In the case of M/s Embassy Property Developments Pvt. Ltd. v. State of Karnataka and Ors., the Resolution Applicant, the Resolution Professional and the Committee of Creditors in an insolvency proceedings under the Insolvency and Bankruptcy Code, preferred an appeal before the Supreme Court. The appeal was filed against an order of the NCLT, Chennai directing the Karnataka Government to execute Supplemental Lease Deeds in favour of the Corporate Debtor.

The facts of the case are that a moratorium was issued under Section 14 (1) of the Insolvency and Bankruptcy Code after admission of the application filed by the Resolution Applicant. With respect to the mining lease, in pursuance of the notices issued the Corporate Debtor, no order of termination of lease was passed by the Karnataka Government on the date of initiation of the Corporate Insolvency Resolution Process, hence the Insolvency Resolution Professional wrote to the Karnatka Government, seeking the benefit of deemed extension of lease in terms of Section 8-A (6) of the Mines & Minerals (Development and Regulation) Act, 1957.

The Interim Resolution Professional (‘IRP’) filed a writ petition before the High Court of Karnataka, seeking a declaration to the same effect, due to no response on his application to the State Government. During the pendency of the writ petition, the Government of Karnataka withdraw the mining lease itself citing statutory and rule-based violations of the mining lease.

The NCLT, Chennai, thereafter, on an application by the IRP, found that the order of cancellation of the mining lease was in violation of the moratorium issued under Section 14 (1) of the IBC, 2016. The Government of Karnataka approached the High Court, aggrieved by the order of the NCLT, Chennai, where it was conceded that the matter be decided after hearing the parties, on merits, and not ex-parte. The matter was thus remanded back to the NCLT for fresh consideration by the High Court of Karnataka, where the Government of Karnataka was once again directed to execute the mining lease deed.

Challenging this order of the NCLT, Chennai a Writ Petition was preferred in the Karnataka High Court by the Karnataka Government and it obtained a stay on execution of the mining lease.

This was the tumultuous history of the facts of the case as it came to the Supreme Court. The argument made by the Resolution Applicant was that the NCLT constituted an alternative forum for adjudication of the dispute and, therefore a bar applied, whereas the Counsel of the Resolution Professional argued that allowing an appeal to the High Court would defeat the object of enactment of the IBC, which is to give a speedy and efficacious remedy to the creditors. The Committee of Creditors also argued that the power to extend the mining lease was within the powers of the NCLT.

The Supreme Court held that, the NCLT could not be elevated to a superior court with powers to review public law and decisions made therein by statutory or quasi-judicial authorities.

It said,

 

..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 law, they cannot, through the resolution professional, take a bypass and go before NCLT for the enforcement of such a right.”

The Court also held that the moratorium under Section 14 would not apply to the extension of mining lease, as it does not amount to dispossession of the Corporate Debtor.

It is thus evident that what is sought to be clarified by the Supreme Court is that under the writ jurisdiction of the High Court is the sole jurisdiction under which decisions of administrative authorities could be appealed or subject to judicial review. The NCLT does not have any such powers, held the bench of justices Rohinton Nariman, Aniruddha Bose and V Ramasubramanian.

Image Link: https://bit.ly/2OLIXSN

Link to Judgment: https://main.sci.gov.in/supremecourt/2019/33953/33953_2019_4_1501_18757_Judgement_03-Dec-2019.pdf