M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD.V. STATE OF KARNATAKA & ORS. versus STATE OF KARNATAKA & ORS on 3 December 2019

[2019] 17 S.C.R. 559

M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD.

v.

STATE OF KARNATAKA & ORS.

(Civil Appeal No. 9170 of 2019)

DECEMBER 03, 2019

[R. F. NARIMAN, ANIRUDDHA BOSEAND V. RAMASUBRAMANIAN, JJ.]

Constitution of India: Arts.226/227 – Scope of interference– Corporate insolvency resolution process initiated against acorporate debtor – Corporate debtor held a mining lease grantedby Government of Karnataka which was to expire – ResolutionProfessional sought benefit of deemed extension of lease – StateGovernment rejected the proposal for deemed extension of mininglease – The said order challenged by Resolution Professional –NCLT set aside the order of State Government on the ground thatthe same was in violation of moratorium declared in terms of s.14(1)of IBC, 2016 and directed the State Government to execute LeaseDeeds in favour of Corporate Debtor – By impugned order, HighCourt granted stay of operation of directions contained in the orderof NCLT – Whether High Court ought to have interfered underArt.226/227 of the Constitution, with an order passed by NCLT inproceeding under the IBC, 2016, despite the availability of astatutory alternative remedy of appeal to NCLAT – Held: Thedecision of the State Government to refuse the benefit of deemedextension of lease, is in the public law domain and, therefore, thecorrectness of the said decision can be called into question onlyin a superior court which is vested with the power of judicial reviewover administrative action – The NCLT, being a creature of a specialstatute to discharge certain specific functions, cannot be elevatedto the status of a superior court having such powers – The NCLTis not even a Civil Court, which has jurisdiction to try all suits ofa civil nature excepting suits, of which their cognizance is eitherexpressly or impliedly barred – Therefore NCLT can exercise onlysuch powers within the contours of jurisdiction as prescribed bythe statute, the law in respect of which, it is called upon toadminister – Though NCLT and NCLAT have jurisdiction to enquireinto questions of fraud, they would not have jurisdiction to

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Aadjudicate upon disputes such as those arising under MMDR Act,1957 and the rules issued thereunder, especially when the disputesrevolve around decisions of statutory or quasi-judicial authorities,which can be corrected only by way of judicial review ofadministrative action – The moratorium provided for in s.14 couldnot have any impact upon the right of the Government to refuseBthe extension of lease – The purpose of moratorium is only topreserve the status quo and not to create a new right – Therefore,NCLT did not have jurisdiction to entertain an application againstthe State Government for a direction to execute Supplemental LeaseDeeds for the extension of the mining lease – Since NCLT choseCto exercise a jurisdiction not vested in it in law, the High Courtwas justified in entertaining the writ petition, on the basis that NCLTwas coram non judice – Mines and Minerals (Development andRegulation) Act, 1957 – Insolvency and Bankruptcy Code, 2016– Judicial review.

DInsolvency and Bankruptcy Code, 2016: Scope of thejurisdiction and the nature of the powers exercised by NCLT andNCLAT under the provisions of IBC, 2016 – Discussed.

Insolvency and Bankruptcy Code, 2016: Whether thequestions of fraud can be inquired into by the NCLT/NCLAT in theEproceedings initiated under the IBC Code – Held: NCLT hasjurisdiction to enquire into allegations of fraud – As a corollary,NCLAT will also have jurisdiction – Fraudulent initiation of CIRPcannot be a ground to bypass the alternative remedy of appealprovided in s.61.FConstitution of India: Arts.226/227 – Exercise of

FConstitution of India: Arts.226/227 – Exercise ofjurisdiction, exception – In cases where a statutory alternativeremedy of appeal is available, one of the exceptions to the selfimposed restraint of the High Court is the lack of jurisdiction onthe part of the statutory/quasi-judicial authority, against whoseorder a judicial review is sought – Traditionally, English courtsGmaintained a distinction between cases where a statutory/quasi-judicial authority exercised a jurisdiction not vested in it in lawand cases where there was a wrongful exercise of the availablejurisdiction – The distinction between lack of jurisdiction andwrongful exercise of available jurisdiction, should certainly beHtaken into account by High Courts, when Art.226 is sought to be invoked bypassing a statutory alternative remedy provided by aspecial statute.

Constitution of India: Arts.226/227 – Scope of jurisdictionand nature of the powers exercised by High Court under Art.226of the Constitution – Discussed.

Constitution of India: Arts.226/227 – Scope of jurisdictionof High Court over private individuals – Held: In view of the useof the expression “any person” in Art.226 (1), the jurisdiction ofthe High Court extends even over private individuals, provided thenature of the duties performed by such private individuals, arepublic in nature – Therefore, the remedies provided under Art.226are public law remedies, which stand in contrast to the remediesavailable in private law.

Mines and Minerals (Development and Regulation) Act,1957: Object of enactment – Discussed – Constitution of India –Seventh Schedule – Union List – Entry 54.

Companies Act, 2013: ss.408, 410 – Jurisdiction and powersof NCLT – NCLT and NCLAT are constituted, not under the IBC,2016 but under ss.408 and 410 of the Companies Act, 2013 –ss.420 and 424 of the Companies Act, 2013 indicate in broad terms,merely the procedure to be followed by the NCLT and NCLATbefore passing orders – However, there are no separate provisionsin the Companies Act, exclusively dealing with the jurisdiction andpowers of NCLT – In contrast, Sub-sections (4) and (5) of s.60 ofIBC, 2016 give an indication respectively about the powers andjurisdiction of the NCLT – Sub-section (4) of s.60 of IBC, 2016states that the NCLT will have all the powers of the DRT ascontemplated under Part III of the Code for the purposes of Sub-section (2) – Insolvency and Bankruptcy Code, 2016 – s.60.

Insolvency and Bankruptcy Code, 2016: ss.60, 179 – Unders.179 (1), it is the DRT which is the Adjudicating Authority inrelation to insolvency matters of individuals and firms – This is incontrast to s.60(1) which names the NCLT as the AdjudicatingAuthority in relation to insolvency resolution and liquidation ofcorporate persons including corporate debtors and personalguarantors – The object of Sub-section (2) of s.60 is to avoid anyconfusion that may arise on account of s.179(1) and to ensure that A

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Awhenever a CIRP is initiated against a corporate debtor, NCLT willbe the Adjudicating Authority not only in respect of such corporatedebtor but also in respect of the individual who stood as surety tosuch corporate debtor, notwithstanding the naming of the DRTunder s.179(1) as the Adjudicating Authority for the insolvencyresolution of individuals.B

Dismissing the appeals, the Court

HELD: 1.1 It is beyond any pale of doubt that IBC, 2016is a complete Code in itself. It is an exhaustive code on thesubject matter of insolvency in relation to corporate entities andCothers. It is also true that IBC, 2016 is a single Unified UmbrellaCode, covering the entire gamut of the law relating to insolvencyresolution of corporate persons and others in a time boundmanner. The code provides a three-tier mechanism namely (i)the NCLT, which is the Adjudicating Authority (ii) the NCLATDwhich is the appellate authority and (iii) this court as the finalauthority, for dealing with all issues that may arise in relation tothe reorganisation and insolvency resolution of corporatepersons. In so far as insolvency resolution of corporate debtorsand personal guarantors are concerned, any order passed by theNCLT is appealable to NCLAT under Section 61 of the IBC,E2016 and the orders of the NCLAT are amenable to theappellate jurisdiction of this court under Section 62. [Para 11][578-D-G]

1.2 Article 226 (1) recognizes the power of every HighFCourt to issue (i) directions, (ii) orders or (iii) writs. They canbe issued to (i) any person or (ii) authority including theGovernment. They may be issued (i) for the enforcement of anyof the rights conferred by Part III and (ii) for any other purpose.But the exercise of the power recognized by Clause (1) of Article226, is restricted by the territorial jurisdiction of the High Court,Gdetermined either by its geographical location or by the placewhere the cause of action, in whole or in part, arose. While thenature of the power exercised by the High Court is delineatedin Clause (1) of Article 226, the jurisdiction of the High Courtfor the exercise of such power, is spelt out in both Clauses (1)Hand (2) of Article 226. [Para 13] [579-B-D]

M/s Innoventive Industries Limited v. ICICI Bank, AIR2017 SC 4084 : [2017] 8 SCR 33 – relied on.

1.3 Traditionally, the jurisdiction under Article 226 wasconsidered as limited to ensuring that the judicial or quasi-judicialtribunals or administrative bodies do not exercise their powersin excess of their statutory limits. But in view of the use of theexpression “any person” in Article 226 (1), courts recognizedthat the jurisdiction of the High Court extended even over privateindividuals, provided the nature of the duties performed by suchprivate individuals, are public in nature. Therefore, the remediesprovided under Article 226 are public law remedies, which standin contrast to the remedies available in private law. One of thewell recognized exceptions to the self-imposed restraint of theHigh Courts, in cases where a statutory alternative remedy ofappeal is available, is the lack of jurisdiction on the part of thestatutory/quasi-judicial authority, against whose order a judicialreview is sought. [Paras 14, 15] [579-E-G]

Nilabati Behera @ Babita Behera v. State of Orissa(1993) 2 SCC 746 : [1993] 2 SCR 581 – relied on.

2. Whether the case of the State of Karnataka fell underthe category of (1) lack of jurisdiction on the part of the NCLTto issue a direction in relation to a matter covered by MMDRAct, 1957 and the Statutory Rules issued thereunder or (2) merewrongful exercise of a recognised jurisdiction.

In the case on hand, the land which formed the subjectmatter of mining lease, belongs to the State of Karnataka. Theliberties and privileges granted to the Corporate Debtor by theGovernment of Karnataka under the mining lease, are delineatedin Part IV of the mining lease. The mining lease was issued inaccordance with the statutory rules namely Mineral ConcessionRules, 1960. Therefore, the relationship between the CorporateDebtor and the Government of Karnataka under the mining leaseis not just contractual but also statutorily governed. The MMDRAct, 1957 is a Parliamentary enactment traceable to Entry 54 inList I of the Seventh Schedule. This Entry 54 speaks aboutregulation of mines and development of minerals to the extentto which such regulation and development under the control of A

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Athe Union, is declared by Parliament by law to be expedient inpublic interest. In fact the expression “public interest” is used onlyin 3 out of 97 Entries in List I, one of which is Entry 54, the othertwo being Entries 52 and 56. Interestingly, Entry 23 in List IIdoes not use the expression “public interest”, though it alsodeals with regulation of mines and mineral development, subjectBto 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 theform of a declaration. Therefore, the decision of the Governmentof Karnataka to refuse the benefit of deemed extension of lease,is in the public law domain and hence the correctness of the saidCdecision can be called into question only in a superior courtwhich is vested with the power of judicial review overadministrative action. The NCLT, being a creature of a specialstatute to discharge certain specific functions, cannot be elevatedto the status of a superior court having the power of judicialreview over administrative action. Judicial review, flows from theDconcept of a higher law, namely the Constitution. The NCLT isnot even a Civil Court, which has jurisdiction by virtue of Section9 of the Code of Civil Procedure to try all suits of a civil natureexcepting suits, of which their cognizance is either expressly orimpliedly barred. Therefore NCLT can exercise only suchEpowers within the contours of jurisdiction as prescribed by thestatute, the law in respect of which, it is called upon toadminister. [Paras 25, 27, 29] [585-B-G; 586-A-B-F]

Sub-Committee on Judicial Accountability v. Union ofIndia (1991) 4 SCC 699 – relied on.FThressiamma Jacob v. Deptt. of Mining & Geology(2013) 9 SCC 725 : [2013] 7 SCR 863 – referred to.

3. Jurisdiction and powers of NCLT

3.1 NCLT and NCLAT are constituted, not under the IBC,G2016 but under Sections 408 and 410 of the Companies Act,2013. Without specifically defining the powers and functions ofthe NCLT, Section 408 of the Companies Act, 2013 simply statesthat the Central Government shall constitute a National CompanyLaw Tribunal, to exercise and discharge such powers andfunctions as are or may be, conferred on it by or under theHCompanies Act or any other law for the time being in force.

Insofar as NCLAT is concerned, Section 410 of the CompaniesAct merely states that the Central Government shall constitutean Appellate Tribunal for hearing appeals against the Orders ofthe Tribunal. The matters that fall within the jurisdiction of theNCLT, under the Companies Act, 2013, lie scattered all overthe Companies Act. Therefore, Sections 420 and 424 of theCompanies Act, 2013 indicate in broad terms, merely theprocedure to be followed by the NCLT and NCLAT beforepassing orders. However, there are no separate provisions inthe Companies Act, exclusively dealing with the jurisdiction andpowers of NCLT. In contrast, Sub-sections (4) and (5) of Section60 of IBC, 2016 give an indication respectively about powersand jurisdiction of the NCLT. [Paras 30, 31] [586-G; 587-A-D]

3.2 Sub-section (4) of Section 60 of IBC, 2016 states thatthe NCLT will have all the powers of the DRT as contemplatedunder Part III of the Code for the purposes of Sub-section (2).Sub-section (2) deals with a situation where the insolvencyresolution or liquidation or bankruptcy of a corporate guarantoror personal guarantor of a corporate debtor is taken up, whenCIRP or liquidation proceeding of such a corporate debtor isalready pending before NCLT. The object of Sub-section (2) isto group together the CIRP or liquidation proceeding of acorporate debtor and the insolvency resolution or liquidation orbankruptcy of a corporate guarantor or personal guarantor of thevery same corporate debtor, so that a single Forum may dealwith both. This is to ensure that the CIRP of a corporate debtorand the insolvency resolution of the individual guarantors of thevery same corporate debtor do not proceed on different tracks,before different Fora, leading to conflict of interests, situationsor decisions. [Para 32] [588-F-H; 589-A]

3.3 If the object of Sub-section (2) of Section 60 is toensure that the insolvency resolutions of the corporate debtorand its guarantors are dealt with together, then the question thatarises is as to why there should be a reference to the powers ofthe DRT in Sub-section (4). The answer to this question is tobe found in Section 179 of IBC, 2016. Under Section 179 (1), itis the DRT which is the Adjudicating Authority in relation toinsolvency matters of individuals and firms. This is in contrast AB

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Ato Section 60(1) which names the NCLT as the AdjudicatingAuthority in relation to insolvency resolution and liquidation ofcorporate persons including corporate debtors and personalguarantors. The expression “personal guarantor” is defined inSection 5(22) to mean an individual who is the surety in acontract of guarantee to a corporate debtor. Therefore the objectBof Sub-section (2) of Section 60 is to avoid any confusion thatmay arise on account of Section 179(1) and to ensure thatwhenever a CIRP is initiated against a corporate debtor, NCLTwill be the Adjudicating Authority not only in respect of suchcorporate debtor but also in respect of the individual who stoodCas surety to such corporate debtor, notwithstanding the namingof the DRT under Section 179(1) as the Adjudicating Authorityfor the insolvency resolution of individuals. This is also why Sub-section (2) of Section 60 uses the phrase “notwithstandinganything to the contrary contained in this Code”. [Para 33] [589- B-E]D

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3.4 Sub-section (2) of Section 179 confers jurisdiction uponDRT to entertain and dispose of (i) any suit or proceeding by oragainst the individual debtor (ii) any claim made by or againstthe individual debtor and (iii) any question of priorities or anyother question whether of law or facts arising out of or in relationEto insolvency and bankruptcy of the individual debtor. Clauses(a), (b) and (c) of Sub-section (2) of Section 179 are identical toClauses (a), (b) and (c) of Sub-section (5) of Section 60.Therefore the only reason why Sub-section (4) is incorporatedin Section 60 is to ensure that NCLT will exercise jurisdictionF– (1) not only to entertain and dispose of matters referred to inClauses (a), (b) and (c) of Sub-section (5) of Section 60 in relationto the corporate debtor, (2) but also to entertain and dispose ofthe matters specified in Clauses (a), (b) and (c) of Sub-section(2) of Section 179, whenever the contingency stated in Section60(2) arises. [Para 34] [589-F-H]G

3.5 A combined reading of Sub-section (4) and Sub-section(2) of Section 60 with Section 179 shows that none of them holdthe key to the question as to whether NCLT would havejurisdiction over a decision taken by the government under theprovisions of MMDR Act, 1957 and the Rules issued there-Hunder. The only provision which can probably throw light on this question would be Sub-section (5) of Section 60, as it speaksabout the jurisdiction of the NCLT. Clause (c) of Sub-section (5)of Section 60 is very broad in its sweep, in that it speaks aboutany question of law or fact, arising out of or in relation toinsolvency resolution. But a decision taken by the governmentor a statutory authority in relation to a matter which is in therealm of public law, cannot, by any stretch of imagination, bebrought within the fold of the phrase “arising out of or in relationto the insolvency resolution” appearing in Clause (c) of Sub-section (5). [Para 36] [590-G-H; 591-A-B]

3.6 If NCLT has been conferred with jurisdiction to decideall types of claims to property, of the corporate debtor, Section18(f)(vi) would not have made the task of the interim resolutionprofessional in taking control and custody of an asset over whichthe corporate debtor has ownership rights, subject to thedetermination of ownership by a court or other authority. In factan asset owned by a third party, but which is in the possessionof the corporate debtor under contractual arrangements, isspecifically kept out of the definition of the term “assets” underthe Explanation to Section 18. This assumes significance in viewof the language used in Sections 18 and 25 in contrast to thelanguage employed in Section 20. Section 18 speaks about theduties of the interim resolution professional and Section 25speaks about the duties of resolution professional. These twoprovisions use the word “assets”, while Section 20(1) uses theword “property” together with the word “value”. Sections 18and 25 do not use the expression “property”. Another importantaspect is that under Section 25 (2) (b) of IBC, 2016, theresolution professional is obliged to represent and act on behalfof the corporate debtor with third parties and exercise rightsfor the benefit of the corporate debtor in judicial, quasi-judicialand arbitration proceedings. Wherever the corporate debtor hasto exercise rights in judicial, quasi-judicial proceedings, theresolution professional cannot short-circuit the same and bringa claim before NCLT taking advantage of Section 60(5).Therefore in the light of the statutory scheme as culled out fromvarious provisions of the IBC, 2016 it is clear that wherever thecorporate debtor has to exercise a right that falls outside thepurview of the IBC, 2016 especially in the realm of the public A

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[2019] 17 S.C.R.

Alaw, they cannot, through the resolution professional, take abypass and go before NCLT for the enforcement of such a right.[Paras 39-40] [593-B-E-H; 594-A-B]

4. The moratorium provided for in Section 14 could nothave any impact upon the right of the Government to refuse theBextension of lease. The purpose of moratorium is only topreserve the status quo and not to create a new right. Thereforenothing turns on Section 14 of IBC, 2016. Even Section 14 (1)(d), of IBC, 2016, which prohibits, during the period ofmoratorium, the recovery of any property by an owner or lessorwhere such property is occupied by or in the possession of theCcorporate debtor, will not go to the rescue of the corporatedebtor, since what is prohibited therein, is only the right not tobe dispossessed, but not the right to have renewal of the leaseof such property. In fact the right not to be dispossessed, foundin Section 14 (1) (d), will have nothing to do with the rightsDconferred by a mining lease especially on a government land.What is granted under the deed of mining lease dated04.01.2001, by the Government of Karnataka, to the CorporateDebtor, was the right to mine, excavate and recover iron oreand red oxide for a specified period of time. The Deed of Leasecontains a Schedule divided into several parts. Part-I of theESchedule describes the location and area of the lease. Part-IIindicates the liberties and privileges of the lessee. Therestrictions and conditions subject to which the grant can beenjoyed are found in Part-III of the Schedule. The liberties,powers and privileges reserved to the Government, despite theFgrant, are indicated in Part-IV. This Part-IV entitles theGovernment to work on other minerals (other than iron ore andred oxide) on the same land, even during the subsistence of thelease. Therefore, what was granted to the Corporate Debtor wasnot an exclusive possession of the area in question, so as to enable the Resolution Professional to invoke Section 14 (1) (d).GSection 14 (1) (d) may have no application to situations of thisnature. Therefore, NCLT did not have jurisdiction to entertainan application against the Government of Karnataka for adirection to execute Supplemental Lease Deeds for theextension of the mining lease. Since NCLT chose to exercise aHjurisdiction not vested in it in law, the High Court of Karnataka was justified in entertaining the writ petition, on the basis thatNCLT was coram non judice. [Paras 44, 45] [595-A-H]

5. Whether NCLT is competent to enquire into allegationsof fraud, especially in the matter of the very initiation of CIRP.

Section 65 specifically deals with fraudulent or maliciousinitiation of proceedings. Even fraudulent tradings carried on bythe Corporate Debtor during the insolvency resolution, can beinquired into by the Adjudicating Authority under Section 66.Section 69 makes an officer of the corporate debtor and thecorporate debtor liable for punishment, for carrying ontransactions with a view to defraud creditors. Therefore, NCLTis vested with the power to inquire into (i) fraudulent initiationof proceedings as well as (ii) fraudulent transactions. Section65(1) deals with a situation where CIRP is initiated fraudulently“for any purpose other than for the resolution of insolvency orliquidation”. It is clear that NCLT has jurisdiction to enquireinto allegations of fraud. As a corollary, NCLAT will also havejurisdiction. Hence, fraudulent initiation of CIRP cannot be aground to bypass the alternative remedy of appeal provided inSection 61. [Paras 49-51] [597-C-G-H; 598-B]

The State of Uttar Pradesh v. Mohammad Nooh. [1958]SCR 595 ; Official Trustee, West Bengal & Others v.Sachindra Nath Chatterjee & Another [1969] 3 SCR92 ; Hirday Nath Roy v. Ramachandra Barna Sarma.ILR LXVIII Calcutta 138 ; Indian Farmers FertiliserCo-operative Ltd. v. Bhadra Products (2018) 2 SCC534 : [2018] 1 SCR 848 ; Mafatlal Industries & Othersv. Union of India (1997) 5 SCC 536 : [1996] 10 Suppl.SCR 585 ; M.L. Sethi v. R.P. Kapur (1972) 2 SCC427 : [1973] 1 SCR 697 ; Hari Prasad MulshankerTrivedi v. V.B Raju (1974) 3 SCC 415 : [1974] 1 SCR548 ; Union Bank of India v. Satyawati Tandon (2010)8 SCC 110 : [2010] 9 SCR 1 ; Sadhana Lodh v.National Insurance Co. (2003) 3 SCC 524 : [2003] 1SCR 567 ; Nivedita Sharma v. Cellular OperatorsAssociation of India (2011) 14 SCC 337 ; CicilyKallarackal v. Vehicle Factory (2012) 8 SCC 524 :[2012] 8 SCR 95 – referred to.

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AAnisminic Ltd. v. Foreign Compensation Commission(1969) 2 WLR 163 ; Barnard and Others v. NationalDock Labour Board and Others (1953) 2 WLR 995 ;Reg. v. Governor of Brixton Prison, Ex parte Armah(1968) AC 192 ; Re Racal Communications Ltd (1981)AC 374 ; O’Reilly v. Mackman (1983) 2 AC 237 ; R.Bv. Lord President [1993] A.C. 682 ; Regina (PrivacyInternational) v. Investigatory Powers Tribunal, [2019]UKSC 22 ; Smith v. East Elloe Rural District Council(1956) AC 736 ; R v. Secretary of State for theEnvironment, Ex p. Ostler(1977) QB 122 ;CWolverhampton New Waterworks Co. v. Hawkesford[1859] 6 CB (NS) 336 – referred to.

Case Law Reference

From the Judgment and Order dated 12.09.2019 of the HighHCourt of Karnataka at Bengaluru in W.P. No. 41029 of 2019.

With

Civil Appeal Nos. 9171, 9172 of 2019.

E. Om Prakash, Kapil Sibal, Arvind P. Datar, Mukul Rohatgi, Sr.Advs., R. Murali, Charudatta Vijayrao Mahindrakar, Ms. Pinky Behera,Ms. Madhusmita Bora, Pawan Kishore Singh, Dipankar Singh, Riju RajSingh Jamwal, Advs. for the Appellants.

K. K. Venugopal, AG, Gurukrishna Kumar, Sr. Adv., OmkarKambi, Ankur Mittal, Manendra Pal Gupta, Prakash Jadhav, V. N.Raghupathy, Advs. for the Respondents.

The Judgment of the Court was delivered by

V. RAMASUBRAMANIAN, J.

1. Leave Granted.

2. Two seminal questions of importance namely:-

i) Whether the High Court ought to interfere, under Article226/227 of the Constitution, with an Order passed bythe National Company Law Tribunal in a proceedingunder the Insolvency and Bankruptcy Code, 2016,ignoring the availability of a statutory remedy of appealto the National Company Law Appellate Tribunal andif so, under what circumstances; and

ii) Whether questions of fraud can be inquired into by theNCLT/NCLAT in the proceedings initiated under theInsolvency and Bankruptcy Code, 2016, arise for ourconsideration in these appeals.

Brief background facts

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

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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 thesethree appeals, claiming to be a Financial Creditor, movedan application before the NCLT Chennai, under Section7 of the Insolvency and Bankruptcy Code, 2016(hereinafter referred to as the IBC, 2016), against M/s. Tiffins Barytes Asbestos & Paints Ltd., the CorporateDebtor (which is the fourth Respondent in the first ofthese three appeals and which is also the appellant inthe next appeal).

ii) By an Order dated 12.03.2018, NCLT Chennai admittedthe application, ordered the commencement of theCorporate Insolvency Resolution Process and appointedan Interim Resolution Professional. Consequently, aMoratorium was also declared in terms of Section 14of the IBC, 2016.

iii) At that time, the Corporate Debtor held a mining leasegranted by the Government of Karnataka, which wasto expire by 25.05.2018. Though a notice for prematuretermination of the lease had already been issued on09.08.2017, on the allegation of violation of statutoryrules and the terms and conditions of the lease deed,no order of termination had been passed till the date ofinitiation of the Corporate Insolvency Resolution Process(hereinafter referred to as CIRP).

iv) Therefore, the Interim Resolution Professional appointedby NCLT addressed a letter dated 14.03.2018 to theChairman of the Monitoring Committee as well as theDirector of Mines & Geology informing them of thecommencement of CIRP. He also wrote a letter dated21.04.2018 to the Director of Mines & Geology, seekingthe benefit of deemed extension of the lease beyond25.05.2018 upto 31.3.2020 in terms of Section 8-A (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 InterimResolution Professional filed a writ petition in WP No.23075 of 2018 on the file of the High Court ofKarnataka, seeking a declaration that the mining leaseshould be deemed to be valid upto 31.03.2020 in termsof Section 8A(6) of the MMDR Act, 1957.

vi) During the pendency of the writ petition, theGovernment of Karnataka passed an Order dated26.09.2018, rejecting the proposal for deemed extension,on the ground that the Corporate Debtor hadcontravened not only the terms and conditions of theLease Deed but also the provisions of Rule 37 of theMineral Concession Rules, 1960 and Rule 24 of theMinerals (Other than Atomic and Hydro CarbonsEnergy Minerals) Rules, 2016.

vii) In view of the Order of rejection passed by theGovernment of Karnataka, the Corporate Debtor,represented by the Interim Resolution Professional,withdrew the Writ Petition No.23075 of 2018, on28.09.2018, with liberty to file a fresh writ petition.

viii) However, instead of filing a fresh writ petition (inaccordance with the liberty sought), the ResolutionProfessional moved a Miscellaneous Application No.632of 2018, before the NCLT, Chennai praying for settingaside the Order of the Government of Karnataka, andseeking a declaration that the lease should be deemedto be valid upto 31.03.2020 and also a consequentialdirection to the Government of Karnataka to executeSupplement Lease Deeds for the period upto31.03.2020.

ix) By an Order dated 11.12.2018, NCLT, Chennai allowedthe Miscellaneous Application setting aside the Orderof the Government of Karnataka on the ground that thesame was in violation of the moratorium declared on12.03.2018 in terms of Section 14(1) of IBC, 2016.Consequently the Tribunal directed the Government ofKarnataka to execute Supplement Lease Deeds infavour of the Corporate Debtor for the period upto31.03.2020.

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x) Aggrieved by the order of the NCLT, Chennai, theGovernment of Karnataka moved a writ petition in WPNo.5002 of 2019, before the High Court of Karnataka.When the writ petition came up for hearing, it wasconceded by the Resolution Professional before the HighCourt of Karnataka that the order of the NCLT couldbe set aside and the matter relegated to the Tribunal,for a decision on merits, after giving an opportunity tothe State to respond to the reliefs sought in theMiscellaneous Application. It is relevant to note here thatthe Order of the NCLT dated 11.12.2018, was passedex-parte, on the ground that the State did not choose toappear despite service of notice.

xi) Therefore, by an Order dated 22.03.2019, the High Courtof Karnataka set aside the Order of the NCLT andremanded the matter back to NCLT for a freshconsideration of the Miscellaneous Application No.632of 2018.

xii) Thereafter, the State of Karnataka filed a Statement ofObjections before the NCLT, primarily raising twoobjections, one relating to the jurisdiction of the NCLTto adjudicate upon disputes arising out of the grant ofmining leases under the MMDR Act, 1957, between theState-Lessor and the Lessee and another relating to thefraudulent and collusive manner in which the entireresolution process was initiated by the related partiesof the Corporate Debtor themselves, solely with a viewto corner the benefits of the mining lease.

xiii) Overruling the objections of the State, the NCLTChennai passed an Order dated 03.05.2019 allowing theMiscellaneous Application, setting aside the order ofrejection and directing the Government of Karnataka toexecute Supplemental Lease Deeds.

xiv) Challenging the Order of the NCLT, Chennai, theGovernment of Karnataka moved a writ petition in WPNo.41029 of 2019 before the High Court of Karnataka.When the writ petition came up for orders as toadmission, the Corporate Debtor represented by the Resolution Professional appeared through counsel andtook notice and sought time to get instructions.Therefore, the High Court, by an Order dated12.09.2019 adjourned the matter to 23.09.2019 andgranted a stay of operation of the direction containedin the impugned Order of the Tribunal. Interim Stay wasnecessitated in view of a Contempt Application movedby the Resolution Professional before the NCLT againstthe Government of Karnataka for their failure to executeSupplement Lease deeds.

xv) It is against the said ad Interim Order granted by theHigh Court that the Resolution Applicant, the ResolutionProfessional and the Committee of Creditors have comeup with the present appeals.

Rival Contentions

5. Sh. K. V. Viswanathan, learned Senior Counsel appearing onbehalf of the Resolution Applicant assailed the impugned Order on theground that when an efficacious alternative remedy is available underSection 61 of IBC, 2016, the High Court of Karnataka ought not tohave entertained a writ petition and that too against an Order passedby the Chennai Bench of NCLT. He drew our attention to a series ofjudgments, wherein it was held that when a statutory forum is createdfor the redressal of grievances, a writ petition should not be entertained.Since the essence of IBC, 2016 is the revival of a Corporate Debtorand the resolution of its problems to enable it to survive as a goingconcern, through the maximization of the value of its assets, the learnedSenior Counsel contended that the Interim Resolution Professional/Resolution Professional had a right to move the NCLT for appropriatereliefs for the preservation of the properties of the Corporate Debtorand therefore the only way the steps taken by the ResolutionProfessional could be set at naught, is to take recourse to the provisionsof the IBC alone. Relying upon the observations made by this Court ina couple of decisions that IBC, 2016 is a unified umbrella of code, thelearned Senior Counsel contended that the remedies providedthereunder are all pervasive and exclusive.

6. Sh. Mukul Rohatgi, learned Senior Counsel appearing for theResolution Applicant supplemented the aforesaid arguments andcontended that though he would not go to the extent of saying that the AB

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Ajurisdiction of the High Court stood completely ousted, the High Courtwas obliged to switch over to the hands off mode, in matters of thisnature. The learned Senior Counsel also contended that the NCLT hasalready approved the Resolution Plan, by an order dated 12.06.2019and that therefore the High Court cannot do anything that will tinkerwith or destroy the very Resolution Plan approved by the NCLT.B

7. Sh. Kapil Sibal, the learned Senior Counsel appearing for theResolution Professional contended that the whole object of IBC, 2016will get defeated, if the Orders of NCLT are declared amenable toreview by the High Court under Article 226/227. He also contendedthat the provisions of IBC, 2016 are given overriding effect underCSection 238, over all other statutes. It is his further contention that aftertaking a stand in their first writ petition in WP No.5002 of 2019 thatthe dispute relating to the refusal to grant deemed extension of the mininglease falls squarely within the jurisdiction of the Mining Tribunal andafter raising a plea that the rejection of the benefit of deemed extension,Dought to have been challenged by way of a revision before the CentralGovernment under Section 30 of the MMDR Act, 1957 the State ofKarnataka agreed to go back to the NCLT for raising all contentions.Therefore, according to the learned counsel, it was not open to theGovernment to question the jurisdiction of the NCLT in the next roundof litigation. Since the expression “Property” as defined in Section 3E(27) of IBC, 2016 includes every description of interest includingpresent or future or vested or contingent interest arising out of orincidental to property, and also since the right to deemed extension oflease would come within the purview of the expression “Property”, itwas contended by the learned Senior Counsel that the ResolutionFProfessional has a duty to preserve the property. The only ground onwhich the Government of Karnataka opposed the MiscellaneousApplication of the Resolution Professional, according to the learnedSenior Counsel, was fraud and collusion on the part of the CorporateDebtor and the creditor who initiated the CIRP. Therefore, it iscontended by him that in view of the sweep of the jurisdiction conferredGupon NCLT under Section 60 (5) (c) of the IBC, 2016, the Tribunalwas entitled to investigate even into allegations of fraud. Once it isconceded that NCLT will have jurisdiction even to enquire into allegationsof fraud, then the question of invoking the jurisdiction of the High Courtunder Article 226 as against an order passed by NCLT, according toHthe learned counsel, does not arise. Any recognition by this court, of the jurisdiction of the High Court under Article 226 to interfere withthe Orders of the NCLT under IBC, 2016, according to the learnedSenior Counsel, would completely derail the resolution process whichis bound to happen within a time frame. Therefore, he appealed thatthe Order of the High Court should be set aside on the ground of lackof jurisdiction.

8. Sh. Arvind P. Datar and Sh. E. Om Prakash, learned SeniorCounsel appearing for the Committee of Creditors submitted that IBC,2016 being a complete code in itself does not provide any room forchallenging the Orders of NCLT, otherwise than in a manner prescribedby the code itself. What was sought by the Resolution Professional,according to the learned Senior Counsel, was a mere recognition ofthe statutory right of deemed extension of lease conferred by Section8A of the MMDR Act, 1957 and that therefore NCLT cannot be takento have exercised a jurisdiction not vested in it in law, so as to enablethe High Court to invoke the jurisdiction under Article 226.

9. In response, Sh. K.K. Venugopal, learned Attorney Generalsubmitted that if a case falls under the category of inherent lack ofjurisdiction on the part of a Tribunal, the exercise of jurisdiction by theTribunal would certainly be amenable to the jurisdiction of the High Courtunder Article 226. Since the contours of jurisdiction of NCLT are definedin Clauses (a), (b) and (c) of Sub-section (5) of Section 60 and alsosince the powers of the NCLT are defined in Sub-section (4) of Section60, to be akin to those of the Debts Recovery Tribunal under theRecovery of Debts Due to Banks and Financial Institutions Act of 1993(hereinafter referred to as DRT Act, 1993), it was contended by thelearned Attorney General that the jurisdiction of the NCLT is confinedonly to contractual matters inter-parties. An order passed by a statutory/quasi-judicial authority under certain special enactments such as theMMDR Act, 1957 falls in the realm of public law and hence it wascontended by the learned Attorney General that the NCLT would haveno power of judicial review of such orders. The learned AttorneyGeneral also drew our attention to the minutes of the 10[th] meeting ofthe Committee of Creditors held on 27.02.2019, in which a Companyother than the present Resolution Applicant was recorded to have madea better offer. But the present Resolution Applicant was able to havehis plan approved, despite the offer being lesser, only because they werewilling 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, A

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Acannot now take shelter under the approval of the Resolution Plan. Onthe contention that the Government of Karnataka had an efficaciousalternative remedy before the NCLAT, the learned Attorney Generalsubmitted, on the basis of the decision in Barnard and Others vs.National Dock Labour Board and Others[1]that when an inferiorTribunal passes an Order which is a nullity, the superior Court needBnot drive the party to the appellate forum stipulated by the Act. Thelearned Attorney General also relied upon the decision of this Court inThe State of Uttar Pradesh vs. Mohammad Nooh.[2]

Question No. 1

C10. In the backdrop of the facts narrated and in the light of therival contentions extracted above, the first question that arises forconsideration is as to whether the High Court ought to interfere, underArticle 226/227 of the Constitution, with an order passed by NCLT ina proceeding under the IBC, 2016, despite the availability of a statutoryalternative remedy of appeal to NCLAT.D

11. It is beyond any pale of doubt that IBC, 2016 is a completeCode in itself. As observed by this Court in M/s Innoventive IndustriesLimited vs. ICICI Bank,[3] it is an exhaustive code on the subject matterof insolvency in relation to corporate entities and others. It is also truethat IBC, 2016 is a single Unified Umbrella Code, covering the entireEgamut of the law relating to insolvency resolution of corporate personsand others in a time bound manner. The code provides a three-tiermechanism namely (i) the NCLT, which is the Adjudicating Authority(ii) the NCLAT which is the appellate authority and (iii) this court asthe final authority, for dealing with all issues that may arise in relationFto the reorganisation and insolvency resolution of corporate persons.In so far as insolvency resolution of corporate debtors and personalguarantors are concerned, any order passed by the NCLT is appealableto NCLAT under Section 61 of the IBC, 2016 and the orders of theNCLAT are amenable to the appellate jurisdiction of this court underSection 62. It is in this context that the action of the State of KarnatakaGin by-passing the remedy of appeal to NCLAT and the act of the HighCourt in entertaining the writ petition against the order of the NCLTare being questioned.

1 (1953) 2 WLR 9952 (1958) SCR 595H3 AIR 2017 SC 4084

1 (1953) 2 WLR 9952 (1958) SCR 595H3 AIR 2017 SC 4084

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

Jurisdiction and the powers of the High Court under Article226

13. What is recognized by Article 226 (1) is the power of everyHigh Court to issue (i) directions, (ii) orders or (iii) writs. They can beissued to (i) any person or (ii) authority including the Government. Theymay be issued (i) for the enforcement of any of the rights conferredby Part III and (ii) for any other purpose. But the exercise of the powerrecognized by Clause (1) of Article 226, is restricted by the territorialjurisdiction of the High Court, determined either by its geographicallocation 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 isdelineated in Clause (1) of Article 226, the jurisdiction of the High Courtfor 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 consideredas limited to ensuring that the judicial or quasi-judicial tribunals oradministrative bodies do not exercise their powers in excess of theirstatutory limits. But in view of the use of the expression “any person”in Article 226 (1), courts recognized that the jurisdiction of the HighCourt extended even over private individuals, provided the nature ofthe duties performed by such private individuals, are public in nature.Therefore, the remedies provided under Article 226 are public lawremedies, which stand in contrast to the remedies available in privatelaw. As observed by this Court in Nilabati Behera @ Babita Beheravs. State of Orissa,[4] public law proceedings serve a different purposethan private law proceedings.

15. One of the well recognized exceptions to the self-imposedrestraint of the High Courts, in cases where a statutory alternativeremedy of appeal is available, is the lack of jurisdiction on the part ofthe statutory/quasi-judicial authority, against whose order a judicialreview is sought. Traditionally, English courts maintained a distinctionbetween cases where a statutory/quasi-judicial authority exercised ajurisdiction not vested in it in law and cases where there was a wrongful 4 (1993) 2 SCC 746

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Aexercise of the available jurisdiction. An “error of jurisdiction” wasalways distinguished from “in excess of jurisdiction”, until the adventof the decision rendered by the House of Lords, by a majority of 3:2 inAnisminic Ltd. vs. Foreign Compensation Commission.[5] Afteracknowledging that a confusion had been created by the observationsmade in Reg. vs. Governor of Brixton Prison, Ex parte Armah[6]toBthe effect that if a Tribunal has jurisdiction to go right, it hasjurisdiction to go wrong, it was held in Anisminic that the real questionwas not whether an authority made a wrong decision but whether theyenquired into and decided a matter which they had no right to consider.

16. Anisminic, hailed as a break-through and a legal landmarkC(see In Re Racal Communications Ltd[7]) abolished the old distinctionbetween errors of law that went to jurisdiction and errors of law thatdid not. Anisminic was hailed in O’Reilly vs. Mackman[8] to haveliberated English public law from the fetters that the courts hadtheretofore imposed upon themselves so far as determinations of inferiorDcourts and statutory tribunals were concerned, by drawing esotericdistinctions between errors of law committed by such tribunals thatwent to their jurisdiction, and errors of law committed by them withintheir jurisdiction.

17. But In Re Racal made a distinction between courts of lawEon the one hand and administrative tribunal/ administrative authority onthe 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 anderrors of law that did not, would still survive, if the decisions of suchcourts are declared by the Statute to be final and conclusive. Thus onedistinction was gone with Anisminic, but another was born with ReFRacal. This could be seen from the after effects of Anisminic.[9]

5 (1969) 2 WLR 163

6 (1968) AC 192

7 (1981) AC 374

8 (1983) 2 AC 237G9 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 haveopined that the true effect of Anisminic was still in doubt. People like Sir JohnLaws, quoted by Prof. Paul Craig, and which was extracted in the decision in Regina(Privacy International) v. Investigatory Powers Tribunal, [2019] UKSC 22, seemsto have opined that once the distinction between jurisdictional and non-jurisdictional errors was discarded, there was no longer any need for the ultra viresHprinciple and that ultra vires is, in truth, a fig-leaf which has enabled the courts

18. Interestingly just four days before the House of Lordsdelivered the judgment in Anisminic (on 17.12.1968), an identical viewwas taken by a three member bench of this court (delivered on13.12.1968) in Official Trustee, West Bengal & Others vs. SachindraNath Chatterjee & Another,[10] approving the view taken by the Fullbench of the Calcutta High Court in Hirday Nath Roy vs.“Ramachandra Barna Sarma.[11] It was held therein that before acourt can be held to have jurisdiction to decide a particular matterit must not only have jurisdiction to try the suit brought, but mustalso have the authority to pass the orders sought for.” This courtalso pointed out that it is not sufficient that it has some jurisdiction inrelation 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) thepower to grant the relief asked for. This decision in Official Trusteewas followed in a recent decision in Indian Farmers Fertiliser Co-operative Ltd. vs. Bhadra Products,[12] quite independent of Anisminicand its followers.

19. Though the decision in Official Trustee preceded Anisminicand can proudly be claimed as the Indian precursor to an English legallandmark, several subsequent decisions of this court consideredAnisminic alone to have provided the breakthrough. In MafatlalIndustries & Others vs. Union of India,[13] Paripoornan, J. providedthe list of Indian cases which cited Anisminic with approval. They are:

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

to intervene in decisions without an assertion of judicial power which too nakedlyconfronts the established authority of the Executive or other public bodies. Accordingto Sir John Laws, Anisminic has produced the historical irony that with all itsemphasis on nullity, it nevertheless erected the legal milestone which pointed towardsa public law jurisprudence in which the concept of voidness and the ultra viresdoctrine have become redundant. In Regina (Privacy International) the U.KSupreme court also quoted the editors of De Smith’s Judicial Review to the effect:“The distinction between jurisdictional and non-jurisdictional error is ultimatelybased 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 alladministrative action should be simply, lawful, whether or not jurisdictionallylawful.”10 (1969) 3 SCR 9211 ILR LXVIII Calcutta 13812 (2018) 2 SCC 53413 (1997) 5 SCC 536

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

(3) R. B. Shreeram Durga Prasad & Fatehchand NursingDas vs. Settlement Commission (IT & WT) & Another,(1989) 1 SCC 628

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(4) Associated Engineering Co. vs. Govt. of AndhraPradesh & 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., madeCcertain interesting observations about Anisminic. The learned Judgeobserved that the effect of the dicta in Anisminic is to reduce thedifference between jurisdictional error and error of law within jurisdictionalmost to a vanishing point and that it came perilously close to sayingthat there is jurisdiction if the decision is right in law, but none if it isDwrong. Anisminic, according to him virtually left a court or tribunal withno 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 thatthough the dividing line between lack of jurisdiction or power and theEerroneous exercise of it has become thin with Anisminic, the distinctionhad not been wiped out completely.

22. But it is relevant to note that Official Trustee/Anisminic andwhat followed both, were mostly in the context of the power of thesuperior court to interfere with the decisions of subordinate courts/tribunals or administrative authorities. Most of these decisions were notFin the context of the exercise of jurisdiction despite the availability ofalternative remedy. That there exists such a distinction between (i) caseswhere the jurisdiction of a superior court is questioned on the basis ofouster clauses and (ii) cases where the exercise of jurisdiction by asuperior court is questioned on the ground of availability of alternativeGremedy, was recognized even in Anisminic, when Lord Reid referredto the decision in Smith vs. East Elloe Rural District Council[16]asposing some difficulty. As a result, the Court of Appeal held in R vs.

14 (1972) 2 SCC 42715 (1974) 3 SCC 415H16 (1956) AC 736

Secretary of State for the Environment, Ex p. Ostler[17] that theavailability of a statutory right to challenge within a specified time limit,among other points, provided a sufficient basis for distinguishingAnisminic. This was taken note of by the UK Supreme Court inRegina (Privacy International). Therefore the question whether theerror committed by an administrative authority/tribunal or a court of lawwent to jurisdiction or whether it was within jurisdiction may still berelevant to test whether a statutory alternative remedy should be allowedto be bypassed or not.

23. In several cases, both in England and India, the ancient rulestated by Willes, J., in Wolverhampton New Waterworks Co. vs.Hawkesford[18]to the effect that where a liability not existing atCommon Law is created by a statute, which also gives a special andparticular remedy for enforcing it, the remedy provided by the statutemust be followed, has been quoted with approval. For instance, UnionBank of India vs. Satyawati Tandon[19] held that the availability of aremedy of appeal under the DRT Act, 1993 and SARFAESI Act, 2002should deter the High Courts from exercising the jurisdiction underArticle 226. Similarly, the availability of remedy of appeal under Section173 of the Motor Vehicles Act, 1988 as against an award of theAccidents Claims Tribunal was held in Sadhana Lodh vs. NationalInsurance Co.[20]as sufficient for the High Court to refuse to exerciseits supervisory jurisdiction. The same principle was applied in (1)Nivedita Sharma vs. Cellular Operators Association of India[21]and(2) Cicily Kallarackal vs. Vehicle Factory[22]in relation to the awardspassed by the special fora constituted under the Consumer ProtectionAct, 1986.

24. Therefore in so far as the question of exercise of the powerconferred by Article 226, despite the availability of a statutory alternativeremedy, is concerned, Anisminic cannot be relied upon. The distinctionbetween the lack of jurisdiction and the wrongful exercise of theavailable jurisdiction, should certainly be taken into account by HighCourts, when Article 226 is sought to be invoked bypassing a statutoryalternative remedy provided by a special statute.

17 (1977) QB 12218 [1859] 6 CB (NS) 33619 (2010) 8 SCC 110

20 (2003) 3 SCC 524

21 (2011) 14 SCC 337

22 (2012) 8 SCC 524

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A25. On the basis of this principle, let us now see whether thecase of the State of Karnataka fell under the category of (1) lack ofjurisdiction on the part of the NCLT to issue a direction in relation to amatter covered by MMDR Act, 1957 and the Statutory Rules issuedthereunder or (2) mere wrongful exercise of a recognised jurisdiction,say for instance, asking a wrong question or applying a wrong testBor granting a wrong relief.

26. The MMDR Act, 1957 is a Parliamentary enactment traceableto 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 minesand development of minerals. After the Amendment Act 38 of 1999,Cthe object of the Act is to provide for the development and regulationof mines and minerals. Section 2 of the Act declares that it is expedientin public interest that the Union should take under its control, theregulation of mines and the development of minerals. Section 4 (1) ofthe Act prohibits the undertaking of mining operations (andDreconnaissance and prospecting operations), in any area, except underand in accordance with the terms and conditions of a mining leasegranted under the Act and the Rules made thereunder. After theinsertion of Sub-section (1A) in Section 4, by the Amendment Act 38of 1999, even transportation or storage of any mineral otherwise thanin accordance with the provisions of the Act and the Rules madeEthereunder is prohibited. The Act also imposes restrictions on the grantof mining leases. Section 8A of the Act, inserted by the AmendmentAct 10 of 2015 provides for deemed grant and deemed extension ofdifferent kinds. Primarily Section 8A applies only to minerals other thanthose specified in Parts A and B of the First Schedule. In so far asFminor minerals are concerned, the State government is empowered tomake rules for regulating the grant of mining leases. It is important tonote that Section 19 of the Act declares any mining lease granted,renewed or acquired in contravention of the provisions of the Act orany rule or order made thereunder to be void and of no effect. The Act confers powers of search, entry and inspection upon officersGauthorised by the Central or State governments. Section 30 of the Actempowers the Central government, either of its own motion or on anapplication made by the aggrieved party, to revise any order made bya State government in exercise of the powers conferred under the Actwith respect to any mineral other than a minor mineral. The procedureHfor filing a revision is prescribed in Rule 54 and the method of disposal of such revisions is prescribed in Rule 55 of the Mineral ConcessionRules, 1960.

27. Though in Thressiamma Jacob vs. Deptt. of Mining &Geology,[23] this court held that the mineral wealth in the sub-soil wouldgo along with the ownership of the land, the question of entitlement ofthe government to charge royalty was left open, as it was pendingreference to the constitution bench. But in the case on hand, the landwhich formed the subject matter of mining lease, belongs to the Stateof Karnataka. The liberties and privileges granted to the CorporateDebtor by the Government of Karnataka under the mining lease, aredelineated in Part IV of the mining lease. The mining lease was issuedin accordance with the statutory rules namely Mineral Concession Rules,1960. Therefore the relationship between the Corporate Debtor and theGovernment of Karnataka under the mining lease is not just contractualbut also statutorily governed. As we have indicated elsewhere, theMMDR Act, 1957 is a Parliamentary enactment traceable to Entry 54in List I of the Seventh Schedule. This Entry 54 speaks about regulationof mines and development of minerals to the extent to which suchregulation and development under the control of the Union, is declaredby Parliament by law to be expedient in public interest. In fact theexpression “public interest” is used only in 3 out of 97 Entries inList I, one of which is Entry 54, the other two being Entries 52and 56. Interestingly, Entry 23 in List II does not use the expression“public interest”, though it also deals with regulation of mines and mineraldevelopment, 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 asfollows:

“It is hereby declared that it is expedient in the public interestthat Union should take under its control the regulation ofmines and the development of minerals to the extenthereinafter provided.”

28. Therefore as rightly contended by the learned AttorneyGeneral, the decision of the Government of Karnataka to refuse thebenefit of deemed extension of lease, is in the public law domain andhence the correctness of the said decision can be called into question A

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Aonly in a superior court which is vested with the power of judicial reviewover administrative action. The NCLT, being a creature of a specialstatute to discharge certain specific functions, cannot be elevated tothe status of a superior court having the power of judicial review overadministrative action. Judicial review, as observed by this court in Sub-Committee on Judicial Accountability vs. Union of India,[24] flowsBfrom the concept of a higher law, namely the Constitution. Paragraph61 of the said decision captures this position as follows:

“But where, as in this country and unlike in England, thereis a written Constitution which constitutes the fundamentaland in that sense a “higher law” and acts as a limitationCupon the legislature and other organs of the State as granteesunder the Constitution, the usual incidents of parliamentarysovereignty do not obtain and the concept is one of ‘limitedgovernment’. Judicial review is, indeed, an incident of andflows from this concept of the fundamental and the higherDlaw being the touchstone of the limits of the powers of thevarious organs of the State which derive power and authorityunder the Constitution and that the judicial wing is theinterpreter of the Constitution and, therefore, of the limits ofauthority of the different organs of the State. It is to be notedthat the British Parliament with the Crown is supreme andEits powers are unlimited and courts have no power of judicialreview of legislation.”

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

Jurisdiction and powers of NCLTG

30. NCLT and NCLAT are constituted, not under the IBC, 2016but under Sections 408 and 410 of the Companies Act, 2013. Withoutspecifically defining the powers and functions of the NCLT, Section408 of the Companies Act, 2013 simply states that the Central H24 (1991) 4 SCC 699

Government shall constitute a National Company Law Tribunal, toexercise and discharge such powers and functions as are or may be,conferred on it by or under the Companies Act or any other law forthe time being in force. Insofar as NCLAT is concerned, Section 410of the Companies Act merely states that the Central Government shallconstitute an Appellate Tribunal for hearing appeals against the Ordersof the Tribunal. The matters that fall within the jurisdiction of the NCLT,under the Companies Act, 2013, lie scattered all over the CompaniesAct. Therefore, Sections 420 and 424 of the Companies Act, 2013indicate in broad terms, merely the procedure to be followed by theNCLT and NCLAT before passing orders. However, there are noseparate provisions in the Companies Act, exclusively dealing with thejurisdiction and powers of NCLT.

31. In contrast, Sub-sections (4) and (5) of Section 60 of IBC,2016 give an indication respectively about the powers and jurisdictionof the NCLT. Section 60 in entirety reads as follows:- “Adjudicating Authority for corporate persons.-(1) TheAdjudicating Authority, in relation to insolvency resolutionand liquidation for corporate persons including corporatedebtors and personal guarantors thereof shall be theNational Company Law Tribunal having territorialjurisdiction over the place where the registered office of thecorporate person is located.

(2) Without prejudice to sub-section (1) and notwithstandinganything to the contrary contained in this Code, where acorporate insolvency resolution process or liquidationproceeding of a corporate debtor is pending before theNational Company Law Tribunal, an application relating tothe insolvency resolution or [liquidation or bankruptcy of acorporate guarantor or personal guarantor, as the case maybe, of such corporate debtor] shall be filed before suchNational Company Law Tribunal.

(3) An insolvency resolution process or [liquidation orbankruptcy of a corporate guarantor or personal guarantor,as the case may be, of the corporate debtor] pending in anycourt or tribunal shall stand transferred to the AdjudicatingAuthority dealing with insolvency resolution process orliquidation proceeding of such corporate debtor.

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(4) The National Company Law Tribunal shall be vestedwith all the powers of the Debt Recovery Tribunal ascontemplated under Part III in of this Code for the purposeof sub-section (2).

(5) Notwithstanding anything to the contrary contained inBany other law for the time being in force, the NationalCompany Law Tribunal shall have jurisdiction to entertainor dispose of –

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

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

(c) any question of priorities or any question of law orfacts, arising out of or in relation to the insolvencyresolution or liquidation proceedings of thecorporate debtor or corporate person under thisCode.

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

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F32. Sub-section (4) of Section 60 of IBC, 2016 states that theNCLT will have all the powers of the DRT as contemplated under PartIII of the Code for the purposes of Sub-section (2). Sub-section (2)deals with a situation where the insolvency resolution or liquidation orbankruptcy of a corporate guarantor or personal guarantor of acorporate debtor is taken up, when CIRP or liquidation proceeding ofGsuch a corporate debtor is already pending before NCLT. The objectof Sub-section (2) is to group together (A) the CIRP or liquidationproceeding of a corporate debtor and (B) the insolvency resolution orliquidation or bankruptcy of a corporate guarantor or personal guarantorof the very same corporate debtor, so that a single Forum may dealHwith both. This is to ensure that the CIRP of a corporate debtor and the insolvency resolution of the individual guarantors of the very samecorporate debtor do not proceed on different tracks, before differentFora, leading to conflict of interests, situations or decisions.

33. If the object of Sub-section (2) of Section 60 is to ensurethat the insolvency resolutions of the corporate debtor and its guarantorsare dealt with together, then the question that arises is as to why thereshould be a reference to the powers of the DRT in Sub-section (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 Authorityin relation to insolvency matters of individuals and firms. This is incontrast to Section 60(1) which names the NCLT as the AdjudicatingAuthority in relation to insolvency resolution and liquidation of corporatepersons including corporate debtors and personal guarantors. Theexpression “personal guarantor” is defined in Section 5(22) to meanan individual who is the surety in a contract of guarantee to a corporatedebtor. Therefore the object of Sub-section (2) of Section 60 is to avoidany confusion that may arise on account of Section 179(1) and to ensurethat whenever a CIRP is initiated against a corporate debtor, NCLTwill be the Adjudicating Authority not only in respect of such corporatedebtor but also in respect of the individual who stood as surety to suchcorporate debtor, notwithstanding the naming of the DRT under Section179(1) as the Adjudicating Authority for the insolvency resolution ofindividuals. This is also why Sub-section (2) of Section 60 uses thephrase “notwithstanding anything to the contrary contained in this Code”.

34. Sub-section (2) of Section 179 confers jurisdiction upon DRTto entertain and dispose of (i) any suit or proceeding by or against theindividual debtor (ii) any claim made by or against the individual debtorand (iii) any question of priorities or any other question whether of lawor facts arising out of or in relation to insolvency and bankruptcy ofthe individual debtor. Clauses (a), (b) and (c) of Sub-section (2) ofSection 179 are identical to Clauses (a), (b) and (c) of Sub-section (5)of Section 60. Therefore the only reason why Sub-section (4) isincorporated in Section 60 is to ensure that NCLT will exercisejurisdiction – (1) not only to entertain and dispose of matters referredto in Clauses (a), (b) and (c) of Sub-section (5) of Section 60 in relationto the corporate debtor, (2) but also to entertain and dispose of thematters specified in Clauses (a), (b) and (c) of Sub-section (2) ofSection 179, whenever the contingency stated in Section 60(2) arises.

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A35. Interestingly there are separate provisions both in Part II andPart III of IBC, 2016 ousting the jurisdiction of civil courts. While Section63 contained in Part II bars the jurisdiction of a civil court in respectof any matter on which NCLT or NCLAT will have jurisdiction, Section180 contained in Part III bars the jurisdiction of civil courts in respectof any matter on which DRT or DRAT has jurisdiction. But curiouslyBthere is something more in Section 180 than what is found in Section63, which can be appreciated if both are presented in a tabular column.

Though what is found in Sub-section (2) of Section 180 is notfound in the corresponding provision in Part II namely, Section 63, asimilar provision is incorporated in an unrelated provision namely SectionF64, which primarily deals with expeditious disposal of applications. Thus,there appears to be some mix-up. However, we are not concernedabout the same in this case and we have made a reference to the sameonly because of Sub-section (4) of Section 60, vesting upon the NCLT,all the powers of the DRT.

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36. From a combined reading of Sub-section (4) and Sub-section(2) of Section 60 with Section 179, it is clear that none of them holdthe key to the question as to whether NCLT would have jurisdictionover a decision taken by the government under the provisions of MMDRAct, 1957 and the Rules issued there-under. The only provision whichHcan probably throw light on this question would be Sub-section (5) of

Section 60, as it speaks about the jurisdiction of the NCLT. Clause (c)of Sub-section (5) of Section 60 is very broad in its sweep, in that itspeaks about any question of law or fact, arising out of or in relation toinsolvency resolution. But a decision taken by the government or astatutory authority in relation to a matter which is in the realm of publiclaw, cannot, by any stretch of imagination, be brought within the foldof the phrase “arising out of or in relation to the insolvencyresolution” appearing in Clause (c) of Sub-section (5). Let us take forinstance a case where a corporate debtor had suffered an order at thehands of the Income Tax Appellate Tribunal, at the time of initiation ofCIRP. If Section 60(5)(c) of IBC is interpreted to include all questionsof law or facts under the sky, an Interim Resolution Professional/Resolution Professional will then claim a right to challenge the orderof the Income Tax Appellate Tribunal before the NCLT, instead ofmoving 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 adifferent matter, if proceedings under statutes like Income Tax Act hadattained finality, fastening a liability upon the corporate debtor, since, insuch cases, the dues payable to the Government would come withinthe meaning of the expression “operational debt” under Section 5(21),making the Government an “operational creditor” in terms of Section5(20). The moment the dues to the Government are crystalised andwhat remains is only payment, the claim of the Government will haveto be adjudicated and paid only in a manner prescribed in the resolutionplan as approved by the Adjudicating Authority, namely the NCLT. )

37. It was argued by all the learned Senior Counsel on the sideof the appellants that an Interim Resolution Professional is duty boundunder Section 20(1) to preserve the value of the property of theCorporate Debtor and that the word “property” is interpreted inSection 3(27) to include even actionable claims as well as everydescription of interest, present or future or vested or contingentinterest arising out of or incidental to property and that thereforethe Interim Resolution Professional is entitled to move the NCLT forappropriate orders, on the basis that lease is a property right and NCLThas jurisdiction under Section 60(5) to entertain any claim by theCorporate Debtor.

38. But the said argument cannot be sustained for the simplereason that the duties of a resolution professional are entirely different AB

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Afrom the jurisdiction and powers of NCLT. In fact Section 20(1) cannotbe read in isolation, but has to be read in conjunction with Section18(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 interimBresolution professional shall perform the following duties,namely:- (a) …

(b) …

(c) …

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(d) …

(e) …

(f) take control and custody of any asset over which theDcorporate debtor has ownership rights as recorded in thebalance sheet of the corporate debtor, or with informationutility or the depository of securities or any other registrythat records the ownership of assets including—

(i) …

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(ii) …

(iii) …

(iv) …

(v) …

F(vi) assets subject to the determination of ownership bya court or authority; (g) …

Explanation. - For the purposes of this section, the termG‘assets’ shall not include the following namely:-

(a) assets owned by a third party in possession of thecorporate debtor held under trust or undercontractual arrangements including bailment; (b) assets of any Indian or foreign subsidiary of theHcorporate debtor; and

(c) such other assets as may be notified by the CentralGovernment in consultation with any financial sectorregulator.”

39. If NCLT has been conferred with jurisdiction to decide alltypes of claims to property, of the corporate debtor, Section 18(f)(vi)would not have made the task of the interim resolution professional intaking control and custody of an asset over which the corporate debtorhas ownership rights, subject to the determination of ownership bya court or other authority. In fact an asset owned by a third party,but which is in the possession of the corporate debtor under contractualarrangements, is specifically kept out of the definition of the term“assets” under the Explanation to Section 18. This assumes significancein view of the language used in Sections 18 and 25 in contrast to thelanguage employed in Section 20. Section 18 speaks about the dutiesof the interim resolution professional and Section 25 speaks about theduties of resolution professional. These two provisions use the word“assets”, while Section 20(1) uses the word “property” together withthe 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 acton behalf of the corporate debtor with third parties and exercise rightsfor the benefit of the corporate debtor in judicial, quasi-judicial andarbitration 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 topreserve and protect the assets of the corporate debtor,including the continued business operations of the corporatedebtor.

(2) For the purposes of sub-section (1), the resolutionprofessional shall undertake the following actions:- (a) ………….

(b) represent and act on behalf of the corporate debtorwith third parties, exercise rights for the benefit ofthe corporate debtor in judicial, quasi judicial andarbitration proceedings.”

This shows that wherever the corporate debtor has to exerciserights in judicial, quasi-judicial proceedings, the resolution professional A

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Acannot short-circuit the same and bring a claim before NCLT takingadvantage of Section 60(5).

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

41. In fact the Resolution Professional in this case appears tohave understood this legal position correctly, in the initial stages. Thisis why when the Government of Karnataka did not grant the benefitCof deemed extension, even after the expiry of the lease on 25.05.2018,the Resolution Professional moved the High Court by way of a writpetition in WP No. 23075 of 2018. The prayer made in WP No. 23075of 2018 was for a declaration that the mining lease should be deemedto be valid upto 31.03.2020. If NCLT was omnipotent, the ResolutionDProfessional 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 of2018), the Government of Karnataka passed an order dated 26.09.2018rejecting the claim. Therefore the Resolution Professional, representingEthe Corporate Debtor filed a memo before the High Court seekingwithdrawal of the writ petition “with liberty to file a fresh writpetition”. However the High Court, while dismissing the writ petitionby order dated 28.09.2018 was little considerate and it disposed of thewrit petition as withdrawn with liberty to take recourse to appropriateremedies in accordance with law. Perhaps taking advantage of thisFliberty, the Resolution Applicant moved the NCLT against the order ofrejection passed by the Government of Karnataka. If NCLT was notconsidered by the Resolution Professional, in the first instance, to beempowered to issue a declaration of deemed extension of lease, wefail to understand how NCLT could be considered to have the powerof judicial review over the order of rejection.G

43. The fact that the Government of Karnataka agreed in thesecond writ petition WP No. 5002 of 2019 to go back to the NCLTand contest the Miscellaneous Application filed by the ResolutionProfessional, would not tantamount to conceding the jurisdiction ofNCLT. In any case a tribunal which is the creature of a statute cannotHbe 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 themoratorium provided for in Section 14 could have any impact upon theright of the Government to refuse the extension of lease. The purposeof moratorium is only to preserve the status quo and not to create anew right. Therefore nothing turns on Section 14 of IBC, 2016. EvenSection 14 (1) (d), of IBC, 2016, which prohibits, during the period ofmoratorium, the recovery of any property by an owner or lessor wheresuch 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 prohibitedtherein, is only the right not to be dispossessed, but not the right to haverenewal of the lease of such property. In fact the right not to bedispossessed, found in Section 14 (1) (d), will have nothing to do withthe rights conferred by a mining lease especially on a government land.What is granted under the deed of mining lease in ML 2293 dated04.01.2001, by the Government of Karnataka, to the Corporate Debtor,was the right to mine, excavate and recover iron ore and red oxide fora specified period of time. The Deed of Lease contains a Scheduledivided into several parts. Part-I of the Schedule describes the locationand area of the lease. Part-II indicates the liberties and privileges ofthe lessee. The restrictions and conditions subject to which the grantcan be enjoyed are found in Part-III of the Schedule. The liberties,powers and privileges reserved to the Government, despite the grant,are indicated in Part-IV. This Part-IV entitles the Government to workon other minerals (other than iron ore and red oxide) on the same land,even during the subsistence of the lease. Therefore, what was grantedto the Corporate Debtor was not an exclusive possession of the areain question, so as to enable the Resolution Professional to invoke Section14 (1) (d). Section 14 (1) (d) may have no application to situations ofthis nature.

45. Therefore, in fine, our answer to the first question would bethat NCLT did not have jurisdiction to entertain an application againstthe Government of Karnataka for a direction to execute SupplementalLease Deeds for the extension of the mining lease. Since NCLT choseto exercise a jurisdiction not vested in it in law, the High Court ofKarnataka was justified in entertaining the writ petition, on the basisthat NCLT was coram non judice.

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AQuestion No. 2

46. The second question that arises for our consideration is asto 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 theBGovernment of Karnataka before the High Court that they chose tochallenge the order of the NCLT before the High Court, instead ofbefore NCLAT, due to the fraudulent and collusive manner in whichthe CIRP was initiated by one of the related parties of the CorporateDebtor themselves. In the writ petition filed by the Government ofCKarnataka before the High Court, it was specifically pleaded (i) thatthe Managing Director of the Corporate Debtor entered into anagreement on 06.02.2011 with one M/s. D. P. Exports, for carrying outmining operations on behalf of the Corporate Debtor and also formanaging its affairs and selling 100% of the extracted iron ore; (ii) thatthe said M/s. D. P. Exports was a partnership firm of which one Mr.DM. Poobalan and his wife were partners; (iii) that another agreementdated 11.12.2012 was entered into between the Corporate Debtor anda proprietary concern by name M/s. P. & D. Enterprises, of which thevery 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 12.12.2012Ebetween the Corporate Debtor and a company by name M/s.Udhyaman Investments Pvt. Ltd., represented by its authorized signatoryMr. M. Poobalan; (vi) that there were a few communications sent bythe said Mr. Poobalan to various authorities, claiming himself to be theauthorized signatory of the Corporate Debtor; (vii) that an MOU wasFentered 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) thatthe said agreement was purportedly executed at Florida, but witnessedat Chennai; (ix) that Mr. Poobalan even communicated to the Director,Department of Mines & Geology as well as the Monitoring Committee,Gtaking 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 theResolution Applicant namely, M/s. Embassy Property Development Pvt.Ltd. as well as the Financial Creditor who initiated CIRP namely, M/s.HUdhyaman Investments Pvt. Ltd. are all related parties and (xii) that Mr. Poobalan had not only acted on behalf of the Corporate Debtorbefore the statutory authorities, but also happened to be the authorizedsignatory of the Financial Creditor who initiated the CIRP, eventuallyfor the benefit of the Resolution Applicant which is a related party ofthe Financial Creditor.

48. In the light of the above averments, the Government ofKarnataka thought fit to invoke the jurisdiction of the High Court underArticle 226 without taking recourse to the statutory alternative remedyof appeal before the NCLAT. But the contention of the appellants hereinis that allegations of fraud and collusion can also be inquired into byNCLT and NCLAT and that therefore the Government could not havebypassed the statutory remedy.

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

“65. Fraudulent or malicious initiation of proceedings. –(1) If, any person initiates the insolvency resolution processor liquidation proceedings fraudulently or with maliciousintent for any purpose other than for the resolution ofinsolvency or liquidation, as the case may be, theadjudicating authority may impose upon such person apenalty which shall not be less than one lakh rupees, butmay extend to one crore rupees.

(2) If, any person initiates voluntary liquidation proceedingswith the intent to defraud any person the adjudicatingauthority may impose upon such person a penalty whichshall not be less than one lakh rupees but may extend to onecrore rupees.”

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

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A51. Therefore, if, as contended by the Government of Karnataka,the CIRP had been initiated by one and the same person taking differentavatars, not for the genuine purpose of resolution of insolvency orliquidation, but for the collateral purpose of cornering the mine and themining lease, the same would fall squarely within the mischief addressedby Section 65(1). Therefore, it is clear that NCLT has jurisdiction toBenquire into allegations of fraud. As a corollary, NCLAT will also havejurisdiction. Hence, fraudulent initiation of CIRP cannot be a ground tobypass the alternative remedy of appeal provided in Section 61.

Conclusion

C52. The upshot of the above discussion is that though NCLT andNCLAT would have jurisdiction to enquire into questions of fraud, theywould not have jurisdiction to adjudicate upon disputes such as thosearising under MMDR Act, 1957 and the rules issued thereunder,especially when the disputes revolve around decisions of statutory orquasi-judicial authorities, which can be corrected only by way of judicialDreview of administrative action. Hence, the High Court was justifiedin entertaining the writ petition and we see no reason to interfere withthe decision of the High Court. Therefore, the appeals are dismissed.There will be no order as to costs.

EDevika Gujral

Appeals dismissed.

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