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2021 (12) TMI 1419
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....LICATION (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 application being the Special Civil Applic....
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....rMittal 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 Professional shall forward all records relating to the conduct of the corporate insolvency resolution p....
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....t 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 submissions made on behalf of Intervenor - Essar Steel Asia Holdings Limited'. It is accordingly dismissed. No costs." 12 The litigation, ultima....
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....ed 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) 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 accruin....
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....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 ensures that the successful resolution applicant starts running the business of the corporate debtor on a fresh slate as it were. In State Bank of India v. V. Ramakrishnan, 2018 (9) SCALE 597, this Court relying upon Section 31 of the Code has held: "22. Section 31 ....
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....cessfully 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 application under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993 (for short, "the RDB Act, 1993") against the writ applicants herein in their capacity as the guarantors, which came to be registered as the original application No.648 of 2018. The following reliefs have been pra....
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....ncluding 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) for all necessary orders, directions to secure full and effective reliefs to the Applicant as sought herein; (x) for costs of this Original Application; and (xi) for such further and other reliefs as the nature and circumstances of the case may require. 7. REASONS FOR RELIEF SOUGHT: (i) The applicant submits that it has to recover a debt of following amoun....
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...., 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.200,00,00,000 (Rupees Two Hundred Crores) Interest amount and other charges 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) (iii) that pending the hearing and final disposal of the Original Application, Receiver/Commissioner be appointed as Receiver of the immovable and movable (including intangible) properties of the Defendants with all powers under the provisions of Recovery o....
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....al 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; (xi) for costs of this Application, and (xii) for such other and further reliefs as the nature and circumstances of the case may require. REASONS FOR INTERIM RELIEFS: The Applicant submits that on following amongst other grounds, it is not only convenient but slso absolutely just and necessary that the interim/ad-interim reliefs/orders as prayed for hereinabove, be granted to the Applicant. It is submitted that if the interim reliefs as prayed for by the Applicant is not granted, grave and irreparable harm, loss, injury and prejudice would....
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....ttempt 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 the Applicant." 17 It is the aforesaid action on the part of the respondent No.2 - Bank in filing the Section 19 application before the Debts Recovery Tribunal that has given rise to the present litigation before us. 18 The writ applicants have come before this Court saying that the proceedings initiated by the respondent No.2 - Bank before the Debts Recovery Tribunal are not maintainable as the Tribunal has no jurisdiction to proceed against the writ applicants in their capacity as guarantors in view of the fact that the entire debt of the Bank came to be assigned to the ArcelorMittal and with such assignment,....
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....ous 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 the benefit of a guarantee or the security for it, (as distinct from the property secured) while retaining the benefit of the guaranteed debt and thereby to convert the one debt owing by both i.e. the 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. 22 To make the above more explicit clear, a chart was provided to us to understand the transactions under the Resolution Plan. We quote it as under: "CHART OF TRANSACTIONS UNDER THE RESOLUTION PLAN I. 1 s t Stage Essar Steel India Limited (Liability)  ....
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...., 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 prohibition in the BR Act, 1949 in the bank transferring its assets inter se. Even in the matter of assigning debts, it cannot be said that the banks are trading in debts, as held by the High Court(s). The assignor bank has never purchased the debt(s). It has advanced loans against security as part of its banking business. The account of a client in the books of the bank becomes Non Performing Asset when the client fails to repay. In assigning the debts with underlying security, the bank is only transferring its asset and is not acquiring any rights of its client(s). The bank transfers its asset for a particular agreed price and is no longer entitled to recover anything from the borrower(s). The moment ICICI Bank Ltd. transfers the debt with underlying security, the borrower(s)....
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...., 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 factors could hardly be carried on if the law were otherwise. " 51. In view of the above exposition of law, we find that under the impugned Deed of Assignment only the Account Receivables in the books of ICICI Bank Ltd. has been transferred to Kotak Mahindra Bank Ltd. The obligations of ICICI Bank Ltd. towards its borrower(s) (customer) under the loan agreement secured by deed of hypothecation/mortgage have not been assigned by ICICI Bank Ltd. to the assignee bank, namely, Kotak Mahindra Bank Ltd. Hence, it cannot be said that the impugned Deed of Assignment is unsustainable in law. The obligations referred to in the impugned Deed of Assignment are the obligations, if any, of ICICI Bank Ltd. towards Kotak Mahindra Bank Ltd. (assignee) in the matter of transfer of NPAs. For example, when an Account Receivabl....
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....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 argued that if any Bank or a financial institution has to recover any debt, it may make an application, but since there is no debt in the present case, as the same came to be assigned to the Arcellor Mittal, the application under Section 19 itself is not maintainable. 27 Both the learned Senior Counsel vehemently argued that this is a fit case in which this Court should issue a writ of prohibition to the Tribunal not to proceed further with the original application as the Tribunal has no jurisdiction to adjudicate such application in the absence of any debt. 28 The following case law has been relied upon to make good the case for issue of a writ of prohibition to the Tribunal: 1 Bengal Immunity Co. Ltd v. State of Bihar and others AIR 1955 SC 661 2 Sri Lakshmindra Theertha Swamiar of Shri Shirur Mutt and another vs. The Com....
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....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. It was argued before the Supreme Court that in such circumstances, the Creditors cannot proceed against them separately. Mr. Pahwa would submit that the Supreme Court negatived such argument holding that the liability of the guarantors subsisted against the creditors and an approved resolution plan can only lead to a "revision of amount or exposure for the entire amount". Mr. Pahwa submitted that the Supreme Court also rejected the argument as regards the discharge of surety upon variance in the terms of the contract under Section 131 of the Contract Act, 1972 by relying on its earlier decision in the case of State Bank of India vs. V. Ramakrishnan and others [(2018) 17 SCC 394], wherein the Supreme Court had clarified that Section 31 of the Code made it clear that an approved resolution plan was binding on a guarantor specifically to avoid any attempt to escape liability under the provi....
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....re 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 whether the suit was barred by Section 14 of the said Act or on principles of res judicata/estoppel. Thus unless there was some very cogent or strong reason the High Court should not have prevented the Court of competent jurisdiction from deciding these questions. In other words the High Court should not usurp the jurisdiction of the civil Court to decide these questions. In the impugned Judgment no reason, much less a cogent or strong reason, has been given as to why the civil Court could 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....
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....ecide 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 including the terms of the personal guarantee to make good his submission that mere assignment of debt by the State Bank of India in favour of the Arcellor Mittal would not absolve the writ applicants of their personal liabilities. 39 In such circumstances referred to above, Mr. Pahwa prays that there being no merit in the present writ applicants, those may be rejected. 40 We also heard Mr. Vishwas K. Shah, the learned counsel appearing for the Canara Bank in one of the connected writ applications. Mr. Shah submitted that he would adopt all the arguments canvassed by Mr. Pahwa. * ANALYSIS: 41 Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether any case for issue of a writ of prohibition has been made out? * WRIT OF PROHIBITION: 42 Before adverting to the submissions canvassed on either side, it....
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....tion 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 writ of prohibition lies not only for excess of jurisdiction or for absence of jurisdiction but also in a case of departure from the rules of natural justice. But the Writ does not lie to correct the course, practice or procedure of an inferior Tribunal or a wrong decision on the merits of the proceedings. The writ cannot be issued to a court or an inferior Tribunal for an error of law unless the error makes it go outside its jurisdiction. A clear distinction has therefore, to be maintained between want of jurisdiction and the manner in which it is exercised. If there is want of jurisdiction than the matter is coarum non judice and a writ of prohibition will lie to the Court or inferior Tribunal forbidding it to continue proceedings therein in excess of jurisdiction. This view was taken following the decision of Regina Versus Controller General of Patents and Designs reported in (1953) 2 WLR 760. 47 In A. V. Venkateswaran v. Wadhwani [1961 AIR 1506]....
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.... 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 proceedings on the premise that it is in excess of the jurisdiction or without authority of law. In other words, it is one of supervisory power to keep the authorities within the confines of law or jurisdiction." 50 In Thirumala Tirupathi Devasthanam and another vs. Thallappaka Ananthacharyulu and another (2003) 8 SCC 134 at paragraph 14, the Supreme Court held as follows: "On the basis of the authorities it is clear' that the Supreme Court and the High Court have power to issue writs, including a writ of prohibition. A writ of prohibition is normally issued only when the inferior. Court or Tribunal (a) proceeds to act' without or in excess of jurisdiction, (b) proceeds to act in 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 right. The principal which govern exercise of such power must be strictly observed. A Writ of Prohibition must be iss....
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....ent 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 allowing a Court of competent jurisdiction to proceed with the case and decide the same rightly or wrongly, would not result in violation of any Fundamental Rights. 52 As regards the dictum as laid in Thirumala (supra), Mr. Joshi submitted that the Supreme Court's aforesaid observations fell keeping in mind Section 9 of the Civil Procedure Code. According to Mr. Joshi, Section 9 of the Civil Procedure Code provides that the Courts shall have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred. According to Mr. Joshi, Section 17 of the D.R.T. Act is differently worded. The submission is that Section 17 of the D.R.T. Act specifically talks about "debt" and the existence of a legally recoverable "debt" is a sine qua non to confer jurisdiction upon the Tribunal. 53 In 'Rex v. Post Master General', (1928) 1 K.B 291, a Post office workman applied for a writ of certiorari to quash a certificate given by....
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....g 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 County Court Judge made an order to enforce an award by execution as on an ordinary County Court judgment under Section 24, Agricultural Holdings Act and on the face of the award it was apparent that the compensation had been awarded to the tenant for the matters not within the Act, and the Court of Appeal interfered by a writ of prohibition notwithstanding the fact that there was an agreement contained in the lease between the lessor and the tenant to refer all disputes to arbitration and also the fact that the lessor had by his conduct acquiesced in the exercise of jurisdiction by the County Court. There is a line of case law wherein it has been held that if a party does not object to jurisdiction at the earliest stage and sits on the fence and takes his chance which way the Tribunal will decide, it is not open to him then to come to the Court and challenge the jurisdiction by asking for a writ under Article 226 because he lost before that Tribunal. But as the said judgments point out, those would be cases wh....
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.... distinction between the case of a patent and latent want of jurisdiction and the distinction according to this learned Lord Justice is : "......but the distinction does not, I think, depend on the existence of a formal record, butt is one of substance, whether the defect is apparent or depends on evidence." And a little lower down on the same page he observes : "In the present case the limits of the jurisdiction appeared, I repeat, on the face of the statute, and the fact of the excess appeared on the face of the amended award which the Court was asked to enforce."" 55 The Queen's Bench Division reported in - 'R. v. Comptroller- General of Patents', (1953) 1 All ER 832 (I), and the observations of the learned Chief Justice at page 365 are very pertinent: "Objection to jurisdiction can always be taken by plea, and, if an appeal lies from the Court of tribunal in which such a plea is raised, the appellate Court could, no doubt, decide the question of jurisdiction, but it by no means follows that, because there Is an appeal, the power of this Court to issue a prohibition is taken away. There is no technical obstacle to the co-existence of a right to appeal and to....
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.... Court has always the power and discretion to grant or refuse to grant this writ which though It is primarily intended for enforcement of fundamental rights must also issue where necessity demands immediate and decisive interposition. (ii) The considerations that arise when this writ is asked for on the ground that any inferior Court or person or body of persons having legal authority is committing or has committed an error of law apparent on the face of its proceedings and those that arise in a case of excess or usurpation of jurisdiction by any such Court or authority must necessarily be differentiated for in the former case there is an erroneous exercise of jurisdiction which exists while in the latter case there is no jurisdiction at all. (iii) Absence of jurisdiction may be patent, that is, apparent on the face of the proceedings, or latent in the sense that is not so apparent. Where the defect is not apparent, the Court in its discretion may refuse the writ if the facts or circumstances attending the case show under delay, insufficient materials, misconduct, leaches or acquiescence on the part of the party applying for it or are such as would render it unjust on the par....
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....n our opinion, the net result of the authorities discussed above is as follows: (a) The writs of mandamus, certiorari and' prohibition, and for the matter of that, all high prerogative writs, are ordinarily not issued where there exists an alternative remedy equally efficient and adequate. (b) But there is no inflexible rule that such writs cannot be issued where the Court thinks it just and convenient to do so. The fact that it ordinarily does not do so is a question not of want of jurisdiction but of expediency. (c) Whether the alternative remedy is equally efficacious or adequate is a question of fact to be decided in each case. (d) Where a complaint is made against any act done or purported to be done under any statutory provision, the fact that there exists in the Statute itself a possible remedy, is an important fact, to be taken into consideration. Where such provisions exist the Court will be extremely reluctant to interfere by way of high prerogative writs and especially so if the applicant has actually taken recourse to his remedy under the Statute. (e) But the fact that there exists a remedy under the Statute does not take away the jurisdiction of the C....
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....er the decision in the case of Tapan Kumar Mukhoty v. Bank of Madura Limited, 2001 D.R.T.C. 91 at page 99 (Cal.) 62 It is to be made mention of Section 17 of the RDDBFI Act, 1993 that a Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to them. Section 18 of the Act creates a bar that no Court or other authority can thereafter exercise any jurisdiction, powers or authority (except the Supreme Court, and the High Court exercising jurisdiction under Article 226 and 227 of the Constitution) in relation to the matters specified in Sections 17 as per decision of the Supreme Court in the State Bank of Bikaner and Jaipur v. Ballabh Dass and Company, 2001 D.R.T.C. 22. 63 It is to be pointed out that the provisions of the RDDBFI Act, 1993 confer exclusive jurisdiction on the "Tribunal" and the "Recovery Officer" in respect of the Debts Due to the Banks and Financial Institutions Act, 1993. To put it precisely, as on date, when the RDDBFI Act, 1993 came into force on 24th June 1993, the Tribunal (which was established on 30th November, 1994)....
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....the principal debtor." Illustrations: (a) A gives a guarantee to C for goods to be supplied by C to B. C supplies goods to B, and afterwards B becomes embarrassed and contracts with his creditors (including C) to assign to them his property in consideration of their releasing him from their demands. Here B is released from his debt by the contract with C, and A is discharged from his suretyship. (a) A gives a guarantee to C for goods to be supplied by C to B. C supplies goods to B, and afterwards B becomes embarrassed and contracts with his creditors (including C) to assign to them his property in consideration of their releasing him from their demands. Here B is released from his debt by the contract with C, and A is discharged from his suretyship." (b) A contracts with B to grow a crop of indigo on A's land and to deliver it to B at a fixed rate, and C guarantees A's performance of this contract. B diverts a stream of water which is necessary for irrigation of A's land, and thereby prevents him from raising the indigo. C is no longer liable on his guarantee. (b) A contracts with B to grow a crop of indigo on A's land and to deliver it to B at a fixed rate, and C guarante....
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....for Personal Guarantors to Corporate Debtors) Rules, 2019 issued on 15th November 2019. The validity of regulations challenged by the Insolvency and Bankruptcy Board of India were also the subject matter of challenge. 69 The petitioner before the Supreme Court had furnished personal guarantees to the banks and financial institutions which led to release of advances to various companies with which they were associated as Directors, Promoters or in some instances, as Chairman or Managing Directors. In many cases, the personal guarantees furnished by the writ petitioners were invoked, and proceedings were pending against the companies with which they were associated with, and advances for which they had furnished the bank guarantees. In several cases, recovery proceedings and later insolvency proceedings were initiated. 70 All the writ petitioners challenged the impugned Notification as having been issued in excess of the authority conferred upon the Union of India (through the Ministry of Corporate Affairs). It was contended on behalf of the writ petitioners that the power conferred upon the Union under Section 1(3) of the Code, 2016 could not have been resorted to in the manner as....
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....ase of State Bank of India vs. V. Ramakrishnan [(2018) 17 SCC 394]. 76 The Supreme Court, while upholding all the submissions canvassed on behalf of the Union, ultimately, held as under: "125. The other question which parties had urged before this court was that the impugned notification, by applying the Code to personal guarantors only, takes away the protection afforded by law; reference was made to Sections 128, 133 and 140 of the Contract Act; the petitioners submitted that once a resolution plan is accepted, the corporate debtor is discharged of liability. As a consequence, the guarantor whose liability is co-extensive with the principal debtor, i.e. the corporate debtor, too is discharged of all liabilities. It was urged therefore, that the impugned notification which has the effect of allowing proceedings before the NCLT by applying provisions of Part III of the Code, deprives the guarantors of their valuable substantive rights. 126. Section 31 of the Code, inter alia, provides that: "31. (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as refe....
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.... classes of claimants, including financial and operational creditors, those entitled to statutory dues, workers, etc., who participate in the resolution process, are heard and those in relation to whom the CoC accepts or rejects pleas, are entitled to vent their grievances before the NCLT. After considering their submissions and objections, the resolution plan is accepted and approved. This results in finality as to the claims of creditors, and others, from the company (i.e. the company which undergoes the insolvency process). The question which the petitioners urge is that in view of this finality, their liabilities would be extinguished; they rely on Sections 128, 133 and 140 of the Contract Act to urge that creditors cannot therefore, proceed against them separately. 129. In Vijay Kumar Jain v. Standard Chartered Bank [2019 SCC Online SC 103] , this court, while dealing with the right of erstwhile directors participating in meetings of Committee of Creditors observed that: "we find that Section 31(1) of the Code would make it clear that such members of the erstwhile Board of Directors, who are often guarantors, are vitally interested in a resolution plan as such resolution....
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.... interfere with proceedings initiated to enforce personal guarantees by financial creditors; it was observed as follows: "106. Following this judgment in V. Ramakrishnan case [SBI v. V. Ramakrishnan, (2018) 17 SCC 394], it is difficult to accept Shri Rohatgi's argument that that part of the resolution plan which states that the claims of the guarantor on account of subrogation shall be extinguished, cannot be applied to the guarantees furnished by the erstwhile Directors of the corporate debtor. So far as the present case is concerned, we hasten to add that we are saying nothing which may affect the pending litigation on account of invocation of these guarantees. However, N CLAT judgment being contrary to Section 31(1) of the Code and this Court's judgment in V. Ramakrishnan case [SBI v. V. Ramakrishnan, (2018) 17 SCC 394], is set aside." 133. It is therefore, clear that the sanction of a resolution plan and finality imparted to it by Section 31 does not per se operate as a discharge of the guarantor's liability. As to the nature and extent of the liability, much would depend on the terms of the guarantee itself. However, this court has indicated, time and again, that....
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.... India Ltd. v. Cannanore Spg. & Wvg. Mills Ltd. [(2002) 5 SCC 54] An earlier decision of three judges, Punjab National Bank v. State of U.P. [(2002) 5 SCC 80] pertains to the issues regarding a guarantor and the principal debtor. The court observed as follows: "The appellant had, after Respondent 4's management was taken over by U.P. State Textile Corporation Ltd. (Respondent 3) under the Industries (Development and Regulation) Act, advanced some money to the said Respondent 4. In respect of the advance so made, Respondents 1, 2 and 3 executed deeds of guarantee undertaking to pay the amount due to the bank as guarantors in the event of the principal borrower being unable to pay the same. Subsequently, Respondent 3 which had taken over the management of Respondent 4 became sick and proceedings were initiated under the Sick Textile Undertakings (Nationalisation) Act, 1974 (for short 'the Act'). The appellant filed suit for recovery against the guarantors and the principal debtor of the amount claimed by it. The following preliminary issue was, on the pleadings of the parties, framed: 'Whether the claim of the plaintiff is not maintainable in view of the provisions of Ac....
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....s call "double dip"). The rule prevents a double proof of what is in substance the same debt being made against the same estate, leading to the payment of a double dividend out of one estate. It is for that reason sometimes called the rule against double dividend. In the simplest case of suretyship (where the surety has neither given nor been provided with security, and has an unlimited liability) there is a triangle of rights and liabilities between the principal debtor (PD), the surety (S) and the creditor (C). PD has the primary obligation to C and a secondary obligation to indemnify S if and so far as S discharges PD's liability, but if PD is insolvent S may not enforce that right in competition with C. S has an obligation to C to answer for PD's liability, and the secondary right of obtaining an indemnity from PD. C can (after due notice) proceed against either or both of PD and S. If both PD and S are in insolvent liquidation, C can prove against each for 100p in the pound but may not recover more than 100p in the pound in all." 136. In view of the above discussion, it is held that approval of a resolution plan does not ipso facto discharge a personal guarantor (of....
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....btor commits default, a financial creditor, an operational creditor or the corporate debtor itself can initiate Corporate Insolvency Resolution process. Therefore, three persons can apply for initiation of Corporate Insolvency Resolution process in respect of a corporate debtor, they being the financial creditor, the operation creditor of the corporate debtor and the corporate debtor itself. In the present case, the first respondent as the secured financial creditor initiated the Corporate Insolvency Resolution process in respect of the company before the National Company Law Tribunal, Kolkata. The prerequisite to make an application under section 7 of the Code of 2016 is the existence of a default by the corporate debtor. The Code of 2016 defines default in Section 3 (12) to mean non-payment of debt when whole or any part or instalment of amount of debt has become due and payable and is not paid by the debtor or the corporate debtor as the case may be. The Code of 2016 defines debt in Section 3 (11) to mean a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt. When the Adjudicating Authority under the provi....
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....ial creditors in full and final settlement. Such Resolution Plan may be approved by the financial creditor in the meeting of the committee of creditors. Would such an approval mean that, the financial creditor entered into a composition with the corporate debtor, thereby impairing the right of the financial creditor to recover the balance amount from the guarantor of the corporate debtor ? In my view, the answer is in the negative. 27. An application under Section 7 of the Code of 2016 once admitted under Section 7(5) thereof has two terminal points for the corporate debtor. The Code of 2016 does not contemplate withdrawal of an application under Section 7 once it is admitted under Section 7(5). The terminal points are, firstly, the approval of a Resolution Plan and secondly, the initiation of liquidation proceeding on a Resolution Plan not being approved. When a financial creditor applies under Section 7 of the Code of 2016 it is exercising a statutory right. The exercise of such statutory right does not depend upon the contractual obligations of the parties bound by the respective contracts between the creditor, principal debtor and the surety. Such contracts cannot be said to....
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....tituted by the appellant against the principaldebtor, the defendant No. 1 and the other defendants who were the guarantors or the sureties. It is not in dispute that the defendant No. 1 during the pendency of the suit was dissolved. According to the appellant, in view of dissolution of the defendant No. 1 the principal debtor, the appellant chose to proceed against the other guarantors. As stated earlier the learned trial Judge held that as the appellant did not choose to proceed against the principal debtor or had released the principal-debtor, the guarantors were also thereby released. It is settled law that the discharge of the principal-debtor by operation of law does not operate as the discharge of the sureties. It is also held by the Supreme Court in the case of Maharashtra State Electricity Board v. Official Liquidator, reported in AIR 1982 SC 1497 that dissolution of the principaldebtor would not release or discharge the sureties. Further, we are of the view that in the instant case there has not been any act or omission on the part of the appellant in not proceeding against the defendant No. 1 or releasing the defendant No. 1. In the present case the principal debtor, the ....
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.... required to take place for the guarantor to stand discharged in terms of section 141 of the Act of 1872. It has held that, the liability of the guarantor cannot but be stated to be a strict liability and even if the principal debtor is discharged from his liability unless such discharge is through the act of the creditor without consent of the surety/guarantor, the creditor's right of action against the surety is preserved. 31. Commercial Bank of Tasmania (supra) has considered a fact situation where, the original debtor was substituted by another debtor. It is after such substitution that, the creditor sought to proceed against the surety of the original debtor. In such factual scenario, the Court has held that, the action by the creditor against the surety is not maintainable since, the novation of debts operates as a complete release of the original debtor and secondly of the surety. The factual scenario in the present case is different. 32. Webb (supra) has recognised that, when, a creditor releases the debtor, he cannot reserve any right against the surety because the debt is gone at law. In an insolvency proceedings initiated by a financial creditor under Section 7....
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....ty, by virtue of a bankruptcy or insolvency proceeding or otherwise, will not require the creditor to refund the amount recovered from the surety on account of the debtor to the surety. Pre bankruptcy and insolvency, the creditor has the right to recover the entire claim against the debtor from the surety. Post the bankruptcy and insolvency proceeding of the debtor, the pre bankruptcy and insolvency right of the creditor does not undergo any metamorphosis on the principle that, such proceedings emanate out of a statutory right and are involuntary in nature. 35. In a proceeding under Section 7 of the Code of 2016, the consent of the surety is immaterial when, the creditor is dealing with the principal debtor in terms of the Code of 2016. Therefore, when, the Adjudicating Authority sanctions a Resolution Plan in respect of the corporate debtor in an application under Section 7 of the Code of 2016, then, the action taken by the creditor in a proceeding under Section 7 of the Code of 2016 is involuntary. The Corporate Debtor in a proceeding under Section 7 of the Code of 2016 may stand discharged of its liability to its creditors. Such discharge being had in a proceeding for bankrup....
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.... and states that any such bankruptcy proceedings shall be filed only before the National Company Law Tribunal. The argument of the learned counsel on behalf of the Respondents that "bankruptcy" would include SARFAESI proceedings must be turned down as "bankruptcy" has reference only to the two Insolvency Acts referred to above. Thus, SARFAESI proceedings against the guarantor can continue under the SARFAESI Act. Similarly, sub-section (3) speaks of a bankruptcy proceeding of a personal guarantor of the corporate debtor pending in any Court or Tribunal, which shall stand transferred to the Adjudicating Authority dealing with the insolvency resolution process or liquidation proceedings of such corporate debtor. An "Adjudicating 21 Authority", defined under Section 5(1) of the Code, means the National Company Law Tribunal constituted under the Companies Act, 2013. 21. The scheme of Section 60(2) and (3) is thus clear - the moment there is a proceeding against the corporate debtor pending under the 2016 Code, any bankruptcy proceeding against the individual personal guarantor will, if already initiated before the proceeding against the corporate debtor, be transferred to the Nationa....
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....f fact, Section 31 is one more factor in favour of a personal guarantor having to pay for debts due without any moratorium applying to save him. 23. We are also of the opinion that Sections 96 and 101, when contrasted with Section 14, would show that Section 14 cannot possibly apply to a personal guarantor. When an application is filed under Part III, an interim-moratorium or a moratorium is applicable in respect of any debt due. First and foremost, this is a separate moratorium, applicable separately in the case of personal guarantors against whom insolvency resolution processes may be initiated under Part III. Secondly, the protection of the moratorium under these Sections is far greater than that of Section 14 in that pending legal proceedings in respect of the debt and not the debtor are stayed. The difference in language between Sections 14 and 101 is for a reason. 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....
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....t repealed, notwithstanding that any such law may not be in operation at all. Thus, the definition of the expression "laws in force" in Article 13(3)(b) and Article 372(3) Explanation I and the definition of the expression "existing law" in Article 366(10) demolish the argument of the State of Kerala that a law has not been made for the purposes of Article 254, unless it is enforced. The expression "existing law" finds place in Article 254. In Edward Mills Co. Ltd. v. State of Ajmer [AIR 1955 SC 25], this Court has held that there is no difference between an "existing law" and a "law in force". 81. Applying the tests enumerated hereinabove, we hold that the Kerala Chitties Act, 1975 became void on the making of the Chit Funds Act, 1982 on 19-8- 1982, [when it received the assent of the President and got published in the Official Gazette] as the Central 1982 Act intended to cover the entire field with regard to the conduct of the chits and further that the State Finance Act 7 of 2002, introducing Section 4(1)(a) into the State 1975 Act, was void as the State Legislature was denuded of its authority to enact the said Finance Act 7 of 2002, except under Article 254(2), after the 26....
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....hatever. Some twelve months later, General Credits advanced further moneys to Kenbrite and, by way of further security, Hutchens executed the mortgage ("the real property mortgage") which lies at the heart of the present case. That mortgage was in favour of General Credits. It mortgaged the subject land to secure the payment to General Credits of "each and all sums of money in which (Hutchens) may now or hereafter be indebted or liable or contingently indebted or liable to the Mortgagee on any account whatever ... including ... any moneys owing under pursuant to or in connexion with" the guarantee and indemnity executed by Hutchens in July 1977. In October 1979, Kenbrite executed in favour of Helvetic Investment Corporation Pty. Ltd. ("Helvetic") a second-ranking mortgage debenture deed ("the second mortgage debenture") containing a floating charge over its assets to secure its indebtedness in respect of past and future borrowings from Helvetic. By February 1982, Kenbrite was insolvent. On 5 March 1982, General Credits appointed Messrs. Hodgson and Judson as receivers and managers of the assets and business of Kenbrite under the first mortgage debenture. As at that date, accordi....
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....egistered proprietor of the real property mortgage given to it by Hutchens as security for his liability as guarantor. On the same day, the receivers and managers appointed by General Credits retired and Mr. Dulhunty was appointed as receiver and manager under the first as well as the second mortgage debenture." 80 The findings recorded by the High Court of Australia are as under: "The overall transaction involving the assignment of the principal debt and the securities, including Hutchens' guarantee and supporting mortgage, by General Credits to Helvetic raises no difficulty as a matter of general principle. The effect of it was that Helvetic was substituted for General Credits as creditor. Kenbrite remained liable as principal debtor; Hutchens remained liable as a guarantor upon whom a demand for payment had been made after default by the principal debtor (cf. Wheatley v. Bastow, at p 279 (p.109 of ER)). Where the difficulty in general principle arises is in the suggestion that the benefit of Hutchens' liability as guarantor and the real property mortgage to secure it were alone transferred to Deauville with the result that Kenbrite remained liable as principal debtor....
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....nces of estoppel in the particular case, a factor which I place to one side. The assignee under an absolute assignment could not be deprived of his right to recover from the debtor because the assignor had recovered from the surety." The qualification is that the analogy (and the legal consequences) would be less clear if, in the case of assignment of the debt but purported retention of the benefit of the guarantee (to which Jacobs J.A. referred), the assignee of the debt had rights of recourse against the original creditor in the event of default by the principal debtor. It has not been argued, on behalf of Deauville, that the conceptual difficulties involved in the suggestion that the benefit of the real property mortgage and of Hutchens' indebtedness under it could be assigned independently of Kenbrite's liability as principal debtor were purely theoretical for the reason that the consideration paid by Deauville for the transfer of the mortgage should be treated as having been applied to discharge the principal debt originally owed by Kenbrite to General Credits. Nor is the factual basis for such an argument to be found in the evidence. Moreover, such an argument w....
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....fferent creditor from the creditor to whom the guaranteed debt remained owing. In other words, the banks have no due recoverable from ESIL, not on account of any compromise arrived at, but on account of the loan asset being transferred to AMIL. When the loan asset does not exist in the books of the bank at all, no portion of the loan asset can be recovered by the banks from any one i.e. ESIL or its guarantees. The dictum as laid in Hutchens (supra) shall be looked into closely by the Tribunal. * TERMS OF THE RESOLUTION PLAN: 82 We, now, undertake the last part of our exercise by looking into the few relevant clauses of the Resolution Plan which came to be approved: "I. Upfront Cash Recovery 1. Secured Financial Creditors Payment of INR 42,000 crores to be paid on the effective date as an upfront amount which comprises the following: * INR 39,500 crores; and * INR 2,500 crores being the 'Guaranteed Working Capital Adjustment' in accordance with the Revised RFP. The cost of the committee of creditors amounting to INR 20 crores out of the Upfront Cash Recovery shall be paid to State Bank of India for the payment towards the legal cost and any process advisory costs....
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....esolution Applicant. The external commercial borrowings of the Corporate Debtor shall be acquired, along with the underlying securities, by an offshore entity nominated in this regard by the Resolution Applicant. The Resolution Applicant shall acquire the entire debt, along with all the underlying securities, upon the payment of INR 42,000 crores on the Effective Date as an upfront amount." "XII. Terms of Settlement General Notwithstanding anything stated herein, the total liability of the Resolution Applicant or the Corporate Debtor in relation to the Claims, liabilities and obligations of the Corporate Debtor prior to the Plan Approval Date shall not exceed the payments to be made to the Financial Creditors, and Operational Creditors as specified in Section V above. All claims that may arise post the Plan Approval Date including claims under applicable Law, contract judicial / quasi-judicial proceedings, disputed or undisputed, crystallized or otherwise which relate to the period prior to the Plan Approval Date shall be subject to the limit on liability stated under this Section. Financial Creditors: Pursuant to the approval of this Resolution Plan by the Adj....
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....ined in this Resolution Plan, the relevant Financial Creditors and the Resolution Applicant may mutually discuss at a later date, the assignment by the relevant Financial Creditors of such corporate and personal guarantees provided for and on behalf of the Corporate Debtor. * * * Any Claims made under any guarantees issued by the Corporate Debtor on behalf of its subsidiaries and third parties excluding the guarantees dealt with above (i.e. as issued in favour of Financial Creditors of the Corporate Debtor), shall not constitute financial debt and all such guarantees shall also stand extinguished as a part of the Resolution Plan and the beneficiaries of such guarantees shall be expected to recover the monies with respect to uninvoked guarantees from the principal borrower and for any shortfall, they shall not have any recourse against the Corporate Debtor and/or the Resolution Applicant. For the sake of brevity. the underlying loans to such principal borrower shall continue with right to full recovery * In the event that the Corporate Debtor is required to pay any amounts pursuant to the invocation of guarantees given on behalf of the Corporate Debtor or payments made t....
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....proval Date, all Encumbrances created or suffered to exist over the assets of the Corporate Debtor or over the Securities of the Corporate Debtor, whether by contract or by Applicable Law. whether created for the benefit of the Corporate Debtor or any Third Party (except the Security Interest that is created or purported to be created for the benefit of the Resolution Applicant and/ or its Connected Persons, and/or banks or financial institutions designated by the Resolution Applicant), shall stand unconditionally and irrevocably assigned or novated in favour of the Resolution Applicant or released (if required by the Resolution Applicant) upon making the relevant payments under the Resolution Plan on the Effective Date and all enforcement of security by any Persons commenced over any of the assets of the Corporate Debtor or over any Securities of the Corporate Debtor shall stand released and reversed, without the requirement of any further deed or action on the part of the Resolution Applicant or the Corporate Debtor including any priority of claims that could have otherwise been claimed by the Tax Authorities under Section 281 of the Income Tax Act, 1961. The Resolution Applicant....
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....n Approval Date, other than as contemplated under Section X, the rights of any Person (whether exercisable now or in the future and whether contingent or not) to call for the allotment, issuance, sale or transfer of shares or Securities or loan capital of the Corporate Debtor, whether On a change of control, or otherwise, shall stand unconditionally and irrevocably extinguished. In addition to the foregoing. on the Plan Approval Date, the right to receive distribution of any shareholder (by way of dividend, coupons etc.) that has accrued or relates to the period prior to the Plan Approval Date. shall stand unconditionally and irrevocably extinguished. All rights of any shareholder of the Corporate (not being the Resolution Applicant or its affiliates), whether arising under law or contract shall stand abated, suspended during the period between the Plan Approval Date and the Effective Date and the shareholder shall not have any rights to cause the Corporate Debtor to take any actions or restrain the Corporate Debtor from carrying on its activities. j. All Claims (whether contingent or crystallized, known or unknown, filed or not filed) of Government Authorities in relation to al....
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....any of them the Guarantor shall on demand pay to the Bank the whole of such guaranteed together with interest, costs, charges, expenses and/or any other monies as may be then due to the Bank in respect of the aforesaid credit facilities and shall indemnify and keep indemnified the Bank against all losses of the said principal sum, interest or other monies due and all costs charges and expenses whatsoever which the Bank may incur by reason of any default on the part of the Borrower. 17. The Guarantor agrees that if the Borrower enters into liquidation or winding up (whether compulsory or voluntary) or if the management of the undertaking of the Borrower is taken over under any law or if the Borrower is nationalised under any law or make any composition or arrangement with creditors the Banks (notwithstanding payment to the Bank by the guarantor or any other person of the whole or any part of the amount hereby secured) rank as creditor and prove against the estate of the Borrower for the full amount of all the Bank's claims against the Borrower or agree to and accept any composition in respect thereof and the Bank may receive and retain the whole of the dividends, composition or o....
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....he 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 the loan agreements and security agreements other than the corporate or personal guarantees provided in relation to the corporate debtor was deemed to have been assigned / novated to the Resolution Applicant. 86 The Resolution Plan also provides with a non-obstante clause stating that notwithstanding anything contained in the Resolution Plan, the relevant financial creditors and the Resolution Applicant may mutually discuss at a future date as regards the assignment by the relevant financial creditors of such corporate and personal guarantees provided for and on behalf of the corporate debtor. 87 The aforesaid will have to be closely looked into by the Tribunal and the Tribunal will have to give a meaningful interpretation to such understanding and agreement between the parties so as to appreciate the arguments canvassed on behalf of the writ applicants that with the assignment of debt by the State Bank to the ArcelorMittal, they in their capacity as the personal guarantors....
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....Debtor. Is there any specific bar under the IBC that a creditor cannot claim its remaining debt due from the guarantor (which has not been recovered from the Corporate Debtor through CIRP)? It is a settled position of law that the liabilities of guarantors are co-extensive with the borrower. Therefore, if the borrower is unable to clear the debt, then the right is accrued in favour of the creditor to proceed against the guarantor. This liability is independent in itself as the contract of guarantee is an independent contract. The guarantors, on the other hand, may take defence of Sections 133, 134 and 140 of the Indian Contract Act. As per Section 134, a guarantor is discharged of its liability towards the creditor if the creditor on its own instance discharges the Principal Debtor. The main ingredient of this section is discharge of the debtor through voluntary act of the creditor and not due to operation of law. Any scheme or plan that is approved by a court or Tribunal becomes a statutory scheme and is, therefore, an act of operation of law. Under the IBC, the position is somewhat different. The Corporate Debtor under the IBC is discharged on the approval and implementation of t....
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....its in English law." 91 The aforesaid observations were taken note of by the Supreme Court in the case of Union of India (UOI) and others vs. Upendra Singh reported in (1994) 3 SCC 357 and having regard to the same, the Supreme Court observed in para 5 as under: "The said statement of law was expressly affirmed by a seven-Judge Bench in Ujjam Bai v. State of UP [AIR 1962 SC 1621]. The reason for this dictum is selfevident. If we do not keep to the broad and fundamental principles that regulate the exercise of jurisdiction in the matter of granting such writs in 3 (1955) 1 SCR 250: AIR 1954 SC 440 4 AIR 1962 SC 1621, 1625 English law, the exercise of jurisdiction becomes rudderless and unguided,it tends to become arbitrary and capricious. There will be no uniformity of approach and there will be the danger of the jurisdiction becoming personalized. The parameters of jurisdiction would vary from Judge to Judge and from Court to Court. (Some say, this has already happened.) Law does advance. Jurisprudence does undoubtedly develop with the passage of time, but not by forgetting the fundamentals. You have to build upon the existing foundations and not by abandoning them. It leads to....
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....dinarily does not do so is a question not of want of jurisdiction but of expediency. [c] Whether the alternative remedy is equally efficacious or adequate is a question of fact to be decided in each case. [d] Where a complaint is made against any act done or purported to be done under any statutory provision, the fact that there exists in the Statute itself a possible remedy, is an important fact, to be taken into consideration. Where such provisions exist the Court will be extremely reluctant to interfere by way of high prerogative writs and especially so if the applicant has actually taken recourse to his remedy under the Statute. [e] But the fact that there exists a remedy under the Statute does not take away the jurisdiction of the Courts to issue the writs in appropriate cases. [f] In the following cases it has been held that a writ of prohibition will be issued notwithstanding an alternative remedy, whether under a statutory provision or otherwise: - [g] Where an inferior tribunal assumes jurisdiction and the want of jurisdiction is patent on the face of it; (ii) where the proceedings complained of are against the principles of natural justice; and (iii) where ....