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2021 (7) TMI 778
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....ts business, the writ petitioner no. 1 obtained loans and finance from the Power Finance Corporation Limited and REC Limited being respondent nos. 3 and 4 respectively. The said credit facilities were continuing since 2012. Outstanding dues of Rs. 3427 Crores each towards respondent nos. 3 and 4 became due and payable by the end of the year 2020. At the request of the petitioner no. 1, the respondent Nos. 3 and 4 agreed to a restructuring of the dues. The restructuring was conditional. The conditions inter alia were as follows :- a) The cutoff date of the Restructuring proposal was 30.09.2021 b) A pass through in fuel charges was to be within a range of 20 paisa/kwh of the variable cost of the last 2 months as on 28th February, 2021. Such tariff would have to be approved by the WBERC respondent no.1. c) The initial Debt Service Reserve Account (DSRA) was required to be maintained equivalent to the next succeeding month. d) A priority debt of 83 crores was also required to be made available by the petitioner prior to implementation of resolution plan. e) Working capital of about 125 crores was also to be made available by the petiti....
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....uptcy Code. In support of his argument Mr. S. N. Mookherjee relied on the decisions of the Supreme Court in the case of ABL International Ltd. and another VS. Export Credit Guarantee Corporation of India Ltd. and others reported in (2004) 3 SCC 553; the case of State of UP Versus Sudhir Kumar Singh and others reported in 2020 SCC Online SC 847 and Unitech Limited and others Vs. Telangana State Industrial Infrastructure Corporation (TSIIC) and others reported in 2021 SCC Online SC 99 to the effect that even in the area of private contracts the actions of the State can be questioned by a writ court. Counsel placed paragraph 23 of the Sudhir Kumar Singh decision (supra) :- "23. It may be added that every case in which a citizen/person knocks at the doors of the writ court for breach of his or its fundamental rights is a matter which contains a "public law element", as opposed to a case which is concerned only with breach of contract and damages flowing therefrom. Whenever a plea of breach of natural justice is made against the State, the said plea, if found sustainable, sounds in constitutional law as arbitrary State action, which attracts the provisions of Article 14 of t....
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....iling remedies under Article 226.11 If the state instrumentality violates its constitutional mandate under Article 14 to act fairly and reasonably, relief under the plenary powers of the Article 226 of the Constitution would lie. This principle was recognized in ABL International: "28. However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power. (See Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1].) And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional m....
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....it case for this Court to exercise jurisdiction under Article 226 against his clients. Having heard the parties at length over 3 days this Court now proceeds to deal with the same. The writ petitioner no.1 was already in dire financial straits to the tune of about 3427 Crores each to the respondent nos. 3 and 4 as on the cutoff date for which it required debt restructuring. The actions of the respondent nos.3 and 4 in the instant case are purely contractual in nature and were guided specifically by the terms and conditions of the restructuring proposal. In matters of this nature, the respondent nos.3 and 4 are guided by and must act strictly on commercial considerations, for recovery of their financial dues. The respondents appear to have given substantial leverage to the writ petitioner no.1 to comply with the terms and conditions of the restructuring proposal which the petitioner has failed. It is however true that the issuance and passing of the tariff order was not within the control of the writ petitioner no.1. The same was required to have been done by the respondent no.1. The said tariff order was issued albeit with some discrepancies only on 31.05.2021. The writ pe....
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....f the writ petitioner. Reference in this regard is made to the decision of the Hon'ble Supreme Court of India in the case of A. Navinchandra Steels Private Limited (supra). "24. A conspectus of the aforesaid authorities would show that a petition either under Section 7 or Section 9 of the IBC is an independent proceeding which is unaffected by winding up proceedings that may be filed qua the same company. Given the object sought to be achieved by the IBC, it is clear that only where a company in winding up is near corporate death that no transfer of the winding up proceeding would then take place to the NCLT to be tried as a proceeding under the IBC. Short of an irresistible conclusion that corporate death is inevitable, every effort should be made to resuscitate the corporate debtor in the larger public interest, which includes not only the workmen of the corporate debtor, but also its creditors and the goods it produces in the larger interest of the economy of the country. It is, thus, not possible to accede to the argument on behalf of the Appellant that given Section 446 of the Companies Act, 1956/Section 279 of the Companies Act, 2013, once a winding up petition is....
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....rate 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 ba....
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....uidation. As tersely put by this Court in Swiss Ribbons [Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17] , the Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors." Merely because an instrumentality of State is engaged in business it cannot be put to any more disadvantage than a private player. The State cannot also be required to grant concessions outside the contract and outside what a private player would ordinarily be required to give. Under the garb of requiring fairness in action even State business entities cannot be imposed with terms & conditions for non-commercial considerations. One must note that the State entities are required to compete with private corporations who are far too quick & opportunistic in commercial matters. While it is indeed true that a State instrumentality is expected to act fairly and in a non-arbitrary manner, the PFC & REC are also driven by a profit motive and their functions cannot be fettered to drive them towards financial disadvantage. This would lead to their ruin & endanger large number of other power companies and persons dependent on t....
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....if contract is capable of being specifically performed. Otherwise, the party may sue for damages. 70.7. Writ can be issued where there is executive action unsupported by law or even in respect of a corporation there is denial of equality before law or equal protection of law or if it can be shown that action of the public authorities was without giving any hearing and violation of principles of natural justice after holding that action could not have been taken without observing principles of natural justice. 70.8. If the contract between private party and the State/instrumentality and/or agency of the State is under the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitution of India and invoking its extraordinary jurisdiction. 70.9. The distinction between public law and private law element in the contract with the State is getting blurred. However, it has not been totally obliterated and where the matter falls purely in private field of contract, this Court has....
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....the conditions of the Initial DSRA or the main DSRA. The petitioner could not have any legitimate expectation of continuation of the restructuring proposal indefinitely. The omissions and failures of the petitioners were duly recorded in the minutes of meeting dated 17th February, 2021, there was substantial notice of cancellation of restructuring proposal. No prejudice could therefore have been caused to the petitioners by non-issuance of a formal recall notice of the loans or cancellation of restructuring proposal. In the facts of the case it would have been a useless formality. The Directions of the RBI, 2019 have been placed by Mr. Mukherjee to argue that since the restructuring was done thereunder, the action of the respondent nos. 3 & 4 can be scrutinized under Art. 226. The restructuring was already done as per the 2019 Directions. The Petitioners have not been able to indicate exactly which Directions has been violated or has not been followed by the REC and PFC. The 2019 Directions appear to have been referred to in a desperate attempt to attract cause of action under Art. 226. The petitioners were afforded a restructuring proposal essentially by reason of t....