IN THE SUPREME COURT OF INDIA CIVIL APPELLATE …

1 REPORTABLEIN THE SUPREME COURT OF INDIACIVIL APPELLATE JURISDICTIONC ivil Appeal No. 9170 of 2019(@ Special Leave Petition (C) No. 22596 of 2019) M/s Embassy Property Developments Pvt. Ltd..Appellant(s)VersusState of Karnataka & Ors..Respondent(s)WITHC ivil Appeal No. 9171 of 2019(@ Special Leave Petition (C) No. 22684 of 2019)andCivil Appeal No. 9172 of 2019(@ Special Leave Petition (C) No. 22724 of 2019)J U D G M E N TV. Ramasubramanian, seminal questions of importance namely: i) Whether the High COURT ought to interfere, underArticle 226/227 of the Constitution, with an Order1passed by the National Company Law Tribunal in aproceeding under the insolvency and Bankruptcy Code,2016, ignoring the availability of a statutory remedy ofappeal to the National Company Law APPELLATE Tribunaland if so, under what circumstances.

2 Andii) Whether questions of fraud can be inquired into bythe NCLT/NCLAT in the proceedings initiated under theInsolvency and Bankruptcy Code, 2016,arise for our consideration in these background are three appeals on hand, one filed by theResolution Applicant, the second filed by the Corporate Debtorthrough the Resolution Professional and the third filed by theCommittee of Creditors, all of which challenge an InterimOrder passed by the Division Bench of High COURT ofKarnataka in a writ petition, staying the operation of adirection contained in the order of the NCLT, on aMiscellaneous Application filed by the Resolution The background facts leading to the filing of the aboveappeals, in brief, are as follows:i) A company by name M/s.

3 Udhyaman Investments which is the twelfth Respondent in the first of these threeappeals, claiming to be a Financial Creditor, moved anapplication before the NCLT Chennai, under Section 7 of theInsolvency and Bankruptcy Code, 2016 (hereinafter referred toas the IBC, 2016), against M/s. Tiffins Barytes Asbestos &Paints Ltd., the Corporate Debtor (which is the fourthRespondent in the first of these three appeals and which isalso the appellant in the next appeal).ii) By an Order dated , NCLT Chennai admittedthe application, ordered the commencement of the CorporateInsolvency Resolution Process and appointed an InterimResolution Professional. Consequently, a Moratorium was alsodeclared in terms of Section 14 of the IBC, 2016. iii) At that time, the Corporate Debtor held a mining leasegranted by the Government of Karnataka, which was to expireby Though a notice for premature termination ofthe lease had already been issued on , on theallegation of violation of statutory rules and the terms andconditions of the lease deed, no order of termination had beenpassed till the date of initiation of the Corporate InsolvencyResolution Process (hereinafter referred to as CIRP).

4 3iv) Therefore, the Interim Resolution Professional appointedby NCLT addressed a letter dated to the Chairmanof the Monitoring Committee as well as the Director of Mines &Geology informing them of the commencement of CIRP. Healso wrote a letter dated to the Director of Mines &Geology, seeking the benefit of deemed extension of the leasebeyond upto 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 of2018 on the file of the High COURT of Karnataka, seeking adeclaration that the mining lease should be deemed to be validupto in terms of Section 8A(6) of the MMDR Act,1957.

5 Vi) During the pendency of the writ petition, the Governmentof Karnataka passed an Order dated , rejecting theproposal for deemed extension, on the ground that theCorporate Debtor had contravened not only the terms andconditions of the Lease Deed but also the provisions of Rule 37of the Mineral Concession Rules, 1960 and Rule 24 of theMinerals (Other than Atomic and Hydro Carbons EnergyMinerals) Rules, 2016. 4vii) In view of the Order of rejection passed by theGovernment of Karnataka, the Corporate Debtor, representedby the Interim Resolution Professional, withdrew the WritPetition of 2018, on , with liberty to file afresh writ petition. viii) However, instead of filing a fresh writ petition (inaccordance with the liberty sought), the ResolutionProfessional moved a Miscellaneous Application of2018, before the NCLT, Chennai praying for setting aside theOrder of the Government of Karnataka, and seeking adeclaration that the lease should be deemed to be valid and also a consequential direction to theGovernment of Karnataka to execute Supplement Lease Deedsfor the period upto ) By an Order dated , NCLT, Chennai allowedthe Miscellaneous Application setting aside the Order of theGovernment of Karnataka on the ground that the same was inviolation of the moratorium declared on in termsof Section 14(1) of IBC, 2016.

6 Consequently the Tribunaldirected the Government of Karnataka to execute SupplementLease Deeds in favour of the Corporate Debtor for the periodupto ) Aggrieved by the order of the NCLT, Chennai, theGovernment of Karnataka moved a writ petition in of 2019, before the High COURT of Karnataka. Whenthe writ petition came up for hearing, it was conceded by theResolution Professional before the High COURT of Karnatakathat the order of the NCLT could be set aside and the matterrelegated to the Tribunal, for a decision on merits, after givingan opportunity to the State to respond to the reliefs sought inthe Miscellaneous Application. It is relevant to note here thatthe Order of the NCLT dated , was passed ex parte,on the ground that the State did not choose to appear despiteservice of ) Therefore, by an Order dated , the High Courtof Karnataka set aside the Order of the NCLT and remandedthe matter back to NCLT for a fresh consideration of theMiscellaneous Application of )

7 Thereafter, the State of Karnataka filed a Statement ofObjections before the NCLT, primarily raising two objections,one relating to the jurisdiction of the NCLT to adjudicate upondisputes arising out of the grant of mining leases under theMMDR Act, 1957, between the State Lessor and the Lesseeand another relating to the fraudulent and collusive manner inwhich the entire resolution process was initiated by the relatedparties of the Corporate Debtor themselves, solely with a viewto corner the benefits of the mining ) Overruling the objections of the State, the NCLT Chennaipassed an Order dated allowing the MiscellaneousApplication, setting aside the order of rejection and directingthe Government of Karnataka to execute Supplemental ) Challenging the Order of the NCLT, Chennai, theGovernment of Karnataka moved a writ petition in of 2019 before the High COURT of Karnataka.

8 Whenthe writ petition came up for orders as to admission, theCorporate Debtor represented by the Resolution Professionalappeared through counsel and took notice and sought time toget instructions. Therefore, the High COURT , by an Order adjourned the matter to and granted astay of operation of the direction contained in the impugnedOrder of the Tribunal. Interim Stay was necessitated in view ofa Contempt Application moved by the Resolution Professionalbefore the NCLT against the Government of Karnataka fortheir failure to execute Supplement Lease ) It is against the said ad Interim Order granted by the HighCourt that the Resolution Applicant, the ResolutionProfessional and the Committee of Creditors have come upwith the present K. V. Viswanathan, learned Senior Counsel appearingon behalf of the Resolution Applicant assailed the impugnedOrder on the ground that when an efficacious alternativeremedy is available under Section 61 of IBC, 2016, the HighCourt of Karnataka ought not to have entertained a writpetition and that too against an Order passed by the ChennaiBench of NCLT.

9 He drew our attention to a series ofjudgments, wherein it was held that when a statutory forum iscreated for the redressal of grievances, a writ petition shouldnot be entertained. Since the essence of IBC, 2016 is therevival of a Corporate Debtor and the resolution of itsproblems to enable it to survive as a going concern, throughthe maximization of the value of its assets, the learned SeniorCounsel contended that the Interim ResolutionProfessional/Resolution Professional had a right to move theNCLT for appropriate reliefs for the preservation of theproperties of the Corporate Debtor and therefore the only waythe steps taken by the Resolution Professional could be set at8naught, is to take recourse to the provisions of the IBC upon the observations made by this COURT in a coupleof decisions that IBC, 2016 is a unified umbrella of code.

10 Thelearned Senior Counsel contended that the remedies providedthereunder are all pervasive and Mukul Rohatgi, learned Senior Counsel appearing forthe Resolution Applicant supplemented the aforesaidarguments and contended that though he would not go to theextent of saying that the jurisdiction of the High COURT stoodcompletely ousted, the High COURT was obliged to switch overto the hands off mode, in matters of this nature. The learnedSenior Counsel also contended that the NCLT has alreadyapproved the Resolution Plan, by an order dated that therefore the High COURT cannot do anything that willtinker with or destroy the very Resolution Plan approved bythe Kapil Sibal, the learned Senior Counsel appearing forthe Resolution Professional contended that the whole object ofIBC, 2016 will get defeated, if the Orders of NCLT are declared9amenable to review by the High COURT under Article 226 also contended that the provisions of IBC, 2016 are givenoverriding effect under Section 238, over all other statutes.