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M/s. Embassy Property Developments Pvt. Ltd. Vs. State of Karnataka [03/12/19]

Section

M/s. Embassy Property Developments Pvt. Ltd. Vs. State of Karnataka Ors.

[Civil Appeal No. 9170 of 2019 @ Special Leave Petition (C) No. 22596 of 2019]

[Civil Appeal No. 9171 of 2019 @ Special Leave Petition (C) No. 22684 of 2019]

[Civil Appeal No. 9172 of 2019 @ Special Leave Petition (C) No. 22724 of 2019]

V. Ramasubramanian, J.

1. Leave
Granted.

2. Two seminal
questions of importance namely:i) Whether the High Court ought to interfere,
under Article 226/227 of the Constitution, with an Order passed by the National
Company Law Tribunal in a proceeding under the Insolvency and Bankruptcy Code, 2016,
ignoring the availability of a statutory remedy of appeal to the National
Company Law Appellate Tribunal and if so, under what circumstances; and (ii) Whether
questions of fraud can be inquired into by the NCLT/NCLAT in the proceedings
initiated under the Insolvency and Bankruptcy Code, 2016, arise for our consideration in these appeals.Brief
background facts

3. There are
three appeals on hand, one filed by the Resolution Applicant, the second filed
by the Corporate Debtor through the
Resolution Professional and the third filed by the Committee of Creditors, all
of which challenge an Interim Order passed by the Division Bench of High Court
of Karnataka in a writ petition, staying the operation of a direction
contained in the order of the NCLT, on a Miscellaneous Application filed by the
Resolution Professional.

4. The
background facts leading to the filing of the above appeals, in brief, are as
follows: (i) A company by name M/s. Udhyaman Investments Pvt. Ltd. which is the
twelfth Respondent in the first of these three appeals, claiming to be a
Financial Creditor, moved an application before the NCLT Chennai, under Section
7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the IBC,
2016), against M/s. Tiffins Barytes Asbestos Paints Ltd., the
Corporate Debtor (which is the fourth Respondent in the first of these three
appeals and which is also the appellant in the next appeal).

(ii) By an
Order dated 12.03.2018, NCLT Chennai admitted the application, ordered the
commencement of the Corporate Insolvency Resolution Process and appointed an
Interim Resolution Professional. Consequently, a Moratorium was also declared
in terms of Section 14 of the IBC, 2016.

(iii) At
that time, the Corporate Debtor held a mining lease granted by the Government
of Karnataka, which was to expire by 25.05.2018. Though a notice for premature
termination of the lease had already been issued on 09.08.2017, on the allegation
of violation of statutory rules and the terms and conditions of the lease deed,
no order of termination had been passed till the date of initiation of the
Corporate Insolvency Resolution Process (hereinafter referred to as CIRP).

(iv) Therefore,
the Interim Resolution Professional appointed by NCLT addressed a letter dated
14.03.2018 to the Chairman of the Monitoring Committee as well as the Director
of Mines Geology informing them of the commencement of CIRP. He also
wrote a letter dated 21.04.2018 to the Director of Mines Geology, seeking
the benefit of deemed extension of the lease beyond 25.05.2018 upto 31.3.2020
in terms of Section 8A (6) of the
Mines Minerals (Development and Regulation) Act, 1957 (hereinafter
referred to as MMDR Act, 1957).

(v) Finding
that there was no response, the Interim Resolution Professional filed a writ
petition in WP No. 23075 of 2018 on the
file of the High Court of Karnataka, seeking a declaration that the mining
lease should be deemed to be valid upto 31.03.2020 in terms of Section 8A(6) of
the MMDR Act, 1957.

(vi) During
the pendency of the writ petition, the Government of Karnataka passed an Order
dated 26.09.2018, rejecting the proposal for deemed extension, on the ground
that the Corporate Debtor had contravened not only the terms and conditions of
the Lease Deed but also the provisions of Rule 37 of the Mineral Concession
Rules, 1960 and Rule 24 of the Minerals (Other than Atomic and Hydro Carbons
Energy Minerals) Rules, 2016.

(vii) In
view of the Order of rejection passed by the Government of Karnataka, the
Corporate Debtor, represented by the
Interim Resolution Professional, withdrew the Writ Petition No.23075 of 2018,
on 28.09.2018, with liberty to file a fresh writ petition.

(viii)
However, instead of filing a fresh writ petition (in accordance with the
liberty sought), the Resolution Professional moved a Miscellaneous Application
No.632 of 2018, before the NCLT, Chennai praying for setting aside the Order of
the Government of Karnataka, and seeking a declaration that the lease should be
deemed to be valid upto 31.03.2020 and also a consequential direction to the Government
of Karnataka to execute Supplement Lease Deeds for the period upto 31.03.2020.

(ix) By an
Order dated 11.12.2018, NCLT, Chennai allowed the Miscellaneous Application
setting aside the Order of the Government of Karnataka on the ground that the
same was in violation of the moratorium declared on 12.03.2018 in terms of
Section 14(1) of IBC, 2016. Consequently the Tribunal directed the Government
of Karnataka to execute Supplement Lease Deeds in favour of the Corporate
Debtor for the period upto 31.03.2020.

(x)
Aggrieved by the order of the NCLT, Chennai, the Government of Karnataka moved
a writ petition in WP No.5002 of 2019, before the High Court of Karnataka. When the writ petition came up for
hearing, it was conceded by the Resolution Professional before the High Court
of Karnataka that the order of the NCLT could be set aside and the matter relegated
to the Tribunal, for a decision on merits, after giving an opportunity to the
State to respond to the reliefs sought in the Miscellaneous Application. It is
relevant to note here that the Order of the NCLT dated 11.12.2018, was passed
exparte, on the ground that the State did not choose to appear despite service
of notice.

(xi)
Therefore, by an Order dated 22.03.2019, the High Court of Karnataka set aside
the Order of the NCLT and remanded the matter back to NCLT for a fresh
consideration of the Miscellaneous Application No.632 of 2018.

(xii)
Thereafter, the State of Karnataka filed a Statement of Objections before the
NCLT, primarily raising two objections, one relating to the jurisdiction of the
NCLT to adjudicate upon disputes arising out of the grant of mining leases
under the MMDR Act, 1957, between the StateLessor and the Lessee and another
relating to the fraudulent and collusive manner in which the entire resolution
process was initiated by the related parties of the Corporate Debtor
themselves, solely with a view to corner the benefits of the mining lease.

(xiii)
Overruling the objections of the State, the NCLT Chennai passed an Order dated
03.05.2019 allowing the Miscellaneous Application, setting aside the order of
rejection and directing the Government of Karnataka to execute Supplemental
Lease Deeds.

(xiv)
Challenging the Order of the NCLT, Chennai, the Government of Karnataka moved a
writ petition in WP No.41029 of
2019 before the High Court of Karnataka. When the writ petition came up for
orders as to admission, the Corporate Debtor represented by the Resolution
Professional appeared through counsel and took notice and sought time to get
instructions. Therefore, the High Court, by an Order dated 12.09.2019 adjourned
the matter to 23.09.2019 and granted a stay of operation of the direction
contained in the impugned Order of the Tribunal. Interim Stay was necessitated
in view of a Contempt Application moved by the Resolution Professional before
the NCLT against the Government of Karnataka for their failure to execute Supplement
Lease deeds.

(xv) It is
against the said ad Interim Order granted by the High Court that the Resolution
Applicant, the Resolution Professional
and the Committee of Creditors have come up with the present appeals.

Rival
Contentions.

5. Sh. K. V.
Viswanathan, learned Senior Counsel appearing on behalf of the Resolution
Applicant assailed the impugned Order on the ground that when an efficacious
alternative remedy is available under Section 61 of IBC, 2016, the High Court
of Karnataka ought not to have entertained a writ petition and that too against
an Order passed by the Chennai Bench of NCLT. He drew our attention to a series
of judgments, wherein it was held that when a statutory forum is created for
the redressal of grievances, a writ petition should not be entertained. Since
the essence of IBC, 2016 is the revival of a Corporate Debtor and the
resolution of its problems to enable it to survive as a going concern, through the
maximization of the value of its assets, the learned Senior Counsel contended
that the Interim Resolution Professional/Resolution Professional had a right to
move the NCLT for appropriate reliefs for the preservation of the properties of
the Corporate Debtor and therefore the only way the steps taken by the
Resolution Professional could be set at naught, is to take recourse to the
provisions of the IBC alone. Relying upon the observations made by this Court
in a couple of decisions that IBC, 2016 is a unified umbrella of code, the learned
Senior Counsel contended that the remedies provided thereunder are all
pervasive and exclusive.

6. Sh. Mukul
Rohatgi, learned Senior Counsel appearing for the Resolution Applicant
supplemented the aforesaid arguments
and contended that though he would not go to the extent of saying that the jurisdiction
of the High Court stood completely ousted, the High Court was obliged to switch
over to the hands off mode, in matters of this nature. The learned Senior
Counsel also contended that the NCLT has already approved the Resolution Plan,
by an order dated 12.06.2019 and that therefore the High Court cannot do
anything that will tinker with or destroy the very Resolution Plan approved by the
NCLT.

7. Sh. Kapil
Sibal, the learned Senior Counsel appearing for the Resolution Professional
contended that the whole object of IBC, 2016 will get defeated, if the Orders
of NCLT are declared amenable to review by the High Court under Article
226/227. He also contended that the provisions of IBC, 2016 are given overriding
effect under Section 238, over all other statutes. It is his further contention
that after taking a stand in their first writ petition in WP No.5002 of 2019
that the dispute relating to the refusal to grant deemed extension of the
mining lease falls squarely within the jurisdiction of the Mining Tribunal and
after raising a plea that the rejection of the benefit of deemed
extension, ought to have been challenged by way of a revision before the
Central Government under Section 30 of the MMDR Act, 1957 the State of
Karnataka agreed to go back to the NCLT for raising all contentions.

Therefore,
according to the learned counsel, it was not open to the Government to question
the jurisdiction of the NCLT in the next round of litigation. Since the
expression “Property” as defined in Section 3 (27) of IBC, 2016 includes every
description of interest including present or future or vested or contingent interest
arising out of or incidental to property, and also since the right to deemed
extension of lease would come within the purview of
the expression “Property”, it was contended by the learned Senior Counsel that
the Resolution Professional has a duty to preserve the property. The only
ground on which the Government of Karnataka opposed the Miscellaneous Application
of the Resolution Professional, according to the learned Senior Counsel, was
fraud and collusion on the part of the Corporate Debtor and the creditor who
initiated the CIRP.

Therefore, it is contended by him that in view of the sweep
of the jurisdiction conferred upon NCLT under Section 60 (5) (c) of the IBC,
2016, the Tribunal was entitled to investigate even into allegations of fraud.
Once it is conceded that NCLT will have jurisdiction even to enquire into
allegations of fraud, then the question of invoking the jurisdiction of the
High Court under Article 226 as against an order passed by NCLT, according to the learned
counsel, does not arise. Any recognition
by this court, of the jurisdiction of the High Court under Article 226 to
interfere with the Orders of the NCLT under IBC, 2016, according to the learned
Senior Counsel, would completely derail the resolution process which is bound to
happen within a time frame. Therefore, he appealed that the Order of the High
Court should be set aside on the ground of lack of jurisdiction.

8. Sh. Arvind
P. Datar and Sh. E. Om Prakash, learned Senior Counsel appearing for the
Committee of Creditors submitted
that IBC, 2016 being a complete code in itself does not provide any room for
challenging the Orders of NCLT, otherwise than in a manner prescribed by the
code itself. What was sought by the Resolution Professional, according to the learned
Senior Counsel, was a mere recognition of the statutory right of deemed
extension of lease conferred by Section 8A of the MMDR Act, 1957 and that
therefore NCLT cannot be taken to have exercised a jurisdiction not vested in it
in law, so as to enable the High Court to invoke the jurisdiction under Article
226.

9. In
response, Sh. K.K. Venugopal, learned Attorney General submitted that if a case
falls under the category of inherent
lack of jurisdiction on the part of a Tribunal, the exercise of jurisdiction by
the Tribunal would certainly be amenable to
the jurisdiction of the High Court under Article 226. Since the contours of
jurisdiction of NCLT are defined in Clauses (a), (b) and (c) of Subsection (5)
of Section 60 and also since the powers of the NCLT are defined in Subsection (4)
of Section 60, to be akin to those of the Debts Recovery Tribunal under the
Recovery of Debts Due to Banks and Financial Institutions Act of 1993
(hereinafter referred to as DRT Act, 1993), it was
contended by the learned Attorney General that the jurisdiction of the NCLT is
confined only to contractual matters interparties.

An order
passed by a statutory/quasijudicial authority under certain special enactments
such as the MMDR Act, 1957 falls in the realm of public law and hence it was
contended by the learned Attorney General that the NCLT would have no power of
judicial review of such orders. The learned Attorney General also drew our attention
to the minutes of the 10th meeting of the Committee of Creditors held on 27.02.2019, in
which a Company other than the present Resolution Applicant was recorded to
have made a better offer. But the present Resolution Applicant was able to have
his plan approved, despite the offer being lesser, only because they were
willing to take the risk of the mining lease not being renewed.

Therefore,
it was his contention that a person who was willing to take a chance, cannot
now take shelter under the approval of the Resolution Plan. On the contention
that the Government of Karnataka had an efficacious alternative remedy before
the NCLAT, the learned Attorney General submitted, on the basis of the decision
in Barnard and Others vs. National Dock Labour Board and Others 1 that when
an inferior Tribunal passes an Order which is a nullity, the superior Court
need not drive the party to the appellate
forum stipulated by the Act. The learned Attorney General also relied upon the
decision of this Court in The State of Uttar Pradesh
vs. Mohammad Nooh. 2 Question
No. 1

10. In the
backdrop of the facts narrated and in the light of the rival contentions
extracted above, the first question that arises for consideration is as to
whether the High Court ought to interfere, under Article 226/227 of the
Constitution, with an order passed by NCLT in a proceeding under the IBC, 2016,
despite the availability of a statutory alternative remedy of appeal to NCLAT.

11. It is
beyond any pale of doubt that IBC, 2016 is a complete Code in itself. As
observed by this Court in M/sInnoventive
Industries Limited vs. ICICI Bank,3 it is an exhaustive
code on the subject matter of insolvency in relation to corporate entities and
others. It is also true that IBC, 2016 is a single Unified Umbrella Code,
covering the entire gamut of the law relating to insolvency resolution of
corporate persons and others in a time bound manner. The code provides a threetier
mechanism namely (i) the NCLT, which is the Adjudicating Authority (ii) the NCLAT
which is the appellate authority and (iii) this court
as the final authority, for dealing with all issues that may arise in relation
to the reorganization and insolvency resolution of corporate persons. In so far
as insolvency resolution of corporate debtors and personal guarantors are
concerned, any order passed by the NCLT is appealable to NCLAT under Section 61
of the IBC, 2016 and the orders of the NCLAT are amenable to the appellate jurisdiction
of this court under Section 62. It is in this context that the action of the
State of Karnataka in bypassing the remedy of appeal to NCLAT and the act of
the High Court in entertaining the writ petition against the order of the NCLT
are being questioned.

12. For finding
an answer to the question on hand, the scope of the jurisdiction and the nature
of the powers exercised by (i) the High Court under Article 226 of the
Constitution and (ii) the NCLT and NCLAT under the provisions of IBC, 2016 are
to be seen. Jurisdiction
and the powers of the High Court under Article 226

13. What is
recognized by Article 226 (1) is the power of every High Court to issue (i)
directions, (ii) orders or (iii) writs. They can be issued to (i) any person or
(ii) authority including the Government. They may be issued (i) for the
enforcement of any of the rights conferred by Part III and (ii) for any other purpose.
But the exercise of the power recognized by Clause (1) of Article 226, is
restricted by the territorial jurisdiction of the High Court, determined either
by its geographical location or by the place where the cause of action, in
whole or in part, arose. While the nature of the power exercised by the High Court
is delineated in Clause (1) of Article 226, the jurisdiction of the High Court
for the exercise of such power, is spelt out in both Clauses (1) and (2) of
Article 226.

14. Traditionally,
the jurisdiction under Article 226 was considered as limited to ensuring that
the judicial or quasijudicial tribunals or administrative bodies do not
exercise their powers in excess of their statutory limits. But in view of the use
of the expression “any person” in Article 226 (1), courts recognized
that the jurisdiction of the High Court extended even over private individuals,
provided the nature of the duties performed by such private individuals, are
public in nature. Therefore, the remedies provided under Article 226 are public
law remedies, which stand in contrast to the remedies available in private law.
As observed by this Court in Nilabati Behera @ Babita
Behera vs. State of Orissa,4 public law proceedings
serve a different purpose than private law proceedings.

15. One of the
well recognized exceptions to the selfimposed restraint of the High Courts, in
cases where a statutory alternative remedy of appeal is available, is the lack
of jurisdiction on the part of the statutory/quasijudicial authority,
against whose order a judicial review is sought. Traditionally, English courts
maintained a distinction between cases where a statutory/quasijudicial authority
exercised a jurisdiction not vested in it in law and cases where there was a wrongful
exercise of the available jurisdiction. An “error of jurisdiction” was always
distinguished from “in excess of jurisdiction”, until the advent of the
decision rendered by the House of Lords, by a majority of 3:2 in Anisminic
Ltd. vs. Foreign Compensation Commission.5 After
acknowledging that a confusion had been created by the observations made in Reg.
vs. Governor of Brixton Prison, Ex parte Armah6 to the
effect that if a Tribunal has jurisdiction to go right, it has jurisdiction
to go wrong, it was held in Anisminic that the
real question was not whether an authority made a wrong decision but whether
they enquired into and decided a matter which they
had no right to consider.

16. Anisminic, hailed as a
breakthrough and a legal landmark (see In Re Racal Communications
Ltd7) abolished the old
distinction between errors of law that went to jurisdiction and errors of law
that did not. Anisminic was hailed in OReilly
vs. Mackman8 to have liberated English public law from the fetters that the
courts had theretofore imposed
upon themselves so far as determinations of inferior courts and statutory
tribunals were concerned, by drawing esoteric distinctions between errors of
law committed by such tribunals that went to their jurisdiction, and errors of
law committed by them within their jurisdiction.

17. But In
Re Racal made a distinction between courts of law on the one hand and
administrative tribunal/ administrative
authority on the other and held that in so far as (inferior) courts of law are
concerned, the subtle distinction between errors of law that went to
jurisdiction and errors of law that did not, would still survive, if the
decisions of such courts are declared by the Statute to be final and
conclusive. Thus one distinction was gone with Anisminic, but
another was born with Re Racal. This
could be seen from the after effects of Anisminic.9

18. Interestingly
just four days before the House of Lords delivered the judgment in Anisminic
(on 17.12.1968), an identical
view was taken by a three member bench of this court (delivered on 13.12.1968)
in Official Trustee, West

Bengal
Others vs. Sachindra Nath Chatterjee Another,10 approving the
view taken by the Full bench of the Calcutta High
Court in Hirday Nath Roy vs. Ramachandra Barna Sarma.11 It was held
therein that “before a court can be held to have jurisdiction to decide a
particular matter it must not only have jurisdiction to try the suit brought, but
must also have the authority to pass the orders sought for.” This court
also pointed out that it is not sufficient that it has some jurisdiction in
relation to the subject matter of the suit, but its jurisdiction must include
(1) the power to hear and decide the questions at issue and (2) the power to
grant the relief asked for. This decision in Official
Trustee was followed in a recent decision in Indian
Farmers Fertiliser Cooperative Ltd.
vs. Bhadra Products,12 quite independent
of Anisminic and its followers.

19. Though the
decision in Official Trustee preceded Anisminic
and can proudly be claimed as the Indian precursor to an English
legal landmark, several subsequent decisions of this court considered Anisminic
alone to have provided the breakthrough. In Mafatlal
Industries Others vs. Union of India,13 Paripoornan,
J. provided the list of Indian cases which cited Anisminic
with approval. They are:

1) Union of
India vs. Tarachand Gupta Bros., (1971) 1 SCC 486

(2) A. R.
Antulay vs. R. S. Nayak Another, (1988) 2 SCC 602

(3) R. B.
Shreeram Durga Prasad Fatehchand Nursing Das vs. Settlement Commission
(IT WT) Another,

(1989) 1 SCC
628

(4)
Associated Engineering Co. vs. Govt. of Andhra Pradesh Another, (1991) 4
SCC 93 and

(5) Shiv
Kumar Chadha vs. Municipal Corporation of Delhi Others, (1993) 3 SCC 161

20. But in M.L.
Sethi vs. R.P. Kapur,14 K. K. Mathew, J., made
certain interesting observations about Anisminic. The learned
Judge observed that the effect of the dicta in Anisminic
is to reduce the difference between jurisdictional error and
error of law within jurisdiction almost to a vanishing point and that it came
perilously close to saying that there is jurisdiction if the decision is right
in law, but none if it is wrong. Anisminic, according
to him virtually left a court or tribunal with no margin of legal error.

21. Again in Hari
Prasad Mulshanker Trivedi vs. V.B Raju,15 K. K.
Mathew, J., speaking for the Constitution Bench, pointed out that though the
dividing line between lack of jurisdiction or power and the erroneous exercise
of it has become thin with Anisminic, the
distinction had not been wiped out completely.

22. But it is
relevant to note that Official Trustee/Anisminic and what
followed both, were mostly in the context of the power of the superior court to
interfere with the decisions of subordinate courts/tribunals or administrative
authorities. Most of these decisions were not in the context of the exercise of
jurisdiction despite the availability of alternative remedy. That there exists
such a distinction between (i) cases where the jurisdiction of a superior court
is questioned on the basis of ouster clauses and (ii) cases where the exercise
of jurisdiction by a superior court is questioned
on the ground of availability of alternative remedy, was recognized even in Anisminic, when Lord
Reid referred to the decision in Smith vs. East Elloe Rural District
Council16 as posing some difficulty. As a result,
the Court of Appeal held in R vs. Secretary of State for
the Environment, Ex p. Ostler17 that the
availability of a statutory
right to challenge within a specified time limit, among other points, provided
a sufficient basis for distinguishing Anisminic. This was
taken note of by the UK Supreme Court in Regina (Privacy
International). Therefore the question whether the error committed by an
administrative authority/tribunal or a court of law went to jurisdiction or whether
it was within jurisdiction may still be relevant to test whether a statutory
alternative remedy should be allowed to be bypassed or not.

23. In several
cases, both in England and India, the ancient rule stated by Willes, J., in Wolverhampton
New Waterworks
Co. vs. Hawkesford18 to the effect that where a liability
not existing at Common Law is created by a statute, which also gives a special
and particular remedy for enforcing it, the remedy provided by the statute must
be followed, has been quoted with approval. For instance, Union
Bank of India vs. Satyawati Tandon19 held that the
availability of a remedy of appeal under the DRT Act, 1993 and SARFAESI Act, 2002
should deter the High Courts from exercising the jurisdiction under Article
226. Similarly, the availability of remedy of appeal under Section 173 of the
Motor Vehicles Act, 1988 as against an award of the Accidents Claims Tribunal was
held in Sadhana Lodh vs. National Insurance Co.20 as sufficient
for the High Court to refuse to exercise its supervisory jurisdiction. The same
principle was applied in (1) Nivedita Sharma vs. Cellular
Operators Association of India21 and (2) Cicily
Kallarackal vs. Vehicle Factory22 in relation
to the awards passed by the special fora constituted under the Consumer
Protection Act, 1986.

24. Therefore in
so far as the question of exercise of the power conferred by Article 226,
despite the availability of a statutory
alternative remedy, is concerned, Anisminic cannot be
relied upon. The distinction between the lack of jurisdiction and the wrongful
exercise of the available jurisdiction, should certainly be taken into account
by High Courts, when Article 226 is sought to be invoked bypassing a statutory
alternative remedy provided by a special statute.

25. On the basis
of this principle, let us now see whether the case of the State of Karnataka
fell under the category of (1) lack of jurisdiction on the part of the NCLT to
issue a direction in relation to a matter covered by MMDR Act, 1957 and the Statutory
Rules issued thereunder or (2) mere wrongful exercise of a recognised
jurisdiction, say for instance, asking a wrong question or
applying a wrong test or granting a wrong relief.

26. The MMDR Act,
1957 is a Parliamentary enactment traceable to Entry 54 of the Union List in
Seventh Schedule of the Constitution. The object of the Act as it stood
originally, was the regulation of mines and development of minerals. After the
Amendment Act 38 of 1999, the object of the Act is to provide for the
development and regulation of mines and minerals. Section 2 of the Act declares
that it is expedient in public interest that the Union should take under its
control, the regulation of mines and the development of minerals. Section 4 (1)
of the Act prohibits the undertaking of mining operations (and reconnaissance
and prospecting operations), in any area, except under and in accordance with
the terms and conditions of a mining lease granted under the Act and the Rules
made thereunder. After the insertion of Subsection (1A) in Section 4, by the
Amendment Act 38 of 1999, even transportation or storage of any mineral
otherwise than in accordance with the provisions of the Act and the Rules made thereunder
is prohibited.

The Act also imposes restrictions on the grant of mining leases.
Section 8A of the Act, inserted by the Amendment Act 10 of 2015 provides for
deemed grant and deemed extension of different kinds. Primarily Section 8A applies
only to minerals other than those specified in Parts A and B of the First
Schedule. In so far as minor minerals are concerned, the State government is
empowered to make rules for regulating the grant of mining leases. It is
important to note that Section 19 of the Act declares any mining lease granted,
renewed or acquired in contravention of the provisions of the Act or any rule
or order made thereunder to be void and
of no effect. The Act confers powers of search, entry and inspection upon officers
authorised by the Central or State governments. Section 30 of the Act empowers
the Central government, either of its own motion or on an application made by
the aggrieved party, to revise any order made by a State government in exercise
of the powers conferred under the Act with respect to any mineral other than a
minor mineral. The procedure for filing a revision is prescribed in Rule 54 and
the method of disposal of such revisions is prescribed in Rule 55 of the
Mineral Concession Rules, 1960.

27. Though in Thressiamma
Jacob vs. Deptt. of Mining Geology,23 this court
held that the mineral wealth in the subsoil would go along with the ownership
of the land, the question of entitlement of the government to charge royalty was
left open, as it was pending reference to the constitution bench. But in the
case on hand, the land which formed the subject matter of mining lease, belongs
to the State of Karnataka. The liberties and privileges granted to the Corporate
Debtor by the Government of Karnataka under the mining lease, are delineated in
Part IV of the mining lease. The mining lease was issued in accordance with the
statutory rules namely Mineral Concession Rules, 1960. Therefore the relationship
between the Corporate Debtor and the Government of Karnataka under the mining
lease is not just contractual but also statutorily governed.

As we have
indicated elsewhere,
the MMDR Act, 1957 is a Parliamentary enactment traceable to Entry 54 in List I
of the Seventh Schedule. This Entry 54 speaks about regulation of mines and
development of minerals to the extent to which such regulation and development
under the control of the Union, is declared by Parliament by law to be
expedient in public interest. In fact the expression “public
interest” is used only in 3 out of 97 Entries in List I, one of which is Entry
54, the other two being Entries 52 and 56. Interestingly, Entry 23 in
List II does not use the expression “public interest”, though it also deals
with regulation of mines and mineral development, subject to the provisions of
List I. It is this element of “public interest” that finds a place in Section 2
of the MMDR Act, 1957, in the
form of a declaration. Section 2 of MMDR Act, 1957 reads as follows:

“It is
hereby declared that it is expedient in the public interest that Union should
take under its control the regulation of mines and the development of minerals
to the extent hereinafter provided.”

28. Therefore as
rightly contended by the learned Attorney General, the decision of the
Government of Karnataka to refuse the benefit of deemed extension of lease, is
in the public law domain and hence the correctness of the said decision can be
called into question only in a superior court which is vested with the power of
judicial review over administrative action. The NCLT, being a creature of a
special statute to discharge certain specific functions, cannot be elevated to
the status of a superior court having the power of judicial review over administrative
action. Judicial review, as observed by this court in SubCommittee
on Judicial Accountability vs. Union of India,24 flows from
the concept of a higher law, namely the Constitution. Paragraph 61 of the said
decision captures this position as follows:

“But
where, as in this country and unlike in England, there is a written
Constitution which constitutes the fundamental and in that sense a “higher
law” and acts as a limitation upon the legislature and other organs of the
State as grantees under the Constitution, the usual incidents
of parliamentary sovereignty do not obtain and the concept is one of limited
government. Judicial review is, indeed, an incident of and flows from this concept
of the fundamental and the higher law being the touchstone of the limits of the
powers of the various organs of
the State which derive power and authority under the Constitution and that the
judicial wing is the interpreter of the Constitution and, therefore, of the limits
of authority of the different organs of the State. It is to be noted that the
British Parliament with the Crown is
supreme and its powers are unlimited and courts have no power of judicial
review of legislation.”

29. The NCLT is
not even a Civil Court, which has jurisdiction by virtue of Section 9 of the
Code of Civil Procedure to try all suits of a civil nature excepting suits, of which
their cognizance is either expressly or impliedly barred. Therefore
NCLT can exercise only such powers within the contours of jurisdiction as
prescribed by the statute, the law in respect of which, it is called upon to
administer. Hence, let us now see the jurisdiction and powers conferred upon
NCLT. Jurisdiction and powers of NCLT

30. NCLT and
NCLAT are constituted, not under the IBC, 2016 but under Sections 408 and 410
of the Companies Act, 2013. Without specifically defining the powers and
functions of the NCLT, Section 408 of the Companies Act, 2013 simply states
that the Central Government shall constitute a National Company Law Tribunal,
to exercise and discharge such powers and functions as are or may be, conferred
on it by or under the Companies Act or any other law for the time being in
force. Insofar as NCLAT is concerned, Section 410 of the Companies Act merely
states that the Central Government shall constitute an Appellate Tribunal for
hearing appeals against the Orders of the Tribunal. The matters that fall
within the jurisdiction of the NCLT, under the Companies Act, 2013, lie
scattered all over the Companies Act. Therefore, Sections 420 and 424 of the
Companies Act, 2013 indicate in broad terms, merely the procedure to be
followed by the NCLT and NCLAT before passing orders. However, there are no
separate provisions in the Companies Act, exclusively dealing with the jurisdiction
and powers of NCLT.

31. In
contrast, Subsections (4) and (5) of Section 60 of IBC, 2016 give an indication
respectively about the powers and jurisdiction of the NCLT. Section 60 in
entirety reads as follows:” Adjudicating
Authority for corporate persons.(1) The Adjudicating
Authority, in relation to insolvency resolution and liquidation for corporate
persons including corporate debtors and personal guarantors thereof shall be
the National Company Law Tribunal having territorial jurisdiction over the
place where the registered office of the corporate person is located.

(2)
Without prejudice to subsection (1) and notwithstanding anything to the
contrary contained in this Code, where a corporate insolvency resolution process
or liquidation proceeding of a corporate debtor is pending before the National
Company Law Tribunal, an application relating to the insolvency resolution or [liquidation
or bankruptcy of a corporate guarantor or personal guarantor, as the case may
be, of such corporate
debtor] shall be filed before such National Company Law Tribunal.

(3) An
insolvency resolution process or [liquidation or bankruptcy of a corporate
guarantor or personal guarantor, as the case may be, of the corporate debtor] pending
in any court or tribunal shall stand transferred to the Adjudicating Authority
dealing with insolvency resolution process or liquidation proceeding of such corporate
debtor.

(4) The
National Company Law Tribunal shall be vested with all the powers of the Debt
Recovery Tribunal as contemplated under Part III in of this Code for the
purpose of subsection (2).

(5)
Notwithstanding anything to the contrary contained in any other law for the
time being in force, the National Company Law Tribunal shall have jurisdiction
to entertain or dispose of –

(a) any
application or proceeding by or against the corporate debtor or corporate
person;

(b) any
claim made by or against the corporate debtor or corporate person, including claims
by or against any of its subsidiaries situated in India; and

(c) any
question of priorities or any question of law or facts, arising out of or in
relation to the insolvency resolution or liquidation proceedings
of the corporate debtor or corporate person under this Code.

(6)
Notwithstanding anything contained in the Limitation Act, 1963 (36 of 1963) or
in any other law for the time being in force, in computing the period of limitation
specified for any suit or application by or against a corporate debtor for
which an order of moratorium has been made under this Part, the period during
which such moratorium is in place shall be excluded.”

32. Subsection (4)
of Section 60 of IBC, 2016 states that the NCLT will have all the powers of the
DRT as contemplated under Part III of the Code for the purposes of Subsection (2).
Subsection (2) deals with a situation where the insolvency resolution or
liquidation or bankruptcy of a corporate guarantor or personal guarantor of a
corporate debtor is taken up, when CIRP or liquidation proceeding of such a
corporate debtor is already pending before NCLT. The object of Subsection (2)
is to group together (A) the CIRP or liquidation proceeding of a corporate
debtor and (B) the insolvency resolution or liquidation or bankruptcy of a
corporate guarantor or personal guarantor of the very same corporate debtor, so
that a single Forum may deal with both. This is to ensure that the CIRP of a
corporate debtor and the insolvency resolution of the individual guarantors of
the very same corporate debtor do not proceed on different tracks, before different
Fora, leading to conflict of interests, situations or decisions.

33. If the object
of Subsection (2) of Section 60 is to ensure that the insolvency resolutions of
the corporate debtor and its guarantors are dealt with together, then the
question that arises is as to why there should be a reference to the powers of the
DRT in Subsection (4). The answer to this question is to be found in Section
179 of IBC, 2016. Under Section 179 (1), it is the DRT which is the
Adjudicating Authority in relation to insolvency matters of individuals and
firms. This is in contrast to Section 60(1) which names the NCLT as the Adjudicating
Authority in relation to insolvency resolution and liquidation of corporate
persons including corporate debtors and personal guarantors.

The expression “personal guarantor” is defined in Section 5(22) to mean an
individual who is the surety in a contract of guarantee to a corporate debtor.
Therefore the object of Subsection (2) of Section 60 is to avoid any confusion
that may arise on account of Section 179(1) and to ensure that whenever a CIRP
is initiated against a corporate debtor, NCLT will be the Adjudicating
Authority not only in respect of such corporate debtor but also in respect of
the individual who stood as surety to such corporate debtor, notwithstanding
the naming of the DRT under Section 179(1) as the Adjudicating Authority for
the insolvency resolution of individuals. This is also why Subsection (2) of
Section 60 uses the phrase “notwithstanding anything to the contrary contained
in this Code”.

34. Subsection (2)
of Section 179 confers jurisdiction upon DRT to entertain and dispose of (i)
any suit or roceeding by or against the individual debtor (ii) any claim made
by or against the individual debtor and (iii) any question of priorities or any
other question whether of law or facts arising out of or in relation to
insolvency and bankruptcy of the individual debtor. Clauses (a), (b) and (c) of
Subsection (2) of Section 179 are identical to Clauses (a), (b) and (c) of
Subsection (5) of Section 60. Therefore the only reason why Subsection (4) is incorporated
in Section 60 is to ensure that NCLT will exercise jurisdiction (1) not only
to entertain and dispose of matters referred to in Clauses (a), (b) and (c) of
Subsection (5) of Section 60 in relation to the corporate debtor, (2) but also
to entertain and dispose of the matters specified in Clauses (a), (b) and (c)
of Subsection (2) of Section 179, whenever the contingency
stated in Section 60(2) arises.

35. Interestingly
there are separate provisions both in Part II and Part III of IBC, 2016 ousting
the jurisdiction of civil courts. While
Section 63 contained in Part II bars the jurisdiction of a civil court in
respect of any matter on which NCLT or NCLAT
will have jurisdiction, Section 180 contained in Part III bars the jurisdiction
of civil courts in respect of any matter on which DRT or DRAT has jurisdiction.
But curiously there is something more in Section 180 than what is found in Section
63, which can be appreciated if both are presented in a tabular column.

Section 63

Section 180

No civil court or authority shall
have jurisdiction to entertain any
suit or proceedings in respect of
any matter on which National
Company Law Tribunal or the
National Company Law Appellate
Tribunal has jurisdiction under this
Code. Civil court not to have jurisdiction.

(1) No civil court or authority
shall have jurisdiction to
entertain any suit or
proceedings in respect of any
matter on which the Debt
Recovery Tribunal or the Debt
Recovery Appellate Tribunal
has jurisdiction under this
Code.

(2) No injunction shall be
granted by any court, tribunal
or authority in respect of anyaction taken, or to be taken, in
pursuance of any power
conferred on the Debt Recovery
Tribunal or the Debt Recovery
Appellate Tribunal by or under
this Code.

Though what
is found in Subsection (2) of Section 180 is not found in the corresponding
provision in Part II namely, Section 63, a similar provision is incorporated in
an unrelated provision namely Section 64, which primarily deals with expeditious
disposal of applications. Thus, there appears to be some mixup. However, we are
not concerned about the same in this case and we have made a reference to the
same only because of Subsection (4) of Section 60, vesting upon the NCLT, all
the powers of the DRT.

36. From a
combined reading of Subsection (4) and Subsection (2) of Section 60 with
Section 179, it is clear that none of them hold the key to the question as to
whether NCLT would have jurisdiction over a decision taken by the government
under the provisions of MMDR Act, 1957 and the Rules issued thereunder. The
only provision which can probably throw light on this question would be
Subsection (5) of Section 60, as it speaks about the jurisdiction of the NCLT. Clause
(c) of Subsection (5) of Section 60 is very broad in its sweep, in that it
speaks about any question of law or fact, arising out of or in relation to
insolvency resolution. But a decision taken by the government or a statutory
authority in relation to a matter which is in the realm of public law, cannot,
by any stretch of agination, be brought within the fold of the phrase “arising
out of or in relation to the insolvency resolution” appearing in
Clause (c) of Subsection (5). Let us take for instance a case where a corporate
debtor had suffered an order at the hands of the Income Tax Appellate Tribunal,
at the time of initiation of CIRP.

If Section 60(5)(c) of IBC is interpreted to
include all questions of law orfacts under the sky, an Interim Resolution Professional/Resolution
Professional will then claim a right to challenge the order of the Income Tax
Appellate Tribunal before the NCLT, instead of moving a statutory appeal under Section
260A of the Income Tax Act, 1961. Therefore the jurisdiction of the NCLT
delineated in Section 60(5) cannot be stretched so far as to bring absurd
results. (It will be a different matter, if proceedings under statutes like
Income Tax Act had attained finality, fastening a liability upon the corporate
debtor, since, in such cases, the dues payable to the Government would come
within the meaning of the expression.

“operational
debt” under Section 5(21), making the Government an “operational
creditor” in terms of Section 5(20). The moment
the dues to the Government are crystalised and what remains is only payment,
the claim of the Government will have to be adjudicated and paid only in a
manner prescribed in the resolution plan as approved by the Adjudicating
Authority, namely the NCLT. )

37. It was argued
by all the learned Senior Counsel on the side of the appellants that an Interim
Resolution Professional is duty bound under Section 20(1) to preserve the value
of the property of the Corporate Debtor and that the word

“property”
is interpreted in Section 3(27) to include even actionable claims as well as
every description of interest, present or future or vested or contingent
interest arising out of or incidental to property and that
therefore the Interim Resolution Professional is entitled to move the NCLT for
appropriate orders, on the basis that lease is a property right and NCLT has
jurisdiction under Section 60(5) to entertain any claim by the Corporate
Debtor.

38. But the said
argument cannot be sustained for the simple reason that the duties of a
resolution professional are entirely
different from the jurisdiction and powers of NCLT. In fact Section 20(1)
cannot be read in isolation, but has to be read in conjunction with Section
18(f)(vi) of the IBC, 2016 together with the Explanation thereunder. Section 18
(f) (vi) reads as follows:

“18.
Duties of interim resolution professional. The interim resolution professional
shall perform the following duties, namely:

(a) …

(b)…

(c) …

(d)…

(e)…

(f) take
control and custody of any asset over which the corporate debtor has ownership
rights as recorded in the balance sheet of the corporate debtor, or with information
utility or the depository of securities or any other registry that records the
ownership of assets including-

(i)…

(ii)…

(iii)…

(iv) …

(v)…

(vi)
assets subject to the determination of ownership by a court or authority;

(g) …

Explanation.
For the purposes of this section, the term assets shall not include the
following namely:

(a)
assets owned by a third party in possession of the corporate debtor held under
trust or under contractual arrangements including bailment;

(b)
assets of any Indian or foreign subsidiary of the corporate debtor; and

(c) such
other assets as may be notified by the Central Government in consultation with
any financial sector regulator.”

39. If NCLT has
been conferred with jurisdiction to decide all types of claims to property, of
the corporate debtor, Section 18(f)(vi) would not have made the task of the
interim resolution professional in taking control and custody of an asset over which
the corporate debtor has ownership rights, subject to the
determination of ownership by a court or other authority. In fact an
asset owned by a third party, but which is in the possession of the corporate
debtor under contractual arrangements, is specifically kept out of the
definition of the term “assets” under the Explanation to Section 18. This assumes
significance in view of the language used in Sections 18 and 25 in contrast to
the language employed in Section 20. Section 18 speaks about the duties of the
interim resolution professional
and Section 25 speaks about the duties of resolution professional. These two
provisions use the word

“assets”,
while Section 20(1) uses the word “property” together with the word “value”.
Sections 18 and 25 do not use the expression “property”. Another important
aspect is that under Section 25 (2) (b) of IBC, 2016, the resolution professional
is obliged to represent and act on behalf of the corporate debtor with third
parties and exercise rights for the benefit of the corporate debtor in judicial,
quasijudicial and arbitration proceedings. Section 25(1) and 25(2)(b)
reads as follows:

“25. Duties
of resolution professional-(1) It shall be the duty of the resolution professional to preserve
and protect the assets of the corporate debtor,
including the continued business operations of the corporate debtor.

(2) For
the purposes of subsection (1), the resolution professional shall undertake the
following actions:

(a)….

(b)
represent and act on behalf of the corporate debtor with third parties, exercise
rights for the benefit of the corporate debtor in judicial, quasi judicial and
arbitration proceedings.” This shows
that wherever the corporate debtor has to exercise rights in judicial,
quasijudicial proceedings, the resolution professional cannot shortcircuit the
same and bring a claim before NCLT taking advantage of Section 60(5).

40. Therefore in
the light of the statutory scheme as culled out from various provisions of the
IBC, 2016 it is clear that wherever the corporate debtor has to exercise a
right that falls outside the purview of the IBC, 2016 especially in the realm
of the public law, they cannot, through the resolution professional, take a
bypass and go before NCLT for the enforcement of such a right.

41. In fact the
Resolution Professional in this case appears to have understood this legal
position correctly, in the initial stages. This is why when the Government of
Karnataka did not grant the benefit of deemed extension, even after the expiry
of the lease on 25.05.2018, the Resolution Professional moved the High Court by
way of a writ petition in WP No. 23075 of 2018. The prayer made in WP No. 23075
of 2018 was for a declaration that the mining lease should be deemed to be
valid upto 31.03.2020. If NCLT was omnipotent, the Resolution Professional
would have moved the NCLT itself for such a declaration. But he did not, as he
understood the legal position correctly.

42. After the
filing of the first writ petition (WP No. 23075 of 2018), the Government of
Karnataka passed an order dated 26.09.2018 rejecting the claim. Therefore the
Resolution Professional, representing the Corporate Debtor filed a memo before
the High Court seeking withdrawal of the writ petition

“with
liberty to file a fresh writ petition”. However the High Court, while
dismissing the writ petition by order dated 28.09.2018
was little considerate and it disposed of the writ petition as withdrawn with
liberty to take recourse to appropriate
remedies in accordance with law. Perhaps taking advantage of this liberty, the
Resolution Applicant moved the NCLT against the order of rejection passed by
the Government of Karnataka. If NCLT was not considered by the Resolution Professional,
in the first instance, to be empowered to issue a declaration of deemed
extension of lease, we fail to understand how NCLT could be considered to have
the power of judicial review over the order of rejection.

43. The fact that
the Government of Karnataka agreed in the second writ petition WP No. 5002 of
2019 to go back to the NCLT and contest the Miscellaneous Application filed by
the Resolution Professional, would not tantamount to conceding the jurisdiction
of NCLT. In any case a tribunal which is the creature of a statute cannot be
clothed with a jurisdiction, by any concession made by a party.

44. A lot of
stress was made on the effect of Section 14 of IBC, 2016 on the deemed
extension of lease. But we do not think that the moratorium provided for in
Section 14 could have any impact upon the right of the Government to refuse the
extension of lease. The purpose of moratorium is only to preserve the status
quo and not to create a new right. Therefore nothing turns on Section 14 of
IBC, 2016. Even Section 14 (1) (d), of IBC, 2016, which prohibits, during the period
of moratorium, the recovery of any property by an owner or lessor where such
property is occupied by or in the possession of the corporate debtor, will not
go to the rescue of the corporate debtor, since what is prohibited therein, is
only the right not to be dispossessed, but not the right to have renewal of the
lease of such property. In fact the right not to be dispossessed, found in
Section 14 (1) (d), will have nothing to do with the rights conferred by a
mining lease especially on a government land.

What is granted under the deed of
mining lease in ML
2293 dated 04.01.2001, by the Government of Karnataka, to the Corporate Debtor,
was the right to mine, excavate and recover iron ore and red oxide for a
specified period of time. The Deed of Lease contains a Schedule divided into
several parts. PartI of the Schedule describes the location and area of the
lease. PartII indicates the
liberties and privileges of the lessee. The restrictions and conditions subject
to which the grant can be enjoyed are found in PartIII of the Schedule. The
liberties, powers and privileges reserved to the Government, despite the grant,
are indicated in PartIV. This PartIV entitles the Government to work on other
minerals (other than iron ore and red oxide) on the same land, even during the
subsistence of the lease. Therefore, what was granted to the Corporate Debtor
was not an exclusive possession of the area in question, so as to enable the Resolution
Professional to invoke Section 14 (1) (d). Section 14 (1) (d) may have no
application to situations of this nature.

45. Therefore, in
fine, our answer to the first question would be that NCLT did not have jurisdiction
to entertain an application
against the Government of Karnataka for a direction to execute Supplemental
Lease Deeds for the extension of
the mining lease. Since NCLT chose to exercise a jurisdiction not vested in it
in law, the High Court of Karnataka was
justified in entertaining the writ petition, on the basis that NCLT was coram non
judice.

Question
No. 2

46. The second
question that arises for our consideration is as to whether NCLT is competent
to enquire into allegations of fraud, especially in the matter of the very
initiation of CIRP.

47. This
question has arisen, in view of the stand taken by the Government of Karnataka
before the High Court that they chose to challenge the order of the NCLT before
the High Court, instead of before NCLAT, due to the fraudulent and collusive
manner in which the CIRP was initiated by one of the related parties of the
Corporate Debtor themselves. In the writ petition filed by the Government of
Karnataka before the High Court, it was specifically pleaded (i) that the
Managing Director of the Corporate Debtor entered into an agreement on 06.02.2011
with one M/s. D. P. Exports, for carrying out mining operations on behalf of
the Corporate Debtor and also for managing its affairs and selling 100% of the
extracted iron ore; (ii) that the said M/s. D. P. Exports was a partnership firm
of which one Mr. M. Poobalan and his wife were partners;

(iii) that another
agreement dated 11.12.2012 was entered into between the Corporate Debtor and a
proprietary concern by name M/s. P. D. Enterprises, of which the very
same person namely, Mr. M. Poobalan was the sole proprietor; (iv) that the said
agreement was for hiring of machinery and equipment; (v) that a finance
agreement was also entered into on 12.12.2012 between the Corporate Debtor and
a company by name M/s. Udhyaman Investments Pvt. Ltd., represented by its authorized
signatory Mr. M. Poobalan; (vi) that there were a few communications sent by
the said Mr. Poobalan to various authorities, claiming himself to be the authorized
signatory of the Corporate Debtor; (vii) that an MOU was entered into on 16.04.2016
between the Corporate Debtor and M/s. Udhyaman Investments Pvt. Ltd.,
represented by the said Mr. Poobalan, whereby the Corporate Debtor agreed to
pay Rs. 11.5 crores;

(viii) that the said agreement was purportedly executed at
Florida, but witnessed at Chennai; (ix) that Mr. Poobalan even communicated to
the Director, Department of Mines Geology as well as the Monitoring
Committee, taking up the cause of the Corporate Debtor as its authorized signatory;
(x) that the CIRP was initiated by M/s. Udhyaman Investments
Pvt. Ltd. represented by its authorized signatory, Mr. Poobalan; (xi) that the
Resolution Applicant namely, M/s. Embassy Property Development Pvt. Ltd. as well
as the Financial Creditor who initiated CIRP namely, M/s. Udhyaman Investments
Pvt. Ltd. are all related parties and (xii) that Mr. Poobalan had not only
acted on behalf of the Corporate Debtor before the statutory authorities, but
also happened to be the authorized signatory of the Financial Creditor who
initiated the CIRP, eventually for the benefit of the Resolution Applicant which
is a related party of the Financial Creditor.

48. In the
light of the above averments, the Government of Karnataka thought fit to invoke
the jurisdiction of the High Court under Article 226 without taking recourse to
the statutory alternative remedy of appeal before the NCLAT. But the contention
of the appellants herein is that allegations of fraud and collusion can also be
inquired into by NCLT and NCLAT and that therefore the Government could not
have bypassed the statutory remedy.

49. The
objection of the appellants in this regard is well founded. Section 65
specifically deals with fraudulent or malicious
initiation of proceedings. It reads as follows:

“65. Fraudulent or
malicious initiation of proceedings. (1) If, any person initiates the
insolvency resolution process or liquidation proceedings fraudulently or with
malicious intent for any purpose other than for the resolution of insolvency or
liquidation, as the case may be, the adjudicating authority may impose upon
such person a penalty which shall not be less than one lakh rupees, but may
extend to one crore rupees.

(2) If, any person
initiates voluntary liquidation proceedings with the intent to defraud any
person the adjudicating authority may impose upon such person a penalty which shall
not be less than one lakh rupees but may extend to one crore rupees.”

50. Even
fraudulent tradings carried on by the Corporate Debtor during the insolvency
resolution, can be inquired into by the Adjudicating Authority under Section
66. Section 69 makes an officer of the corporate debtor and the corporate debtor
liable for punishment, for carrying on transactions with a view to defraud
creditors. Therefore, NCLT is vested with the power to inquire into (i)
fraudulent initiation of proceedings as well as (ii) fraudulent transactions.
It is significant to note that Section 65(1) deals with a situation where CIRP
is initiated fraudulently “for any purpose
other than for the resolution of insolvency or liquidation”.

51. Therefore,
if, as contended by the Government of Karnataka, the CIRP had been initiated by
one and the same pedifferent avatars, not for the genuine purpose of resolution of
insolvency or liquidation, but for the collateral purpose of cornering the mine
and the mining lease, rson
taking the same would fall squarely within the mischief
addressed by Section 65(1). Therefore, it is clear that NCLT has jurisdiction
to enquire into allegations of fraud. As a corollary, NCLAT will also have
jurisdiction. Hence, fraudulent initiation of CIRP cannot be a ground to bypass
the alternative remedy of appeal provided in Section 61. Conclusion

52. The upshot
of the above discussion is that though NCLT and NCLAT would have jurisdiction
to enquire into questions
of fraud, they would not have jurisdiction to adjudicate upon disputes such as
those arising under MMDR Act, 1957
and the rules issued thereunder, especially when the disputes revolve around
decisions of statutory or quasijudicial authorities, which can be corrected
only by way of judicial review of administrative action. Hence, the High Court was
justified in entertaining the writ petition and we see no reason to interfere with
the decision of the High Court. Therefore, the appeals are dismissed. There
will be no order as to costs.

……………………….J. (Rohinton Fali Nariman)

……………………….J. (Aniruddha Bose)

……………………….J. (V. Ramasubramanian)

New Delhi

December 03, 2019.

1 (1953) 2 WLR 995

2 (1958) SCR 595

3 AIR 2017 SC 4084

4 (1993) 2 SCC 746

5 (1969) 2 WLR 163

6 (1968) AC 192

7 (1981) AC 374

8(1983) 2 AC 237

9 Anisminic had its own quota of problems. Prof. Wade, as
pointed out in R. v. Lord President of the Privy Council Ex p. Page, [1993]
A.C. 682, seems to have opined that the true effect of Anisminic was still in
doubt. People like Sir John Laws, quoted by Prof. Paul Craig, and which was
extracted in the decision in Regina (Privacy International) v. Investigatory
Powers Tribunal, [2019] UKSC 22, seems to have opined that once the distinction
between jurisdictional and nonjurisdictional errors was discarded, there was no
longer any need for the ultra vires principle and that ultra vires is, in truth,
a fig-leaf which has enabled the courts to intervene in decisions without an
assertion of judicial power which too nakedly confronts the established
authority of the Executive or other public bodies. According to Sir John Laws,
Anisminic has produced the historical irony that with all its emphasis on
nullity, it nevertheless erected the legal milestone which pointed towards a
public law jurisprudence in which the concept of voidness and the ultra vires
doctrine have become redundant. In Regina (Privacy International) the U.K
Supreme court also quoted the editors of De Smiths Judicial Review to the
effect: The distinction between jurisdictional and non-jurisdictional error is
ultimately based upon foundations of sand. Much of the superstructure has
already crumbled. What remains is likely quickly to fall away as the courts
rightly insist that all administrative action should be simply, lawful, whether
or not jurisdictionally lawful.”

10 (1969) 3 SCR 92

11 ILR LXVIII Calcutta 138

12 (2018) 2 SCC 534

13 (1997) 5 SCC 536

14 (1972) 2 SCC 427

15 (1974) 3 SCC 415

16 (1956) AC 736

17 (1977) QB 122

18 [1859] 6 CB (NS) 336

19 (2010) 8 SCC 110

20 (2003) 3 SCC 524

21 (2011) 14 SCC 337

22 (2012) 8 SCC 524

23 (2013) 9 SCC 725

24 (1991) 4 SCC 699

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