2019 Supreme(SC) 1314

SUPREME COURT OF INDIA
ROHINTON FALI NARIMAN, ANIRUDDHA BOSE, V. RAMASUBRAMANIAN, JJ.
M/s Embassy Property Developments Pvt. Ltd. – Appellants
Versus
State of Karnataka & Ors – Respondents
Civil Appeal No. 9170, 9171, 9172 of 2019 (@ Special Leave Petition (C) No. 22596, 22684, 22724 of 2019)
Decided On : 03-12-2019

IMPORTANT POINTS
(1) Fraudulent initiation of CIRP cannot be a ground to bypass alternative remedy of appeal provided in Section 61 of Insolvency and Bankruptcy Code, 2016.
(2) Distinction between lack of jurisdiction and wrongful exercise of 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.

Headnote:

(A) Insolvency and Bankruptcy Code, 2016 – Sections 61 and 62 – Constitution of India – Article 226/227 – Corporate Insolvency Resolution Process – Scope of judicial review of order passed by National Company Law Tribunal (NCLAT) – Alternative remedy – IBC, 2016 is a complete Code in itself – It is an exhaustive code on subject matter of insolvency in relation to corporate entities and others – IBC, 2016 is a single Unified Umbrella Code, covering entire gamut of law relating to insolvency resolution of corporate persons and others in a time bound manner – Code provides a three-tier mechanism namely (i) NCLT, which is Adjudicating Authority (ii) NCLAT which is appellate authority and (iii) this court as final authority, for dealing with all issues that may arise in relation to reorganisation and insolvency resolution of corporate persons – In so far as insolvency resolution of corporate debtors and personal guarantors are concerned, any order passed by NCLT is appealable to NCLAT under Section 61 of IBC, 2016 and orders of NCLAT are amenable to appellate jurisdiction of this court under Section 62 – Public law proceedings serve a different purpose than private law proceedings. (Paras 11 and 14)

(B) Insolvency and Bankruptcy Code, 2016 – Sections 61 and 62 – Mineral Concession Rules, 1960 – Rule 55 – Constitution of India – Article 226/227 – Corporate Insolvency Resolution Process – Scope of judicial review of order passed by National Company Law Tribunal (NCLAT) – Alternative remedy – Relationship between Corporate Debtor and Government of Karnataka under mining lease is not just contractual but also statutorily governed – Decision of Government of Karnataka to refuse benefit of deemed extension of lease, is in public law domain and correctness of said decision can be called into question only in a superior court which is vested with power of judicial review over administrative action – NCLT, being a creature of a special statute to discharge certain specific functions, cannot be elevated to the status of a superior court having power of judicial review over administrative action – Judicial review flows from concept of a higher law, Constitution – NCLT can exercise only such powers within contours of jurisdiction as prescribed by statute, law in respect of which it is called upon to administer. (Paras 27, 28 and 29)

(C) Insolvency and Bankruptcy Code, 2016 – Sections 61 and 62 – Mineral Concession Rules, 1960 – Rule 55 – Constitution of India – Article 226/227 – Corporate Insolvency Resolution Process – Scope of judicial review of order passed by National Company Law Tribunal (NCLAT) – Alternative remedy – NCLT did not have jurisdiction to entertain an application against Government of Karnataka for a direction to execute Supplemental Lease Deeds for extension of mining lease – Since NCLT chose to exercise a jurisdiction not vested in it in law, High Court of Karnataka was justified in entertaining writ petition, on the basis that NCLT was coram non judice. (Para 45)

(D) Insolvency and Bankruptcy Code, 2016 – Section 65 – Constitution of India – Article 226/227 – Corporate Insolvency Resolution Process – Scope of judicial review of order passed by National Company Law Tribunal (NCLAT) – NCLT has jurisdiction to enquire into allegations of fraud – As a corollary, NCLAT will also have jurisdiction – Fraudulent initiation of CIRP cannot be a ground to bypass alternative remedy of appeal provided in Section 61 – 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 rules issued thereunder, especially when disputes revolve around decisions of statutory or quasi-judicial authorities which can be corrected only by way of judicial review of administrative action – High Court was justified in entertaining writ petition. (Paras 51 and 52)

(E) Constitution of India – Article 226 – Writ jurisdiction – Invocation of – Distinction between lack of jurisdiction and wrongful exercise of 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. (Para 24)

Facts of the case:

Whether High Court ought to interfere, under Article 226/227 of the Constitution, with an Order passed by 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, are the seminal issues which arise for consideration in these appeals.

Findings of Court:

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 disputes revolve around decisions of statutory or quasi-judicial authorities, which can be corrected only by way of judicial review of administrative action.

Result : Appeals dismissed.