M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD v. STATE OF KARNATAKA & Ors.

1.2 Article 226 (1) recognizes the power of every High Court to issue (i) directions, (ii) orders or (iii) writs. They can be issued to (i) any person or (ii) authority including the Government. They may be issued (i) for the enforcement of any of the rights conferred by Part III and (ii) for any other purpose. But the exercise of the power recognized by Clause (1) of Article 226, is restricted by the territorial jurisdiction of the High Court, determined either by its geographical location or by the place where the cause of action, in whole or in part, arose. While the nature of the power exercised by the High Court is delineated in Clause (1) of Article 226, the jurisdiction of the High Court for the exercise of such power, is spelt out in both Clauses (1) and (2) of Article 226. [Para 13] [579-B-D] M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD. v. STATE OF KARNATAKA 563 M/s Innoventive Industries Limited v. ICICI Bank, AIR 2017 SC 4084 : [2017] 8 SCR 33 – relied on.

1.3 Traditionally, the jurisdiction under Article 226 was considered as limited to ensuring that the judicial or quasi-judicial tribunals or administrative bodies do not exercise their powers in excess of their statutory limits. But in view of the use of the expression “any person” in Article 226 (1), courts recognized that the jurisdiction of the High Court extended even over private individuals, provided the nature of the duties performed by such private individuals, are public in nature. Therefore, the remedies provided under Article 226 are public law remedies, which stand in contrast to the remedies available in private law. One of the well recognized exceptions to the self-imposed restraint of the High Courts, in cases where a statutory alternative remedy of appeal is available, is the lack of jurisdiction on the part of the statutory/quasi-judicial authority, against whose order a judicial review 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.

Whether the case of the State of Karnataka fell under the category of (1) lack of jurisdiction on the part of the NCLT to issue a direction in relation to a matter covered by MMDR Act, 1957 and the Statutory Rules issued thereunder or (2) mere wrongful exercise of a recognised jurisdiction. In the case on hand, the land which formed the subject matter of mining lease, belongs to the State of Karnataka. The liberties and privileges granted to the Corporate Debtor by the Government of Karnataka under the mining lease, are delineated in Part IV of the mining lease. The mining lease was issued in accordance with the statutory rules namely Mineral Concession Rules, 1960. Therefore, the relationship between the Corporate Debtor and the Government of Karnataka under the mining lease is not just contractual but also statutorily governed. The MMDR Act, 1957 is a Parliamentary enactment traceable to Entry 54 in List I of the Seventh Schedule.

Jurisdiction and powers of NCLT

3.1 NCLT and NCLAT are constituted, not under the IBC, 2016 but under Sections 408 and 410 of the Companies Act, 2013. Without specifically defining the powers and functions of the NCLT, Section 408 of the Companies Act, 2013 simply states that the Central Government shall constitute a National Company Law Tribunal, to exercise and discharge such powers and functions as are or may be, conferred on it by or under the Companies Act or any other law for the time being in force. M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD. v. STATE OF KARNATAKA 565 Insofar as NCLAT is concerned, Section 410 of the Companies Act merely states that the Central Government shall constitute an Appellate Tribunal for hearing appeals against the Orders of the Tribunal. The matters that fall within the jurisdiction of the NCLT, under the Companies Act, 2013, lie scattered all over the Companies Act. Therefore, Sections 420 and 424 of the Companies Act, 2013 indicate in broad terms, merely the procedure to be followed by the NCLT and NCLAT before passing orders. However, there are no separate provisions in the Companies Act, exclusively dealing with the jurisdiction and powers of NCLT. In contrast, Sub-sections (4) and (5) of Section 60 of IBC, 2016 give an indication respectively about powers and jurisdiction of the NCLT. [Paras 30, 31] [586-G; 587-A-D]

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

3.3 If the object of Sub-section (2) of Section 60 is to ensure that the insolvency resolutions of the corporate debtor and its guarantors are dealt with together, then the question that arises is as to why there should be a reference to the powers of the DRT in 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 Authority in relation to insolvency matters of individuals and firms. This is in contrast A B C D E F G H 566 SUPREME COURT REPORTS [2019] 17 S.C.R. A B C D E F G H to Section 60(1) which names the NCLT as the Adjudicating Authority in relation to insolvency resolution and liquidation of corporate persons including corporate debtors and personal guarantors. The expression “personal guarantor” is defined in Section 5(22) to mean an individual who is the surety in a contract of guarantee to a corporate debtor. Therefore the object of Sub-section (2) of Section 60 is to avoid any confusion that may arise on account of Section 179(1) and to ensure that whenever a CIRP is initiated against a corporate debtor, NCLT will be the Adjudicating Authority not only in respect of such corporate debtor but also in respect of the individual who stood as surety to such corporate debtor, notwithstanding the naming of the DRT under Section 179(1) as the Adjudicating Authority for the insolvency resolution of individuals. This is also why Sub- section (2) of Section 60 uses the phrase “notwithstanding anything to the contrary contained in this Code”. [Para 33] [589- B-E]

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

3.5 A combined reading of Sub-section (4) and Sub-section (2) of Section 60 with Section 179 shows that none of them hold the key to the question as to whether NCLT would have jurisdiction over a decision taken by the government under the provisions of MMDR Act, 1957 and the Rules issued there- under. The only provision which can probably throw light on this M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD. v. STATE OF KARNATAKA 567 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 it speaks about any question of law or fact, arising out of or in relation to insolvency resolution. But a decision taken by the government or a statutory authority in relation to a matter which is in the realm of public law, cannot, by any stretch of imagination, be brought within the fold of the phrase “arising out of or in relation to 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 decide all types of claims to property, of the corporate debtor, Section 18(f)(vi) would not have made the task of the interim resolution professional in taking control and custody of an asset over which the corporate debtor has ownership rights, subject to the determination of ownership by a court or other authority. In fact an asset owned by a third party, but which is in the possession of the corporate debtor under contractual arrangements, is specifically kept out of the definition of the term “assets” under the Explanation to Section 18. This assumes significance in view of the language used in Sections 18 and 25 in contrast to the language employed in Section 20. Section 18 speaks about the duties of the interim resolution professional and Section 25 speaks about the duties of resolution professional. These two provisions use the word “assets”, while Section 20(1) uses the word “property” together with the word “value”. Sections 18 and 25 do not use the expression “property”. Another important aspect is that under Section 25 (2) (b) of IBC, 2016, the resolution professional is obliged to represent and act on behalf of the corporate debtor with third parties and exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial and arbitration proceedings. Wherever the corporate debtor has to exercise rights in judicial, quasi-judicial proceedings, the resolution professional cannot short-circuit the same and bring a claim before NCLT taking advantage of Section 60(5). Therefore in the light of the statutory scheme as culled out from various provisions of the IBC, 2016 it is clear that wherever the corporate debtor has to exercise a right that falls outside the purview of the IBC, 2016 especially in the realm of the public A B C D E F G H 568 SUPREME COURT REPORTS [2019] 17 S.C.R. A B C D E F G H law, they cannot, through the resolution professional, take a bypass and go before NCLT for the enforcement of such a right. [Paras 39-40] [593-B-E-H; 594-A-B]

The moratorium provided for in Section 14 could not have any impact upon the right of the Government to refuse the extension of lease. The purpose of moratorium is only to preserve the status quo and not to create a new right. Therefore nothing turns on Section 14 of IBC, 2016. Even Section 14 (1) (d), of IBC, 2016, which prohibits, during the period of moratorium, the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor, will not go to the rescue of the corporate debtor, since what is prohibited therein, is only the right not to be dispossessed, but not the right to have renewal of the lease of such property. In fact the right not to be dispossessed, found in Section 14 (1) (d), will have nothing to do with the rights conferred by a mining lease especially on a government land. What is granted under the deed of mining lease dated 04.01.2001, by the Government of Karnataka, to the Corporate Debtor, was the right to mine, excavate and recover iron ore and red oxide for a specified period of time.

Whether NCLT is competent to enquire into allegations of fraud, especially in the matter of the very initiation of CIRP. Section 65 specifically deals with fraudulent or malicious initiation of proceedings. Even fraudulent tradings carried on by the Corporate Debtor during the insolvency resolution, can be inquired into by the Adjudicating Authority under Section 66. Section 69 makes an officer of the corporate debtor and the corporate debtor liable for punishment, f or carrying on transactions with a view to defraud creditors. Therefore, NCLT is vested with the power to inquire into (i) fraudulent initiation of proceedings as well as (ii) fraudulent transactions. Section 65(1) deals with a situation where CIRP is initiated fraudulently “for any purpose other than for the resolution of insolvency or liquidation”. It is clear that NCLT has jurisdiction to enquire into allegations of fraud. As a corollary, NCLAT will also have jurisdiction.

Leave Granted.

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

3. There are three appeals on hand, one filed by the Resolution Applicant, the second filed by the Corporate Debtor through the Resolution Professional and the third filed by the Committee of Creditors, all of which challenge an Interim Order passed by the Division Bench of High Court of Karnataka in a writ petition, staying the operation of a direction contained in the order of the NCLT, on a Miscellaneous Application filed by the Resolution Professional. A B C D E F G H 572 SUPREME COURT REPORTS [2019] 17 S.C.R. A

4. The background facts leading to the filing of the above appeals, in brief, are as follows: i) A company by name M/s. Udhyaman Investments Pvt. Ltd. which is the twelfth Respondent in the first of these three appeals, claiming to be a Financial Creditor, moved an application before the NCLT Chennai, under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the IBC, 2016), against M/ s. Tiffins Barytes Asbestos & Paints Ltd., the Corporate Debtor (which is the fourth Respondent in the first of these three appeals and which is also the appellant in the next appeal). ii) By an Order dated 12.03.2018, NCLT Chennai admitted the application, ordered the commencement of the Corporate Insolvency Resolution Process and appointed an Interim Resolution Professional. Consequently, a Moratorium was also declared in terms of Section 14 of the IBC, 2016. iii) At that time, the Corporate Debtor held a mining lease granted by the Government of Karnataka, which was to expire by 25.05.2018.

Though a notice for premature termination of the lease had already been issued on 09.08.2017, on the allegation of violation of statutory rules and the terms and conditions of the lease deed, no order of termination had been passed till the date of initiation of the Corporate Insolvency Resolution Process (hereinafter referred to as CIRP). iv) Therefore, the Interim Resolution Professional appointed by NCLT addressed a letter dated 14.03.2018 to the Chairman of the Monitoring Committee as well as the Director of Mines & Geology informing them of the commencement of CIRP. He also wrote a letter dated 21.04.2018 to the Director of Mines & Geology, seeking the benefit of deemed extension of the lease beyond 25.05.2018 upto 31.3.2020 in terms of Section 8-A (6) of the Mines & Minerals (Development and Regulation) Act, 1957 (hereinafter referred to as MMDR Act, 1957). B C D E F G H M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD. v.

STATE OF KARNATAKA [V. RAMASUBRAMANIAN, J.] 573 v) Finding that there was no response, the Interim Resolution Professional filed a writ petition in WP No. 23075 of 2018 on the file of the High Court of Karnataka, seeking a declaration that the mining lease should be deemed to be valid upto 31.03.2020 in terms of Section 8A(6) of the MMDR Act, 1957. vi) During the pendency of the writ petition, the Government of Karnataka passed an Order dated 26.09.2018, rejecting the proposal for deemed extension, on the ground that the Corporate Debtor had contravened not only the terms and conditions of the Lease Deed but also the provisions of Rule 37 of the Mineral Concession Rules, 1960 and Rule 24 of the Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Rules, 2016. vii) In view of the Order of rejection passed by the Government of Karnataka, the Corporate Debtor, represented by the Interim Resolution Professional, withdrew the Writ Petition No.23075 of 2018, on 28.09.2018, with liberty to file a fresh writ petition. viii) However, instead of filing a fresh writ petition (in accordance with the liberty sought), the Resolution Professional moved a Miscellaneous Application No.632 of 2018, before the NCLT, Chennai praying for setting aside the Order of the Government of Karnataka, and seeking a declaration that the lease should be deemed to be valid upto 31.03.2020 and also a consequential direction to the Government of Karnataka to execute Supplement Lease Deeds for the period upto 31.03.2020. ix) By an Order dated 11.12.2018, NCLT, Chennai allowed the Miscellaneous Application setting aside the Order of the Government of Karnataka on the ground that the same was in violation of the moratorium declared on 12.03.2018 in terms of Section 14(1) of IBC, 2016.

Consequently the Tribunal directed the Government of Karnataka to execute Supplement Lease Deeds in favour of the Corporate Debtor for the period upto 31.03.2020. A B C D E F G H 574 SUPREME COURT REPORTS [2019] 17 S.C.R. A B C D E F G H x) Aggrieved by the order of the NCLT, Chennai, the Government of Karnataka moved a writ petition in WP No.5002 of 2019, before the High Court of Karnataka. When the writ petition came up for hearing, it was conceded by the Resolution Professional before the High Court of Karnataka that the order of the NCLT could be set aside and the matter relegated to the Tribunal, for a decision on merits, after giving an opportunity to the State to respond to the reliefs sought in the Miscellaneous Application. It is relevant to note here that the Order of the NCLT dated 11.12.2018, was passed ex-parte, on the ground that the State did not choose to appear despite service of notice. xi) Therefore, by an Order dated 22.03.2019, the High Court of Karnataka set aside the Order of the NCLT and remanded the matter back to NCLT for a fresh consideration of the Miscellaneous Application No.632 of 2018. xii) Thereafter, the State of Karnataka filed a Statement of Objections before the NCLT, primarily raising two objections, one relating to the jurisdiction of the NCLT to adjudicate upon disputes arising out of the grant of mining leases under the MMDR Act, 1957, between the State-Lessor and the Lessee and another relating to the fraudulent and collusive manner in which the entire resolution process was initiated by the related parties of the Corporate Debtor themselves, solely with a view to corner the benefits of the mining lease. xiii) Overruling the objections of the State, the NCLT Chennai passed an Order dated 03.05.2019 allowing the Miscellaneous Application, setting aside the order of rejection and directing the Government of Karnataka to execute Supplemental Lease Deeds. xiv) Challenging the Order of the NCLT, Chennai, the Government of Karnataka moved a writ petition in WP No.41029 of 2019 before the High Court of Karnataka.

When the writ petition came up for orders as to admission, the Corporate Debtor represented by the M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD. v. STATE OF KARNATAKA [V. RAMASUBRAMANIAN, J.] 575 Resolution Professional appeared through counsel and took notice and sought time to get instructions. Therefore, the High Court, by an Order dated 12.09.2019 adjourned the matter to 23.09.2019 and granted a stay of operation of the direction contained in the impugned Order of the Tribunal. Interim Stay was necessitated in view of a Contempt Application moved by the Resolution Professional before the NCLT against the Government of Karnataka for their failure to execute Supplement Lease deeds. xv) It is against the said ad Interim Order granted by the High Court that the Resolution Applicant, the Resolution Professional and the Committee of Creditors have come up with the present appeals. Rival Contentions

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

Sh. Mukul Rohatgi, learned Senior Counsel appearing for the Resolution Applicant supplemented the aforesaid arguments and contended that though he would not go to the extent of saying that the A B C D E F G H 576 SUPREME COURT REPORTS [2019] 17 S.C.R. A B C D E F G H jurisdiction of the High Court stood completely ousted, the High Court was obliged to switch over to the hands off mode, in matters of this nature. The learned Senior Counsel also contended that the NCLT has already approved the Resolution Plan, by an order dated 12.06.2019 and that therefore the High Court cannot do anything that will tinker with or destroy the very Resolution Plan approved by the NCLT.

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

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

In response, Sh. K.K. Venugopal, learned Attorney General submitted that if a case falls under the category of inherent lack of jurisdiction on the part of a Tribunal, the exercise of jurisdiction by the Tribunal would certainly be amenable to the jurisdiction of the High Court under Article 226. Since the contours of jurisdiction of NCLT are defined in Clauses (a), (b) and (c) of Sub-section (5) of Section 60 and also since the powers of the NCLT are defined in Sub-section (4) of Section 60, to be akin to those of the Debts Recovery Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act of 1993 (hereinafter referred to as DRT Act, 1993), it was contended by the learned Attorney General that the jurisdiction of the NCLT is confined only to contractual matters inter-parties. An order passed by a statutory/ quasi-judicial authority under certain special enactments such as the MMDR Act, 1957 falls in the realm of public law and hence it was contended by the learned Attorney General that the NCLT would have no power of judicial review of such orders. The learned Attorney General also drew our attention to the minutes of the 10th meeting of the Committee of Creditors held on 27.02.2019, in which a Company other than the present Resolution Applicant was recorded to have made a better offer. But the present Resolution Applicant was able to have his plan approved, despite the offer being lesser, only because they were willing to take the risk of the mining lease not being renewed. Therefore, it was his contention that a person who was willing to take a chance, A B C D E F G H 578 SUPREME COURT REPORTS [2019] 17 S.C.R. A B C D E F G H cannot now take shelter under the approval of the Resolution Plan. On the contention that the Government of Karnataka had an efficacious alternative remedy before the NCLAT, the learned Attorney General submitted, on the basis of the decision in Barnard and Others vs. National Dock Labour Board and Others1 that when an inferior Tribunal passes an Order which is a nullity, the superior Court need not drive the party to the appellate forum stipulated by the Act. The learned Attorney General also relied upon the decision of this Court in The State of Uttar Pradesh vs. Mohammad Nooh.2 Question No. 1

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

It is beyond any pale of doubt that IBC, 2016 is a complete Code in itself. As observed by this Court in M/s Innoventive Industries Limited vs. ICICI Bank,3 it is an exhaustive code on the subject matter of insolvency in relation to corporate entities and others. It is also true that IBC, 2016 is a single Unified Umbrella Code, covering the entire gamut of the law relating to insolvency resolution of corporate persons and others in a time bound manner. The code provides a three-tier mechanism namely (i) the NCLT, which is the Adjudicating Authority (ii) the NCLAT which is the appellate authority and (iii) this court as the final authority, for dealing with all issues that may arise in relation to the 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 the NCLT is appealable to NCLAT under Section 61 of the IBC, 2016 and the orders of the NCLAT are amenable to the appellate jurisdiction of this court under Section 62. It is in this context that the action of the State of Karnataka in by-passing the remedy of appeal to NCLAT and the act of the High Court in entertaining the writ petition against the order of the NCLT are being questioned. 1 (1953) 2 WLR 995 2 (1958) SCR 595 3 AIR 2017 SC 4084 M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD. v. STATE OF KARNATAKA [V. RAMASUBRAMANIAN, J.] 579

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

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

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

One of the well recognized exceptions to the self-imposed restraint of the High Courts, in cases where a statutory alternative remedy of appeal is available, is the lack of jurisdiction on the part of the statutory/quasi-judicial authority, against whose order a judicial review is sought. Traditionally, English courts maintained a distinction between cases where a statutory/quasi-judicial authority exercised a jurisdiction not vested in it in law and cases where there was a wrongful 4 (1993) 2 SCC 746 A B C D E F G H 580 SUPREME COURT REPORTS [2019] 17 S.C.R. A B C D E F G H exercise of the available jurisdiction. An “error of jurisdiction” was always distinguished from “in excess of jurisdiction”, until the advent of the decision rendered by the House of Lords, by a majority of 3:2 in Anisminic Ltd. vs. Foreign Compensation Commission.5 After acknowledging that a confusion had been created by the observations made in Reg. vs. Governor of Brixton Prison, Ex parte Armah6 to the effect that if a Tribunal has jurisdiction to go right, it has jurisdiction to go wrong, it was held in Anisminic that the real question was not whether an authority made a wrong decision but whether they enquired into and decided a matter which they had no right to consider.

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

But In Re Racal made a distinction between courts of law on the one hand and administrative tribunal/ administrative authority on the other and held that in so far as (inferior) courts of law are concerned, the subtle distinction between errors of law that went to jurisdiction and errors of law that did not, would still survive, if the decisions of such courts are declared by the Statute to be final and conclusive. Thus one distinction was gone with Anisminic, but another was born with Re Racal. This could be seen from the after effects of Anisminic.9 5 (1969) 2 WLR 163 6 (1968) AC 192 7 (1981) AC 374 8 (1983) 2 AC 237 9 Anisminic had its own quota of problems. Prof. Wade, as pointed out in R. v. Lord President of the Privy Council Ex p. Page, [1993] A.C. 682, seems to have opined that the true effect of Anisminic was still in doubt. People like Sir John Laws, quoted by Prof. Paul Craig, and which was extracted in the decision in Regina (Privacy International) v. Investigatory Powers Tribunal, [2019] UKSC 22, seems to have opined that once the distinction between jurisdictional and non- jurisdictional errors was discarded, there was no longer any need for the ultra vires principle and that ultra vires is, in truth, a fig-leaf which has enabled the courts M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD. v. STATE OF KARNATAKA [V. RAMASUBRAMANIAN, J.] 581

Interestingly just four days before the House of Lords delivered the judgment in Anisminic (on 17.12.1968), an identical view was taken by a three member bench of this court (delivered on 13.12.1968) in Official Trustee, West Bengal & Others vs. Sachindra Nath Chatterjee & Another,10 approving the view taken by the Full bench of the Calcutta High Court in Hirday Nath Roy vs. Ramachandra Barna Sarma.11 It was held therein that “before a court can be held to have jurisdiction to decide a particular matter it must not only have jurisdiction to try the suit brought, but must also have the authority to pass the orders sought for.” This court also pointed out that it is not sufficient that it has some jurisdiction in relation to the subject matter of the suit, but its jurisdiction must include (1) the power to hear and decide the questions at issue and (2) the power to grant the relief asked for. This decision in Official Trustee was followed in a recent decision in Indian Farmers Fertiliser Co- operative Ltd. vs. Bhadra Products,12 quite independent of Anisminic and its followers.

Though the decision in Official Trustee preceded Anisminic and can proudly be claimed as the Indian precursor to an English legal landmark, several subsequent decisions of this court considered Anisminic alone to have provided the breakthrough. In Mafatlal Industries & Others vs. Union of India,13 Paripoornan, J. provided the list of Indian cases which cited Anisminic with approval. They are: (1) Union of India vs. Tarachand Gupta & Bros., (1971) 1 SCC 486 to intervene in decisions without an assertion of judicial power which too nakedly confronts the established authority of the Executive or other public bodies. According to Sir John Laws, Anisminic has produced the historical irony that with all its emphasis on nullity, it nevertheless erected the legal milestone which pointed towards a public law jurisprudence in which the concept of voidness and the ultra vires doctrine have become redundant. In Regina (Privacy International) the U.K Supreme court also quoted the editors of De Smith’s Judicial Review to the effect:

The distinction between jurisdictional and non-jurisdictional error is ultimately based upon foundations of sand. Much of the superstructure has already crumbled. What remains is likely quickly to fall away as the courts rightly insist that all administrative action should be simply, lawful, whether or not jurisdictionally lawful.

10 (1969) 3 SCR 92 11 ILR LXVIII Calcutta 138 12 (2018) 2 SCC 534 13 (1997) 5 SCC 536 A B C D E F G H 582 SUPREME COURT REPORTS [2019] 17 S.C.R. A B C D E F G H (2) A. R. Antulay vs. R. S. Nayak & Another, (1988) 2 SCC 602 (3) R. B. Shreeram Durga Prasad & Fatehchand Nursing Das vs. Settlement Commission (IT & WT) & Another, (1989) 1 SCC 628 (4) Associated Engineering Co. vs. Govt. of Andhra Pradesh & Another, (1991) 4 SCC 93 and (5) Shiv Kumar Chadha vs. Municipal Corporation of Delhi & Others, (1993) 3 SCC 161

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

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

But it is relevant to note that Official Trustee/Anisminic and what followed both, were mostly in the context of the power of the superior court to interfere with the decisions of subordinate courts/ tribunals or administrative authorities. Most of these decisions were not in the context of the exercise of jurisdiction despite the availability of alternative remedy. That there exists such a distinction between (i) cases where the jurisdiction of a superior court is questioned on the basis of ouster clauses and (ii) cases where the exercise of jurisdiction by a superior court is questioned on the ground of availability of alternative remedy, was recognized even in Anisminic, when Lord Reid referred to the decision in Smith vs. East Elloe Rural District Council16 as posing some difficulty. As a result, the Court of Appeal held in R vs.