LexM/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD.V. STATE OF KARNATAKA & ORS. versus STATE OF KARNATAKA & ORS
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A B C D E F G H 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 BOSE AND V. RAMASUBRAMANIAN, JJ.] Constitution of India: Arts.226/227 – Scope of interference – Corporate insolvency resolution process initiated against a corporate debtor – Corporate debtor held a mining lease granted by Government of Karnataka which was to expire – Resolution Professional sought benefit of deemed extension of lease – State Government rejected the proposal for deemed extension of mining lease – The said order challenged by Resolution Professional – NCLT set aside the order of State Government on the ground that the same was in violation of moratorium declared in terms of s.14(1) of IBC, 2016 and directed the State Government to execute Lease Deeds in favour of Corporate Debtor – By impugned order, High Court granted stay of operation of directions contained in the order of NCLT – Whether High Court ought to have interfered under Art.226/227 of the Constitution, with an order passed by NCLT in proceeding under the IBC, 2016, despite the availability of a statutory alternative remedy of appeal to NCLAT – Held: The decision of the State Government to refuse the benefit of deemed extension of lease, is in the public law domain and, therefore, the correctness of the said decision can be called into question only in a superior court which is vested with the power of judicial review over administrative action – The NCLT, being a creature of a special statute to discharge certain specific functions, cannot be elevated to the status of a superior court having such powers – The NCLT is not even a Civil Court, which has jurisdiction to try all suits of a civil nature excepting suits, of which their cognizance is either expressly or impliedly barred – Therefore NCLT can exercise only such powers within the contours of jurisdiction as prescribed by the statute, the law in respect of which, it is called upon to administer – Though NCLT and NCLAT have jurisdiction to enquire into questions of fraud, they would not have jurisdiction to [2019] 17 S.C.R. 559 559 A B C D E F G H 560 SUPREME COURT REPORTS [2019] 17 S.C.R. adjudicate upon disputes such as those arising under MMDR Act, 1957 and the rules issued thereunder, especially when the disputes revolve around decisions of statutory or quasi-judicial authorities, which can be corrected only by way of judicial review of administrative action – The moratorium provided for in s.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, NCLT did not have jurisdiction to entertain an application against the State Government for a direction to execute Supplemental Lease Deeds for the extension of the mining lease – Since NCLT chose to exercise a jurisdiction not vested in it in law, the High Court was justified in entertaining the writ petition, on the basis that NCLT was coram non judice – Mines and Minerals (Development and Regulation) Act, 1957 – Insolvency and Bankruptcy Code, 2016 – Judicial review. Insolvency and Bankruptcy Code, 2016: Scope of the jurisdiction and the nature of the powers exercised by NCLT and NCLAT under the provisions of IBC, 2016 – Discussed. Insolvency and Bankruptcy Code, 2016: Whether the questions of fraud can be inquired into by the NCLT/NCLAT in the proceedings initiated under the IBC Code – Held: NCLT has jurisdiction to enquire into allegations of fraud – As a corollary, NCLAT will also have jurisdiction – Fraudulent initiation of CIRP cannot be a ground to bypass the alternative remedy of appeal provided in s.61. Constitution of India: Arts.226/227 – Exercise of jurisdiction, exception – In cases where a statutory alternative remedy of appeal is available, one of the exceptions to the self imposed restraint of the High Court 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 exercise of the available jurisdiction – The distinction between lack of jurisdiction and wrongful exercise of available jurisdiction, should certainly be taken into account by H
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