TaxTMI 
TaxTMI 
2021 (12) TMI 1419
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.... NO. 11715 of 2019 With CIVIL APPLICATION (FOR AMENDMENT) NO. 1 of 2019 In R/SPECIAL CIVIL APPLICATION NO. 11715 of 2019 With CIVIL APPLICATION (FOR JOINING PARTY) NO. 1 of 2021 In R/SPECIAL CIVIL APPLICATION NO. 11715 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 19901 of 2019 With CIVIL APPLICATION (FOR AMENDMENT) NO. 1 of 2019 In R/SPECIAL CIVIL APPLICATION NO. 19901 of 2019 With CIVIL APPLICATION (FOR JOINING PARTY) NO. 1 of 2021 In R/SPECIAL CIVIL APPLICATION NO. 19901 of 2019 HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE NIRAL R. MEHTA For the Petitioners : MR MIHIR THAKORE SENIOR COUNSEL WITH MR MIHIR JOSHI SENIOR COUNSEL ASSISTED BY MR KEYUR GANDHI WITH MR RAHEEL PATEL ADVOCATES FOR NANAVATI ASSOCIATES(1375) For the Respondent : MR NAVIN PAHWA SENIOR COUNSEL FOR SHARDUL AMARCHAND MANGALDAS AND CO(8426) for the Respondent(s) No. 1 NOTICE SERVED BY DS(5) CAV COMMON JUDGMENT (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1 Since the issues raised in all the captioned writ applications are the same, those were taken up for hearing analogously and are being disposed of by this common judgement and order. 2 For the sake of convenience, the writ....
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....solution of the principal borrower. The financial package offered by the ArcelorMittal to the lender including the respondent No.1 is to the tune of Rs.42,000 Crore. 9 In accordance with the provisions of the Code, the Resolution Professional (RP) preferred an application under Section 30(6) of the Code being the Interlocutory Application No.431 of 2018 for the approval of the resolution plan of ArcelorMittal by the NCLT. 10 The resolution plan of ArcelorMittal was approved by the NCLT vide its order dated 8th March 2019. The I.A. No.431 of 2018 came to be conditionally allowed. We quote para 28 of the order passed by the NCLT as under: "28. In the light of the above stated discussions, present I.A. No.431 of 2018 is conditionally allowed. The Resolution Plan submitted by ArcelorMittal India Pvt. Ltd. being H-1, is approved, as per Section 31(1) of the I&B Code, subject to the aforesaid observations and conditions and with the following statutory directions under Section 31(3) of the I&B Code:- (a) that the moratorium order passed by the Adjudicating Authority under Section 14 of the I&B Code shall cease to have effect; and (b) that the Resolution P....
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.....', which stands closed in view of the decision and directions of the Hon'ble Supreme Court. 30. So far as the Appellant Mr. Prashant Ruia's right of subrogration under Section 140 of the Contract Act and right to be indemnified under Section 145 of the said Act is concerned, the question of exercising such right does not arise in the present case. 31. The Appellant - Mr. Prashant Ruia has executed a 'Deed of Guarantee' between the lenders and the 'Corporate Debtor'. Such guarantee is with regard to clearance of debt. Once the debt payable by the 'Corporate Debtor' stands cleared in view of the approval of the plan by making payment in favour of the lenders ('Financial Creditors), the effect of 'Deed of Guarantee' comes to an end as the debt stands paid. The guarantee having become ineffective in view of payment of debt by way of resolution to the original lenders ('Financial Creditors), the question of right of subrogation of the Appellant's right under Section 140 of the Contract Act and the right to be indemnified under Section 145 of the Contract Act does not arise. 32. We find no merit in this appeal preferred by Appellant Mr. Prashant Ruia or submis....
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...., but for this Guarantee, would reduce, release or prejudice any of its obligations under this Guarantee (without limitation and whether or not known to it or any Secured Party) including : xxx xxx xxx (g) any insolvency or similar proceedings." Also, under the caption "terms of settlement", the final resolution plan dated 02.04.2018, as approved on 23.10.2018, specifically provided: "Financial Creditors: Pursuant to the approval of this Resolution Plan by the Adjudicating Authority, each of the Financial Creditors shall be deemed to have agreed and acknowledged the following terms: The payment to the Financial creditors in accordance with this Resolution Plan shall be treated as full and final payment of all outstanding dues of the Corporate Debtor to each of the Financial Creditors as of the Effective Date, and all agreements and arrangements entered into by or in favour of each of the Financial Creditors, including but not limited to loan agreements and security agreements (other than corporate or personal guarantees provided in relation to the Corporate Debtor by the Existing Promoter Group or their respective affiliates) sh....
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....l not apply in any manner which may extinguish/affect the rights of the Financial Creditors to enforce the corporate guarantees and personal guarantees issued for and on behalf of the Corporate Debtor by Existing Promoter Group or their respective affiliates, which guarantees shall continue to be retained by the Financial Creditors and shall continue to be enforceable by them." (emphasis supplied) We were also informed by the learned senior counsel that the personal guarantees of the promoter group have been invoked and legal proceedings in respect thereof are pending. It has been pointed out to us that Shri Prashant Ruia and other members of the promoter group, who are guarantors, are not parties to the resolution plan submitted by ArcelorMittal and hence, the resolution plan cannot bind them to take away rights of subrogation, which they may have if they are ordered to pay amounts guaranteed by them in the pending legal proceedings. 66. Section 31(1) of the Code makes it clear that once a resolution plan is approved by the Committee of Creditors it shall be binding on all stakeholders, including guarantors. This is for the reason that this provision ens....
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....ccessful 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 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, the NCLAT judgment must also be set aside on this count." 14 Thus, the Supreme Court, while holding that the NCLT judgement was quite contrary to Section 31(1) of the Code, refrained from saying anything as regards the invocation of the guarantees in view of the pending litigation. 15 Upon the Resolution Plan, ultimately, attaining finality; the entire debt of the principal borrower (ESIL) came to be assigned to ArcelorMittal. 16 The respondent No.2 herein, thereafter, preferred an ap....
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....'ble Tribunal may deem fit and proper; (vi) That upon the relief in terms of prayer (iii) above being granted, this Hon'ble Tribunal be pleased to appoint a Receiver to take possession and control of the assets so disclosed, with all powers under the provisions of RDB Act as well as under Order XL Rule 1 of the Civil Procedure Code, 1908 including power to take possession thereof and if required, to take forcible possession of the said properties from the Defendant No.1 and Defendant No.2 by breaking upon the locks, taking physical possession / occupation and if necessary with the help of police, to take inventory thereof and to sell the same by public auctin or by private treaty and the net sale proceeds thereof be ordered to be paid over to the applicant towards satisfaction of its claim in the original application; (vii) that all receivables and realization of such securities be paid over to the Applicant towards satisfaction of all its dues claimed herein: (viii) that the Hon'ble Tribunal may be pleased to allow the Applicant to make publication in relation to the filing of the present Application, and the grant of any reliefs herein; (ix) fo....
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....se for appointment of Receiver / Commissioner in respect of the properties of the Defendants. (vii) There is no dispute regarding the indebtedness of the Defendants and/or its liability to pay to the Applicant. The Applicant has therefore an excellent chance of succeeding in the Original Application. 8. INTERIM RELIEFS: (i) that pending hearing and final disposal of the application, the Defendant No.1 be directed to forthwith deposit, with the applicant, the following amount that is outstanding under the Personal Guarantees, as applicable to Defendant No.1: Principal Amount as on 2 August, 2017 : Rs.200,00,00,000 (Rupees Two Hundred Crores) Interest amount and other chargers as on 30 June, 2018 : Rs.73,36,49,623.59 (Rupees Seventy Three Crores Thirty Six Lakhs Forty Nine Thousand Six Hundred and Twenty Three and Fifty Nine Paise) (ii) that pending hearing and final disposal of the application, the Defendant No.2 be directed to forthwith deposit, with the applicant, the following amounts that is outstanding under the Personal Guarantees, as applicable to Defendant No.2: Principal Amount as on 2 August, 2017 : Rs.200,00,0....
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....s, including intangible assets, belonging to Defendants, within such time as may be fixed by this Hon'ble Tribunal and upon such disclosure Defendants, by themselves, their servants or agents be restrained by an order and injunction of this Hon'ble Tribunal from in any manner disposing off, selling, transferring, alienating, encumbering, parting with possession, creating third party right, title interest and claim of any nature whatsoever in their immovable and movable properties; (viii) That pending hearing and final disposal of the Original Application, the Defendants be restrained from leaving the country; (ix) That pending hearing and final disposal of the Original Application, each of the Defendants be directed to deposit their passports with this Hon'ble Tribunal; (x) That pending hearing and final disposal of the Original Application, each of the defendants be required to submit their respective taxation, Permanent Account Number, and details related to any or all bank accounts, held by them or their affiliates with any banking company or financial institution. (xi) for ad-interim reliefs in terms of prayers (a) to (i) above; ....
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....n of public money, its interest are required to be protected by this Hon'ble Tribunal and any delay in granting the reliefs would adversely impact the interest of the public. Hence, public interest demands that the reliefs as prayed for by the Applicant are granted. (iv) The Applicant submits that, in the present case, where there are no valid disputes in respect of the liability of Defendants to pay to the Applicant, it is just and in the interest of justice that the reliefs as prayed for by the Applicant be granted. (v) The Applicant apprehends that Defendants are likely to attempt to leave the country to evade the jurisdiction of this Hon'ble Tribunal, and payment of the amounts claimed by the Applicant. (vi) The Applicant has an excellent chance of succeeding on merits, since Defendants have no tenable defense. (vii) It is just and in the interest of justice that the reliefs as prayed for by the Applicant be granted. (viii) The Applicant submits that if the orders, as prayed for are not granted grave harm and irreparable loss, prejudice and injury would be caused to the Applicant. The balance of convenience is entirely in favour of t....
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....e explained to us that had it been a case of some adjustment of the amount and pursuant to such adjustment, if there would have been some payment, then, it could not be said that the debt stood assigned. According to the learned Senior Counsel, the case on hand is not one of discharge of debt or part payment of the debt, but the same is one of assignment of debt. 21 Mr. Thakore and Mr. Joshi brought to our notice a Full Bench decision rendered by the High Court of Australia in the case of Hutchens v. Deauville Investments Pty Ltd reported in 68 Australian Law Reports 367 and relying on the same, it was argued that it is preposterous to suggest that the liability of the writ applicants as guarantors could be transformed into an independent liability to a different creditor from the creditor to whom the guaranteed debt remained owing. Such suggestion would seem to lie ill with the basic principle that the debt owed by a guarantor, upon default by the principal borrower, is and remains the same debt as that owing by the principal debtor. To put it succinctly, it would seem to simply impossible, according to both the learned Senior Counsel, as a matter of basic principle, to assign ....
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....same debt of INR 45,000 Crores, as total recovery of INR 55,000 Crores is proposed to be effected. (iii) The Banks has no dues recoverable from ESSAR Steel India Limited not because of a compromise but because the Loan Asset is transferred to ArcelorMital India Private Limited. (iv) When the loan asset is not existing in the books of the Banks at all, no portion of the Loan Asset can be recovered by the Banks from any one, Essar Steel India Limited and/or its Guarantees." 23 In the aforesaid context, our attention was invited to the decision of the Supreme Court in the case of ICICI Bank Limited vs. Official Liquidator of APS Star Industries Limited reported in (2010) 10 SCC 1, wherein the Supreme Court observed as under: "46. As stated above, an outstanding in the account of a borrower(s) (customer) is a debt due and payable by the borrower(s) to the bank. Secondly, the bank is the owner of such debt. Such debt is an asset in the hands of the bank as a secured creditor or mortgagee or hypothecatee. The bank can always transfer its asset. Such transfer in no manner affects any right or interest of the borrower(s) (customer). Further, there is no prohib....
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....ts under a contract by a party who has performed his obligation thereunder and an assignment of a claim for compensation which one party has against the other for breach of contract. 49. In the case of Camdex International Ltd. v. Bank of Zambia reported in (1998) Q.B. 22 (CA) the following observation which is relevant to the present case needs to be quoted: "The assignment of a debt will not be contrary to public policy solely on the grounds that the assignee has purchased the debt for a considerably discounted price or because that price is only payable after a period of credit. Nor will the assignment be contrary to public policy simply because the assignee may make a profit on the transaction at the end of the day. If there was no prospect of a profit, Hobhouse LJ observed, commercial entities would never purchase debts." 50. Similarly, the following proposition in Chitty on Contracts, 27th edn. (1994) at para 19.027 is relevant to be noted. "It is also well established that a claim to a simple debt is assignable even if the debtor has refused to pay. The practice of assigning or `selling' debts to debt collecting agencies and credit fac....
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....usiness activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application [and includes any liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrower by the debenture trustee or any other authority in whose favour security interest is created for the benefit of holders of debt securities or;]" 26 Thereafter, our attention was drawn to Section 17 of the Act, which is with respect to the jurisdiction, powers and authority of the Tribunals. Reading Section 17, it was argued that the Tribunal can exercise jurisdiction only for recovery of debts due to the Banks and financial institutions, but if there is no existing debt, then there is no question of any recovery. Our attention was also drawn to Section 19 of the Act, 1993. It provides for filing of the application to the Tribunal. Again, it was sought to be....
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....abilities as guarantors and the law permits the Bank to enforce the personal guarantees. With the assignment of debt, the Bank may not be in a position to proceed against the principal borrower i.e. the ESIL, but nothing precludes the Bank from proceeding against the guarantors i.e. the writ applicants herein, more particularly, in view of certain clauses of the resolution plan itself. 32 Mr. Pahwa, in support of his aforesaid submissions, seeks to rely upon a recent pronouncement of the Supreme Court in the case of Lalit Kumar Jain vs. Union of India and others reported in 2021 SCC Online SC 396, wherein the Supreme Court upheld the provisions of the Code 2016 relating to the insolvency of personal guarantees by way of a Notification under 2019. Mr. Parikh would submit that in the said case, the writ applicants, being the personal guarantors of the corporate debtors, argued before the Supreme Court that since the liability of the guarantor is co-extensive with the corporate debtors, once a resolution plain is approved by the Committee of Creditors (COC) of a corporate debtor, the guarantors along with the corporate debtors stand discharged of the liability towards the creditors....
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....violation of rules of natural justice, (c) proceeds to act under law which is itself ultra vires or unconstitutional, or (d) proceeds to act in contravention of fundamental rights. The principles, which govern exercise of such power, must be strictly observed. A writ of prohibition must be issued only in rarest of rare cases. Judicial disciplines of the highest order has to be exercised whilst issuing such writs. It must be remembered that the writ jurisdiction is original jurisdiction distinct from appellate jurisdiction. An appeal cannot be allowed to be disguised in the form of a writ. In other words, this power cannot be allowed to be used "as a cloak of an appeal in disguise". Lax use of such a power would impair the dignity and integrity of the subordinate Court and could also lead to chaotic consequences. It would undermine the confidence of the subordinate Court. It was not even argued that there was total lack of jurisdiction in the civil Court. It could not be denied that the civil Court, before which the suit was pending, had powers to decide on the maintainability of the suit and to decide on questions of its jurisdiction. The civil Court had jurisdiction to decide whet....
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....z., setting up of Special Tribunals for recovery of dues of the banks and financial institutions by following a summary procedure. The intention of the legislature in enacting the Act is to provide for expeditious adjudication and recovery of debts due to banks and financial institutions; therefore, if all the provisions of the Code are applied to proceedings before the Debts Recovery Tribunal, it would defeat the very object of the enactment. Nonetheless, while ordinarily the Debts Recovery Tribunal should not decide issues as preliminary issues, in the opinion of this court, if the issue raised is one which goes to the root of the matter and strikes at the very jurisdiction of the Tribunal to decide the application, the court is of the view that the Tribunal is not barred from deciding such issue as a preliminary issue merely because section 22 of the Act does not specifically refer to the power to frame and decide preliminary issues. However, such power should be exercised sparingly, only in cases where the question of the jurisdiction of the Debts Recovery Tribunal to decide the case is involved." 38 Mr. Pahwa also took us through various clauses of the Resolution Plan inclu....
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....preventing the inferior Court from usurping a jurisdiction with which ti is not legally invested or to compel Courts entrusted with judicial duties to keep within the limits of their jurisdiction. 45 In M/s. East India Commercial Company Ltd. Calcutta v. Collector of Customs, Calcutta [AIR 1962 SC 1893 at 1898 (paragraph 26), following Mackonochie v. Lord Penzance (1881) 6 Appeal Cases 424, it was held by the Supreme Court that a "writ of prohibition is an order directed to an inferior Tribunal forbidding it from continuing with proceeding therein on the ground that the proceeding is without or in excess of jurisdiction or contrary to the laws of the land, statutory or otherwise." 46 In S. Govindan Menon vs. Union of India reported in AIR 1967 SC 1274, the Supreme Court held that the jurisdiction for grant of Writ of Prohibition is primarily supervisory and object of the Writ is to restrain courts or inferior Tribunals from exercising jurisdiction which they do not possess at all or else to prevent them from exceeding the limits of their jurisdiction. In other words, the object is to confine the Court or Tribunals of inferior or limited jurisdiction within their bounds. The w....
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....on a variety of individual facts which must govern the proper exercise of the discretion of the Court, and that in a matter which is thus pre-eminently one of discretion, it is not possible or even if it were, it would not be desirable to lay down inflexible rules which should be applied with rigidity in every case which comes up before the Court." 48 Again in Isha Beevi v. Tax Recovery Officer [1975 AIR 2135], the Supreme Court while dealing with the existence of alternative remedy and the issue of a writ of prohibition held: "The existence of an alternate remedy is not generally a bar to the issuance of a writ of prohibition. But in order to substantiate a right to obtain a writ of prohibition from a High Court or the Supreme Court, an applicant has to demonstrate total absence of jurisdiction to proceed on the part of the officer or the authority complained against........................." 49 The Supreme Court in M. V. S. Prasada Rao v. State of A. P. [1985 Lab. I. C. 438], while explaining the scope and effect of a writ of prohibition, laid down: "Writ of prohibition is an order directing the inferior Tribunal or authority forbidding to continue the pro....
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....d not be allowed to decide these questions. The impugned judgment does not state that the civil Court had either proceeded to act without or in excess of jurisdiction or that it had acted in violation of rules of natural justice or that it had proceeded to act under law which was ultra vires or unconstitutional or proceeded to act in contravention of fundamental rights. The impugned judgment does not indicate as to why the High Court did not consider it expedient to allow the civil Court to decide on questions of maintainability of the suit or its own jurisdiction. The impugned judgment does not indicate why the civil Court be not allowed to decide whether the suit was barred by virtue of Section 14 of the said Act or on principal of res judicata/estoppel. To be remembered that no fundamental right is being violated when a Court of competent jurisdiction is deciding rightly or wrongly matters before it." 51 Thus, the Supreme Court has cautioned that unless there are some very cogent or strong reasons, the High Court should not prevent the competent Forum from deciding the various questions raised before it including the question of "want of jurisdiction". It is also stated that ....
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....n the case of mandamus, the rule is not inflexible: The 'Queen v. Thomas', (1892) 1 QB 426. In 'Rex v. North Oakey' (1927) 1 K.B. 491, Lord Atkin said as follows: "I think it is quite plain that the fact of there being a remedy by way of, appeal is no answer to a writ of prohibition where the want of jurisdiction complained of is based upon the breach of a fundamental principle of justice..............." This view is also supported in two cases of this Court, 'Dorman Long & Co. v. Jagadish Chandra', 62 Cal 596 at p. 605 and 'In re Ramjidas Mahaliram', 62 Cal 1011 at p. 1035. See also 'R v. Wandsworth', (1942) 1 All E R 56. But the Court has an undoubted discretion in the matter. If the alternative remedy is an efficient remedy and there is no want of jurisdiction, patent on the face of it, or any breach of natural justice, then the writ may be refused: 'R v. Kindsland Parish etc', (1922) 8 Tax Cas 327 (Halsbury Vol. 9, p. 879 n(s) )." 54 Turning to the English authorities on this point, the most important is the decision of the English Court in - 'Farquharson v. Morgan', (18S4) 1 QB 552 (G). In that case a....
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....n apparent on the face of the proceedings. Whilst in cases of latent want of jurisdiction there has always been a great conflict of judicial opinion, as to whether the grant of the writ was discretionary or not, the authorities seem unanimous in deciding that, where the want of jurisdiction is patent, the grant of the writ of prohibition is of course." And at page 559 the learned Lord Justice points out: "The reason why, notwithstanding such acquiescence, a prohibition is granted where the want of jurisdiction is apparent on the face of the proceedings, is explained by Lord Denman in - 'Bodenham v. Ricketts', 6 N & M 170 (H) to be for the sake of the public, lest 'the case might become a precedent if allowed to stand without impeachment', and, I will add for myself, because it is a want of jurisdiction of which the Court is informed by the proceedings before it, and which, the judge should have observed, and of which he himself should have taken notice." And again at page 563 Lord Justice Davey draws a distinction between the case of a patent and latent want of jurisdiction and the distinction according to this learned Lord Justice is : ....
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....round of this prerogative writ. 'The root principle of the English law about jurisdiction is that the judges stand in the place of the sovereign and, therefore, necessarily to be restrained by prohibition. Such usurpation when it is patent has been judicially characterised as in contempt of the Crown. It is with this background that in England it has been held that In such a case the writ of prohibition is demandable of right. But no such considerations need weigh with this Court In appreciating the broad principle that granting of all writs under article 226 of the Constitution Including the writ of prohibition ts always discretionary though of course different considerations may prevail in case of different writs........... The following propositions though not exhaustive of the subject are sufficient for the purposes of this case and I venture to think that rue measure and scope of the exercise of this jurisdiction and the discretion of this Court to issue a writ of prohibition under our law, in respect of proceedings in excess of jurisdiction, may be thus stated : (i) The High Court has always the power and discretion to grant or refuse to grant this writ which though ....
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....s that the Income-tax Officer in issuing the notice had no authority or competence to do so and that the assessment proceedings which he proposes to initiate pursuant to that notice would be proceedings without ;any jurisdiction at all. What is the meaning to be attached to the expression "complete absence of jurisdiction apparent on the face of the record?" As we shall presently point out, two views are possible. One is that the absence of jurisdiction should be clear beyond any reasonable doubt on the construction of the statute which confers the jurisdiction or confers the power or competence, and that if two views are possible of a construction of a section then it would not be a case of absence of jurisdiction apparent on the face of the record. The other view is that if absence of jurisdiction can be established by reference to statute without more, and no evidence was necessary and no facts had to be proved in order to establish want of jurisdiction, then absence of jurisdiction is one which is apparent on the face of the record, or, as one learned Judge has said, apparent on the face of the statute." 58 In our opinion, the net result of the authorities discussed above is....
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.... tried by the Tribunal alone the jurisdiction of the Civil Court would stand ousted. Also that, while determining the matter, the Tribunal can decide peripheral matters. After all, the aim of RDDBFI Act is to provide a speedy mode for the Banks and Financial Institutions to recover their "Debts". 60 Moreover, when the debt falls under the definition of the Act, in our view, any dispute arising out of the same is to be determined by the Tribunal duly constituted for that purpose. Once a remedy is provided under the RDDBFI Act, 1993 which is a Special enactment, there will be a ouster of jurisdiction by a Debtor or a Guarantor to approach the Civil Court (which was established on 30th November, 1994) (except the Supreme Court, and the High Court exercising jurisdiction under Article 226 and 227 of the Constitution). 61 It is to be pointed out that the term 'Debt' defined under Section 2(g) of the Act means any liability which is alleged as due from any person by a Bank during the course of any business activity undertaking by the Bank, in cash or otherwise, whether secured or unsecured, subsisting on, and legally recoverable on, the date of the application, as per the d....
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....itor, discharges the surety as to transactions subsequent to the variance. Section 134 stipulates that the surety is discharged by any contract between the creditor and the principal-debtor, by which the principal-debtor is released, or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal-debtor. However, certain kinds of discharge of the principal-debtor which may operate by operation of law may not ensure to the benefit of the Surety. Such instances being the bankruptcy of the principal-debtor or liquidation in the case the principal-debtor is a company. 66 Section 134 of the Contract Act reads thus: "134. Discharge of surety by release or discharge of principal debtor.- The surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. -The surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or omission of the creditor, the legal consequence of which i....
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....d the ESIL being the principal debtor, whereby the principal debtor was released. Therefore, in such circumstances, there was no question of the writ applicants herein being discharged of any contract entered into by the Bank and the ESIL. There has been no act or any omission on the part of the Bank, the legal consequence of which is discharged of the principal debtor. In the instance case, prima facie, it could be said that the principal debtor (ESIL) stood exonerated by the assignment of debt i.e. by operation of law and the discharge of a principal debtor by operation of law may not operate in all cases as a discharge of the sureties. • LALIT KUMAR JAIN vs. UNION OF INDIA AND OTHERS (SUPRA): 68 The aforesaid takes us now to look into the recent pronouncement of the Supreme Court in the case of Lalit Kumar Jain vs. Union of India and others [2021 SCC Online SC 396]. The common question that fell for the consideration of the Supreme Court was one relating to the vires and validity of a Notification dated 15th November 2019 issued by the Central Government. The other reliefs claimed were one relating to the validity of the Insolvency and Bankruptcy (Application to ....
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....s, the Solicitor General of India submitted before the Supreme Court that the liability of a guarantor is co-extensive, joint and several with that of the principal borrower unless the contrary is provided by the contract. It was argued that a discharge which a principal borrower may secure by operation of law (for instance on account of winding or the process under the Code) would not absolve the surety from its liability. It was argued by the learned Solicitor General that neither the guarantor's obligations are absolved nor discharged in terms of Sections 133 to 136 of the Contract Act on account of release / discharge / composition of variance of contract which a principal borrower may secure by way of operation of law for instance as under the Code. 73 The learned Solicitor General invited the attention of the Supreme Court to the decision in the case of the State Electricity Board vs. Official Liquidator, High Court of Ernakulum [1982 (3) SCC 358] and Punjab National Bank vs. State of U.P. [(2002) 5 SCC 80]. 74 The Supreme Court also took notice of the Calcutta High Court judgement in the case of Gouri Shankar Jain vs. Punjab National Bank [2019 SCC Online CAL 7288]. ....
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....out the surety's consent, in the terms of the contract between the principal 1 [debtor] and the creditor, discharges the surety as to transactions subsequent to the variance. 134.Discharge of surety by release or discharge of principal debtor.-The surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. ****************** 140.Rights of surety on payment or performance.-Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor. 141.Surety's right to benefit of creditor's securities.-A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into, whether the surety knows of the existence of such security or not; and if the creditor loses, or, without th....
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....binding on the guarantor, to avoid any attempt to escape liability under the provisions of the Contract Act. It was observed that: "25. Section 31(1), in fact, makes it clear that the guarantor cannot escape payment as the resolution plan, which has been approved, may well include provisions as to payments to be made by such guarantor...." 131. And further that: "26.1 Section 14 refers only to debts due by corporate debtors, who are limited liability companies, and it is clear that in the vast majority of cases, personal guarantees are given by Directors who are in management of the companies. The object of the Code is not to allow such guarantors to escape from an independent and co-extensive liability to pay off the entire outstanding debt, which is why Section 14 is not applied to them. However, insofar as firms and individuals are concerned, guarantees are given in respect of individual debts by persons who have unlimited liability to pay them. And such guarantors may be complete strangers to the debtor - often it could be a personal friend. It is for this reason that the moratorium mentioned in Section 101 would cover such persons, as such moratorium....
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....efault on the part of the Company in liquidation before the amount demanded is paid. The Bank cannot raise the plea that it is liable only to the extent of any loss that may have been sustained by the Electricity Board owing to any default on the part of the supplier of goods i.e. the Company in liquidation. The liability is absolute and unconditional. The fact that the Company in liquidation i.e. the principal debtor has gone into liquidation also would not have any effect on the liability of the Bank i.e. the guarantor. Under Section 128 of the Indian Contract Act, the liability of the surety is coextensive with that of the principal debtor unless it is otherwise provided by the contract. A surety is no doubt discharged under Section 134 of the Indian Contract Act by any contract between the creditor and the principal debtor by which the principal debtor is released or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. But a discharge which the principal debtor may secure by operation of law in bankruptcy (or in liquidation proceedings in the case of a company) does not absolve the surety of his liability (see Jagannat....
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....where the liability of the guarantor in a case where liability of the principal debtor was discharged under the insolvency law or the company law, was considered. It was held in this case that in view of the unequivocal guarantee such liability of the guarantor continues and the creditor can realize the same from the guarantor in view of the language of Section 128 of the Contract Act as there is no discharge under Section 134 of that Act. In our opinion, the principle of the aforesaid decision of this Court is equally applicable in the present case. The right of the appellant to recover money from Respondents 1, 2 and 3 who stood guarantors arises out of the terms of the deed of guarantee which are not in any way superseded or brought to a naught merely because the appellant may not be able to recover money from the principal borrower. It may here be added that even as a result of the Nationalisation Act the liability of the principal borrower does not come to an end. It is only the mode of recovery which is referred to in the said Act." 135. In Kaupthing Singer and Friedlander Ltd. (supra) the UK Supreme Court reviewed a large number of previous authorities on t....
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....o and relied upon by the Supreme Court in Lalit Kumar Jain (supra), we may also look into few relevant observations made by the Calcutta High Court: "23. In the facts of the present case, the first respondent initiated a Corporate Insolvency Resolution process of the company under section 7 of the Code of 2016 before the National Company Law Tribunal, Kolkata. The Code of 2016 was enacted to consolidate and amend the laws relating to reorganisation and Insolvency Resolution of corporate persons, partnership firms and individuals in a time bound manner. The Code of 2016 was amended in 2018. Prior to the enactment of the Code of 2016, there were various statutes relating to insolvency and bankruptcy of corporate entities, partnership firms and individuals. The Code of 2016 brought the law governing insolvency of corporate persons, partnerships and individuals under one statute. The Code of 2016 is divided into five parts with each part containing a number of chapters. Section 7 of the Code of 2016 is under Part II which deals with Insolvency Resolution and liquidation for corporate persons, and Chapter II of Part II deals with Corporate Insolvency Resolution process. ....
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....position with the corporate debtor in respect of the claim. In a given situation, the Resolution Plan submitted with the resolution professional and accepted by the committee of creditors and ultimately approved by the Adjudicating Authority, may provide for payment of the entirety of the claim of the financial creditor applying for initiation of the Corporate Insolvency Resolution process. In such a situation, no compromise takes place. In a given situation, the financial creditor applying for initiation of the Corporate Insolvency Resolution process may receive a portion of the claim as full and final settlement as against the corporate debtor, in accordance with the Resolution Plan approved under the Code of 2016. In neither of the two situations, can it be said that, the financial creditor entered into a voluntary compromise with the corporate debtor with regard to the quantum of the claim. 26. The Code of 2016 stipulates that, a Resolution Plan in respect of a corporate debt is required to be approved by a vote of not less than 66% of the voting share of the financial creditors. In a given case, the financial creditor applying for initiation of Corporate Insolvency Re....
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.... the facts of that case, a company in respect of which a bank issued a guarantee in favour of the Electricity Board, went into liquidation. The Supreme Court has held that, the fact that the company which is the principal debtor has gone into liquidation would not have any effect on the liability of the guarantor. 29. The Division Bench of this Hon'ble Court in Modern Stores (India) Ltd. (supra) has considered the interplay of sections 134 and 137 of the Act of 1872. It has applied the ratio laid down in Maharashtra State Electricity Board, Bombay (supra). It has held as follows: - "18. Section 134 consists of two parts, The first part of the section speaks that the sureties are discharged by any contract between the creditor and the principal-debtor, by which the principal debtor is released. This part has no application to the present case as in this case there has not been any contract between the plaintiff being the creditor and the defendant No. 1 being the principal-debtor whereby the principal debtor was released. 19. The second part of Section 134 is to this effect. The sureties are discharged by any act or omissions of the creditor, legal con....
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....s on the Contract Act, 10th Edition, page 742, the surety's right to indemnify against a principal-debtor is a necessary result of such a reservation. It is also the opinion of the learned Author that if a creditor without ceasing to hold the principal debtor liable, prefers to sue the more solvent of two sureties for the debt, this still more obviously, does not discharge the other Surety. 20. It will appear from Section 137 of the Contract Act that mere forbearance on the part of the creditor to sue the principal debtor or to enforce any other remedy against him does not discharge the surety. Therefore, it appears that mere forbearance on the part of the creditor to sue the principal debtor will not discharge the surety. It has been held by certain decisions that "mere forbearance" to sue may spring from a contract or there may be simple forbearance. If such forbearance springs from a contract that will be a case under Section 135 of the Contract Act but if the plaintiff forbears to sue the principal debtor within the period of limitation that itself would not discharge the surety. 21. Therefore, in our view, mere omission to sue the principal debtor or to p....
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....borrower/principal debtor. In the facts of that case, it was found that, a scheme sanctioned by the Court under Sections 391 and 394 of the Companies Act, 1956 was binding on the creditors whether such creditors assented to it or not. It has taken note of Section 135 of the Act of 1872 and held that, a contract between the creditor and the principal debtor by which the creditor compounds with the principal debtor, discharges the surety. 34. In the facts of the present case, most respectfully, I am unable to accept and apply the ratio of Kundanmal Dabriwala (supra). Firstly, Kundanmal Dabriwala (supra) is not binding precedent upon me. Canonnore Spinning and Weaving Mills Ltd (supra), Maharashtra State Electricity Board, Bombay (supra) and Modern Stores (India) Ltd. (supra) are binding precedents on me. Secondly, the proposition that, as a binding arrangement sanctioned by Court under Section 391 of the Companies Act, 1956 being a deemed and binding contract through operation of law and if it extinguishes the liability of the principal debtor, the same has the effect of preventing the surety from recovering the amount of debt from the debtor and therefore, the creditor cann....
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....f 2016 cannot be construed to be a discharge of the surety in terms of Section 134 of the Act of 1872. On the same analogy, an application under Section 7 of the Code of 2016 cannot be construed to be a discharge of the surety under Section 135 of the Act of 1872. An application under Section 7 of the Code of 2016 and the consequential orders that may be passed under the Code of 2016 cannot also be construed to be a discharge of the surety in terms of Section 139 of the Act of 1872. The implied promise recognised under Section 145 of the Act of 1872 is not impaired by any order that may be passed under the Code of 2016. As noted above, when, a financial creditor approaches the National Company Law Tribunal under the provisions of the Code of 2016, it does so, in exercise of statutory rights. Contractual obligations between the financial creditor and the surety are not obliterated or modified or suspended by the eventual outcome of such proceeding. 36. The Supreme Court in V. Ramakrishnan & Anr. (supra) has considered the issue as to whether Section 14 of the Code of 2016 would apply to a personal guarantor of a corporate debtor. It has held that, Section 14 of the Code of ....
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....e seen that Section 249, dealing with the consequential amendment of the Recovery of Debts Act to empower Debt Recovery Tribunals to try such 22 proceedings, has also not been brought into force. It is thus clear that Section 2(e), which was brought into force on 23.11.2017 would, when it refers to the application of the Code to a personal guarantor of a corporate debtor, apply only for the limited purpose contained in Section 60(2) and (3), as stated hereinabove. This is what is meant by strengthening the Corporate Insolvency Resolution Process in the Statement of Objects of the Amendment Act, 2018. 22. Section 31 of the Act was also strongly relied upon by the Respondents. This Section only states that once a Resolution Plan, as approved by the Committee of Creditors, takes effect, it shall be binding on the corporate debtor as well as the guarantor. This is for the reason that otherwise, under Section 133 of the Indian Contract Act, 1872, any change made to the debt owed by the corporate debtor, without the surety's consent, would relieve the guarantor from payment. Section 31(1), in fact, makes it clear that the guarantor cannot escape payment as the Resolution Pla....
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....erala and Ors. v. Mar Appraem Kuri Co. Ltd. and Anr., (2012) 7 SCC 106, that a law 'made' by the Legislature is a law on the statute book even though it may not have been brought into force. The said judgment states: "79. The proviso to Article 254(2) provides that a law made by the State Legislature with the President's assent shall not prevent Parliament from making at any time any law with respect to the same matter including a law adding to, amending, varying or repealing the law so made by a State Legislature. Thus, Parliament need not wait for the law made by the State Legislature with the President's assent to be brought into force as it can repeal, amend, vary or add to the assented State law no sooner it is made or enacted. We see no justification for inhibiting Parliament from repealing, amending or varying any State legislation, which has received the President's 25 assent, overriding within the State's territory, an earlier parliamentary enactment in the concurrent sphere, before it is brought into force. Parliament can repeal, amend, or vary such State law no sooner it is assented to by the President and that it need not wait till such ....
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....of the Act of 1872." 78 Thus, the dictum as laid in the case of Lalit Kumar Jain (supra) to our understanding is that the release or discharge of a principal borrower from its debt to its creditor by involuntary process would not absolve a guarantor of its liability that may arise out of an independent contract. The Supreme Court concluded that the sanction of a resolution plan and finality imparted to it by Section 31 of the IBC would not per se operate as a discharge of the guarantor's liability, the nature and extent of which would depend on the terms of the guarantees itself. However, according to Mr. Thakore and Mr. Joshi, in Lalit Kumar Jain (supra), the Supreme Court had no occasion to consider the effect of assignment of debt. • HUTCHENS v. DEAUVILLE INVESTMENTS PTY LTD (SUPRA): 79 In the earlier part of our judgement, we have referred to the case of Hutchens (supra). This decision is of the Full Bench of the High Court of Australia. The facts, as noted in the judgement, read thus: "In July 1977, a proprietary company called The Kenbrite Corporation Pty. Ltd. ("Kenbrite"), of which Hutchens was a director, agreed to borrow money from Genera....
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....ve been under no liability under the guarantee and mortgage given by him in favour of General Credits. Alternatively, if General Credits had obtained payment of the debt owing by Kenbrite from Hutchens pursuant to the terms of his guarantee, Hutchens would, subject to an argument about the effect of cl.2 of the guarantee which we find it unnecessary to pursue, have been subrogated to General Credits' rights against Kenbrite under the first mortgage debenture and would, on those figures, have obtained full reimbursement of the amount which he had been required to pay as guarantor. In that regard, it is relevant to note that there would seem to be no suggestion that Hutchens was or is under any relevant liability otherwise than such as flows from his guarantee of moneys owed by Kenbrite to General Credits. On 12 March 1982, Helvetic appointed Mr. Dulhunty as receiver and manager of the assets and business of Kenbrite under the second mortgage debenture. By a demand dated 16 March 1982, General Credits demanded of Hutchens payment of "all sums of money which are in the definition of 'the principal sum' of the (real property) Mortgage". The demand did not specify the amount....
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.... thereby to convert the one debt owing by both principal debtor and guarantor to the one creditor into two debts, one owing by the principal debtor to the creditor and the other owing by the guarantor to the assignee. If it were otherwise, the position would seem to be that, by assigning the benefit of a guarantee and the guarantor's security and retaining the benefit of a principal debtor's indebtedness and the principal debtor's security, a creditor could effectively divorce the guarantor's liability from that of the principal debtor and effectively deprive the guarantor of the rights which flowed from his position as such including (where available) his rights of subrogation. In that regard, the case of a purported assignment of the debt of a guarantor while retaining the benefit of the guaranteed debt is, subject to one qualification, analogous to that to which Jacobs J.A. referred in International Leasing Corp. Ltd. v. Aiken (1967) 2 NSWR 427, at p 439: "If the debt is assigned but the guarantee is not assigned then the right in the original creditor to recover under the guarantee must at least be suspended so long as the debt is assigned. There cannot....
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....se to be surmounted, however, there would remain at least one further matter which Hutchens is entitled to have investigated upon a trial. If the receiver has, by arrangement between Helvetic and himself, appropriated moneys which have come to his hands as receiver to the payment of the debt owing under the second mortgage debenture in preference to the payment of moneys owing under the prior security, there would, at least prima facie, appear to be grounds for inferring, as Hutchens asserts, that Helvetic and the receiver have so acted for the purpose of enhancing Helvetic's position under the second mortgage debenture by subverting and rendering valueless Hutchens' rights of subrogation to the benefit of the first mortgage debenture. If such an inference were found to be warranted and subject to possible intervening questions (e.g. notice, estoppel or the effect of particular contractual terms), a serious issue would arise about whether there had been active connivance of a kind which would entitle Hutchens to be discharged from his obligations as guarantor or, at the least, to have his liability under the guarantee, and hence under the mortgage, reduced by the amount whi....
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.... Financial Creditors. All such allocations to the Financial Creditors will be binding on all Stakeholders. For the avoidance of doubt, such allocation shall be binding on all Financial Creditors, including dissenting Financial Creditors, if any. For the sake of clarity, INR 42,000 crores is a committed amount even if the working capital adjustment amount is below INR 2,500 crores. The Upfront Cash Recovery amount will be paid in accordance with this Resolution Plan within 30 days from the Plan Approval Date. 2. Unsecured Financial Creditors A. Payment of INR 17.4 crores to the unsecured financial creditors to be paid on the Effective Date as an upfront amount by the Resolution Applicant which shall be divided proportionately to the unsecured financial creditors. B. Payment of INR 3,055,738 to be paid to the unsecured financial creditors (whose Admitted Claim is less than INR 10 lakhs) to be paid on the effective date as an upfront amount by the Resolution applicant. Such amount shall be paid over and above the amount offered to the Secured Financial Creditors." "4. Acquisition of Debt Simultaneously with acquir....
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....curity agreements (other than corporate or personal guarantees provided in relation to the Corporate Debtor by the Existing Promoter Group or their respective affiliates) shall be deemed to have been (i) assigned / novated to the Resolution Applicant, or any Person nominated by the Resolution Applicant, with effect from the Effective Date, with no rights subsisting or accruing to the Financial Creditors for the period prior to such assignment or novation; and (ii) to the extent not legally capable of assigned or novated - terminated with effect from the Effective Date, with no rights accruing or subsisting to the Financial Creditors for the period prior to termination. • In relation to the loans and financial assistance provided to the Corporate Debtor; each of the Financial Creditors, as the case may be, shall: - Assign / novate all security given (including but not limited to Encumbrance over assets of the Corporate Debtor, pledge of shares of the Corporate Debtor (other than corporate guarantees and personal guarantees) related in any manner to the Corporate Debtor) to the Resolution Applicant and/or its Connected Persons, and/or banks or financial institut....
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.... shall bear all litigation costs for contesting such clam." "Other Terms of the Resolution Plan Extinguishment of Claims: 1. Notwithstanding anything contained under Applicable Law or otherwise, the Claims pertaining to the Corporate Debtor shall stand extinguished, settled, abated and satisfied in the manner set out hereinafter: a. Other than the payments/ settlements under this Resolution Plan, no other payments or settlements (of any kind) will have to be made to any other Person in respect of the Claims filed under the Resolution Process and all Claims (including, for the avoidance of doubt, Rejected Claims Amount and Verification Pending Amounts) against the Corporate Debtor as of insolvency Commencement Date along with any related Proceedings, including Proceedings for enforcement of any security interest, shall stand irrevocably and unconditionally abated, discharged, settled and extinguished in perpetuity on the Plan Approval Date. b. The payments contemplated in this Resolution Plan shall be the Corporate Debtor's full and final performance, and satisfaction of all Claims (including Rejected Claims Amount and Verification Pe....
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....ency Commencement Date, including those relating to any corporate guarantees, indemnities and all other forms of credit support provided by the Corporate Debtor prior to the Plan Approval Date shall stand irrevocably and unconditionally abated, settled and extinguished in perpetuity. f. Upon the approval of the Resolution Plan by the Adjudicating Authority, all pending Proceedings relating to the winding-up of the Corporate Debtor shall stand irrevocably and unconditionally abated in perpetuity. As on the Plan Approval Date, the Government Creditors and Trade Creditors shall be deemed to have waived all termination rights on account of payment defaults, and rights to payment of penalty, default payment or any payment of like nature under any agreement or arrangement against the Corporate Debtor, including but not limited to any rights arising from any breach, default, act or omission, under any such agreement or arrangement executed by the Corporate Debtor and/ or the Resolution Professional for and on behalf of the Corporate Debtor, till the Plan Approval Date. g. Upon the approval of the Resolution Plan by the Adjudicating Authority, in relation to guarantees pr....
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....ties (whether contingent or crystallized, known or unknown, filed or not filed) in relation to any corporate guarantees, indemnities and all other forms of credit support provided by the Corporate Debtor prior to the Plan Approval Date (whether on behalf of Group Companies or otherwise) shall stand extinguished and discharged with effect from the Plan Approval Date. l. No person shall be entitled to initiate any proceedings to enforce any Claims or continue any proceedings in relation to any Claims in so far as the Claims relate to the period prior to the Plan Approval Date. 2. With respect to the matters stated in paragraph 1 above, any liabilities and/or Claims that arise till the Effective Date shall stand waived, extinguished, abated, discharged in perpetuity and provisions of paragraph 1 above shall mutatis mutandis apply. 3. Nothing in this Resolution Plan shall affect the rights of the Corporate Debtor to recover any amounts due to the Corporate Debtor from the Third Party (including any Related Party) except in the case of personal and corporate guarantees provided for and on behalf of the Corporate Debtor to the Financial Creditors and there shal....
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....e Banks claims against the Borrower have been satisfied and the Bank may enforce and recover payment from the Guarantor of the full amount payable by the Guarantor notwithstanding any such proof of composition as aforesaid. On the happening of any of the aforesaid events, the Guarantor shall forthwith inform the Bank in writing of the same. 18. The Guarantee hereby given is independent and distinct from any security that the Bank has taken or may take in any manner whatsoever whether it be by way of hypothecation and/or mortgage and/or other change over goods, movable or other assets and/or any other property movable or immovable and the Guarantor has not given this Guarantee upon the understanding faith or belief that the Bank has taken and/or may hereafter take any or other such security and that notwithstanding the provisions of Section 140 and Section 141 of the Indian Contract Act, 1872, or other section of that Act or any other law, the Guarantor will not claim to be discharged to any extent because of the Bank's failure to take any or other such security or in requiring or obtaining any or other such security or losing for any reason whatsoever including reasons att....
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....from doing the things which he undertook to do, or has connived at the debtor's omission to do those things or has enabled him to do something which he ought not to have done, but he must also show that the creditor has done some act inconsistent with the rights of the surety, or omitted to do any act which his duty towards the surety required him to do within the meaning of Section 139. Thus, before the surety is discharged the following two conditions must be satisfied (1) the creditor must do an act which is inconsistent with the rights of the surety or he must omit to do any act which his duty to the surety requires him to do; and (2) by the action or inaction of the creditor referred to in ground (one), the eventual remedy of the surety himself against the principal debtor is impaired. Whether the said two conditions are fulfilled in the present case or not will have to be closely examined by the Tribunal keeping in mind the terms of the Resolution Plan, the terms of the guarantee and the legal effect of the assignment of debt vis-a-vis the liability of the guarantors. This aspect shall be examined by the Tribunal bearing in mind the dictum laid in decision of HUTCHENS (supra)....
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....aw, i.e. approval of the Resolution Plan by the Adjudicating Authority on its satisfaction and not at the instance of a creditor even if one or any of the creditors may or may not be in favour of Resolution Plan. Once the Resolution Plan is approved by the Adjudicating Authority, the Corporate debtor is discharged and the said decision is binding on the creditor. Thus, whether the guarantors could be said to be discharged of its liability towards the creditor on the discharge of principal debtor's liability under the IBC will have to be decided by the Tribunal keeping in mind that the case on hand is one of assignment of debt. 90 A writ of prohibition is issued only when patent lack of jurisdiction is made out. It is true that a High Court acting under Article 226 is not bound by the technical rules applying to the issuance of prerogative writs like certiorari, prohibition and mandamus in United Kingdom, yet the basic principles and norms applying to the said writs must be kept in view, as observed by this Court in T. C. Basappa (supra). It was observed by Mukherjea, J. speaking for the Constitution Bench : "The language used in Articles 32 and 226 of our Constitution i....
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....hould not be issued on mere asking. 93 The upshot of the aforesaid discussion is that the case on hand is not one in which it could be said that there is a patent lack of jurisdiction in the Debts Recovery Tribunal to look into all the issues discussed above. Had it been a case of patent lack of jurisdiction, this Court would have gone into the pivotal issue and answered the same. We are of the view that the Tribunal should be allowed to look into all the relevant aspects of the matter, more particularly, the pivotal issue as regards the assignment of debt vis-a-vis the liabilities of the guarantors under the guarantees deed. The pivotal point raised by the writ applicants is one for which detailed analysis has to be made by the Tribunal itself even to find out as to whether the facts on record would clothe the Tribunal with the necessary jurisdiction to decide the issues raised before it on merits. When we pose a question to ourselves as to instead of issuing a writ of prohibition, as prayed for, by the writ applicants, if by permitting the Tribunal to proceed further, whether any serious prejudice would be caused? We find that by adopting the said course, while no prejudice wo....