB) No.470/KB/2018 filed by EARC challenging the decision of the RP in not admitting its claim and application being CA(IB) No.509/KB/2018 filed by the District Mining Officer, Department of Mining and Geology, Jharkhand challenging the nonadmission of its claim were also dismissed with cost of Rs. 1,00,000....
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....plicants. NCLT found, that the information with regard to claim of all financial creditors inclusive of EARC's claim was available in the virtual data room. The record also revealed, that the claim of EARC was not admitted for the reason that the corporate guarantee in question was uninvoked as on date. 104. Insofar as the second objection of EARC with regard to the shares owned by the Corporate Debtor in APNRL, which were pledged with IIFCL to secure the loan given by IIFCL to APNRL and which were assigned to EARC being invoked on 30.4.2018 is concerned, NCLT found the same claim also to be without merit. NCLT found, that on 30.4.2018, the moratorium was in force and therefore invocation of pledge by EARC on 30.4.2018 was not permissible in law. It was further found, that RP had rightly not admitted the said claim. 105. It was sought to be argued on behalf of EARC, that CIRP process was complete on 29.4.2018 and therefore, invocation of pledge by EARC on 30.4.2018 was legal and valid. However, NCLT found, that unless the application filed by RP under Section 31(1) for approval of the plan was decided and an order either approving or rejecting the resolution plan was passed, the ....
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....g the claim of the District Mining Officer since it was not supported by any document or affidavit. NCLT therefore rejected the said application with cost of Rs. 1,00,000/. 108. The order dated 22.6.2018 passed by NCLT was challenged by way of four appeals before NCLAT; two appeals being Company Appeal (AT) (Insolvency) Nos.437 and 444 of 2018 filed by EARC; one appeal being Company Appeal (AT) (Insolvency) No. 438 of 2018 filed by one Deepak Singh and one appeal being Company Appeal (AT) (Insolvency) No. 500 of 2018 filed by Sundargarh Mines & Transport Workers Union. 109. Vide the impugned judgment and order dated 23.4.2019, NCLAT found, that as no ground was made out in terms of Section 61(3) of I&B Code, no relief could be granted in the appeals. However, while doing so, NCLAT observed thus: "28. However, we make it clear that the rejection of the claim for the purpose of collating the claim and making it part of the 'Resolution Plan' will not affect the right of the Appellant' Edelweiss Asset Reconstruction Limited' to invoke the Bank Guarantee against the 'Corporate Debtor' in case the 'Principal Borrower' failed to pay the debt amount, the 'Moratorium' period having come....
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....plicants, including EARC and that the Adjudicating Authority has rightly approved the resolution plan of GMSPL. After coming to such finding, the only option available with NCLAT was to dismiss the appeals. In our view, the observations made in the aforesaid paragraphs, if permitted to remain, would totally frustrate the object of I&B Code of revival of a Corporate Debtor and to resurrect it as a going concern. As held by this Court, the successful resolution applicant cannot be flung with surprise claims which are not part of the resolution plan. 112. It will also be relevant to refer to the conduct of EARC. Clause 2.1.3 of the resolution plan submitted by EARC reads as under: "2.1.3 Financial Creditors other than Identified Financial Creditors (i) Liabilities We have been informed by the RP that other than the Identified Financial Creditors, there are no other Financial Creditors of the Company, whether secured or unsecured. Other than the Assigned Debt, any and all dues to, liabilities or obligations payable to, claims, counter claims, demands, actions or penalties made or imposed by (including but not limited to all interests, damages, losses, expenses and third par....
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....OMML. 9. Directions to ensure that the Proposed Merger application shall stand withdrawn. Relinquishment of corporate guarantee issued by OMML in favour of or on behalf of any of its subsidiaries, associates, group companies or any third party. Directions to the effect that the guarantees provided by any and all members of Incumbent Promoter Group or their respective promoters or any person associated with the Incumbent Promoter Group, may continue with the Financial Creditors. However, the same shall not result in any liability towards OMML or the Resolution Applicants." 114. It is thus clear, that according to the resolution plan submitted by EARC itself, had it been a successful applicant, then in that event, the claims made by it would have been irrevocably waived and permanently extinguished and written off in full with effect from the Effective Date. Had the resolution plan of EARC been approved, then all such debts would have stood extinguished without any further act or deed and approval of the said plan by NCLT would have been a sufficient notice required to be given to any person for such matter. Undisputedly, the resolution plan submitted by EARC was on the basis of....
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.... learned counsel for the parties and perused the relevant material on record. The Civil Appeal is dismissed. It will be open for the appellant to urge all points as may be available to it in law before the appropriate forum, if so advised." 118. It will thus be clearly seen, that this Court while dismissing the appeal has reserved the liberty to the appellant to urge all points as may be available to it in law before the appropriate forum. 119. It is to be noted, that in the appeal before NCLAT, the EXIM Bank as well as Axis Bank had taken steps immediately after the claim of said Banks on the basis of corporate guarantee came to be rejected by RP/CoC. After rejection of the claim, said Banks had filed an application under Section 60(5) before NCLT. On NCLT rejecting the said claim, those Banks had approached NCLAT in appeals, which were allowed and the order, as stated hereinabove, was passed. 120. In the present case, the claim of EARC was rejected on 22.1.2018. Instead of challenging the said rejection, EARC participated in the proceedings and was one of the resolution applicants. Not only that, in the first round, it was a successful bidder being ranked H1 bidder. How....
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....phs nos. 28, 42, 43, 51 and 52 from the judgment of NCLAT dated 23.4.2019. It is ordered accordingly. The judgment and order passed by NCLT dated 22.6.2018 is upheld. No costs. CIVIL APPEAL ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NO.11232 OF 2020 126. The present appeal arises out of the judgment and order passed by the Division Bench of the Allahabad High Court dated 6.7.2020 thereby, dismissing the petition filed by the appellant on the ground of availability of alternate remedy. The petition being Civil Misc. Writ Petition (Tax) No.354 of 2020 came to be filed seeking following reliefs: "i. Issue a writ, order or direction in the nature of certiorari quashing the order dated 30.01.2020 passed by the Additional Commissioner Grade - 2 (Appeal) rejecting the appeal preferred by the petitioner in respect of Assessment Year 201516 (U.P. V A T) and affirming a demand of Rs. 232.60 Lacs raised on the petitioner; ii. Issue a writ, order or direction in the nature of certiorari quashing the Communications/orders of the Joint Commissioner (Corporate), Ghaziabad holding that the proceedings in the State of U.P. would remain unaffected irrespective of the Resolution Plan of th....
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....Registrar of Trade Marks, Mumbai & Ors. (1998) 8 SCC 1, Nivedita Sharma vs. Cellular Operators Association of India & Ors. (2011) 14 SCC 337, Embassy Property Developments Pvt. Ltd. vs. State of Karnataka and Others (2020) 13 SCC 308 and recently in the case of Kalpraj Dharamshi (supra), that nonexercise of jurisdiction under Article 226 is a rule of selfrestraint. It has been consistently held, that the alternate remedy would not operate as a bar in at least three contingencies, namely, (1) where the writ petition has been filed for the enforcement of any of the Fundamental Rights; (2) where there has been a violation of the principle of natural justice; and (3) where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. 130. In the foregoing paragraphs, we have held, that 2019 amendment to Section 31 of I&B Code is clarificatory and declaratory in nature and therefore will have a retrospective operation. As such, when the resolution plan is approved by NCLT, the claims, which are not part of the resolution plan, shall stand extinguished and the proceedings related thereto shall stand terminated. Since the subject matter of the petit....
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.... income tax dues concerning the present petitioner by way of Special Leave Petition (Civil) No.6483 of 2018. This Court passed the following order in the said Special Leave Petition on 10.8.2018: "Heard. Delay, if any, is condoned. Given Section 238 of the Insolvency and Bankruptcy Code, 2016, it is obvious that the Code will override anything inconsistent contained in any other enactment, including the IncomeTax Act. We may also refer in this Connection to Dena Bank vs. Bhikhabhai Prabhudas Parekh and Co. & Ors. (2000) 5 SCC 694 and its progeny, making it clear that incometax dues, being in the nature of Crown debts, do not take precedence even over secured creditors, who are private persons. We are of the view that the High Court of Delhi, is, therefore, correct in law. Accordingly, the Special Leave Petitions are dismissed. Pending applications, if any, stand disposed of." 139. In ordinary course, we would not have entertained such a petition directly under Article 32 of the Constitution. However, a question of law, which arises for consideration in the present petition has been considered by us in this batch of matters. In that view of the matter, we find, th....
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....ng observations made by us hereinabove. 145. We also find, that the High Court has erred in holding, that the Appellant - Company does not have locus to file the writ petitions inasmuch as, the management has been taken over by M/s Vedanta Limited. The resolution plan is in respect of the Corporate Debtor and the successful resolution applicant only takes over the management of the Corporate Debtor in accordance with the resolution plan. The resolution applicant steps into the shoes of the Corporate Debtor. As such, the finding in this respect would also not be sustainable in law. 146. Shri Gurukrishna Kumar, learned Senior Counsel, strenuously argued, that RP/CoC had acted in a fraudulent manner. It is submitted, that though a notice inviting claim was required to be published in local newspapers where the registered office of the Corporate Debtor was situated, the notice was published in the newspaper of Kolkata edition. As per Regulation 6(2)(b) of the 2016 Regulations, the said notice is required to be published in one English and one regional language newspaper with wide circulation at the location of the registered office and corporate office of the Corporate Debtor. Perusa....