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TMI Blog2019 (12) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ms. Saudamini Sharma, Adv. Ms. Snidha Mehra, Adv. Mr. Hemant Arya, Adv. Ms. Kirti Dua, Adv. Tanisha Samanta, Adv. Mr. Chakitan V.S. Papta, Adv. Mrs. Anil Katiyar, AOR Mr. Arvind Kumar Sharma, AOR Ms. Astha Tyagi, AOR Ms. Madhusweta, Adv. Ms. Kanika Tandon, Adv. Ms. Subhashree Mohapatra, Adv. Mr. Piyush Sharma, AOR Mr. Gauhar Mirza, Adv. Mr. Nishant Dushi, Adv. Mr. S. S. Shroff, AOR Mr. Shailesh Madiyal, AOR Mr. Shail Kumar Dwivedi, AOR Mr. C.A. Sundaram, Sr. Adv. Mr. Ashish Bhan, Adv. Mr. Mohit Rohatgi, Adv. Mr. Ketan Gaur, Adv. Mr. Ayush Mitruka, Adv. Mr. Rajendra Dangwal, Adv. Mr. Syed Jafar Alam, AOR Mr. Abhishek Gupta, Adv. Mr. Zafar Inayat, Adv. Ms. Rohini Musa, Adv. Mr. Ashwani Kumar, AOR Ms. Peeha Verma, Adv. Mr. Ravinder Nain, Adv. Mr. Ravindra Lokhande, Adv. Mr. Abhishek Atrey, AOR JUDGMENT R. F. Nariman, J. 1. This set of Writ Petitions seek to challenge the constitutional validity of Section 87 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Arbitration Act, 1996") as inserted by Section 13 of the Arbitration and Conciliation (Amendment) Act, 2019 (hereinafter referred to as the "2019 Amendment Act") and brought into force with effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a challenge is filed to an award under Section 34 and/or Section 37 of the Arbitration Act, 1996, such debt becomes a 'disputed debt' under the judgments of this Court, and proceedings initiated under the Insolvency Code at the behest of the Petitioner company, not being maintainable in any case, would be dismissed at the threshold. Huge sums of money are therefore due from all these companies/government/government bodies to the Petitioners. 5. On the other hand, in order that the Petitioner company continue to operate, the Petitioner owes large sums to operational creditors for supplying men, machinery and material for the projects. It is stated in the Writ Petition No.1074 of 2019 that Demand Notices have been issued to the Petitioner by a large number of operational creditors for sums amounting to over a hundred crores. 6. Dr. Abhishek Manu Singhvi, learned Senior Advocate appearing on behalf of the Petitioner No.1 in Writ Petition No.1074 of 2019, has argued that the Arbitration Act, 1996 is based upon the UNCITRAL Model Law on International Commercial Arbitration (as adopted by the United Nations Commission on International Trade Law on 21 June 1985) (hereinafter referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and to the learned Attorney General for India, Section 87 was enacted, reference being made only to the Srikrishna Committee Report, without even a mention of the aforesaid judgment of this Court in BCCI (supra). Consequently, the learned Senior Advocate argued that since the basis of a judgment of the Supreme Court can only be removed if there is a pointed reference to the said judgment, obviously the judgment of this Court has been sought to be directly overturned without removing its basis. Further, Section 87 flies in the face of not only the object of the Arbitration Act, 1996 as a whole and the objects for enacting the 2015 Amendment Act, but is also contrary to Section 35 of the Arbitration Act, 1996. He has stated that it is amazing that in a Civil Court where a full-blooded appeal is filed, Order XLI Rule 5 of the Code of Civil Procedure, 1908 (hereinafter referred to as the "CPC") is to apply, there being no automatic-stay of a money decree; whereas in a summary proceeding under Section 34 of the Arbitration Act, 1996, where the court does not sit in appeal over the award - and if the view of the arbitrator is a possible view, it passes muster - there is an automatic-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is concerned, Dr. Singhvi exhorted us to read 'corporate person', as defined by Section 3(7) of the Insolvency Code, to include Government Bodies other than Government Companies (which are already included). This was based on the argument that qua the object sought to be achieved by the Insolvency Code, it makes no difference as to whether the person sued as a corporate person is a government company or a body corporate set up under a statute. He exhorted us to either delete the words 'limited liability' contained in Section 3(7) of the Code, or read Section 3(23)(g) of the Code into Section 3(7), and relied upon judgments which stressed the 'positive' aspect of Article 14 of the Constitution of India, which permit such interpretation. He then pointed out that whereas 'financial position' (as defined under Section 5(9) of the Insolvency Code) mandates taking into consideration the financial information and balance sheets, such financial position is irrelevant at the stage of triggering the Insolvency Code, and only becomes relevant at the stage of declaring such position to prospective resolution applicants, which itself makes the provision manifestly arbitrary. He then argued as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount to an arbitrary exercise of power, which is liable to be struck down. Dr. Singhvi contended that this extra amount of 10% per annum, being severable, can be struck down without otherwise impacting the NITI Aayog Scheme. 10. Shri Neeraj Kishan Kaul, also appearing for Hindustan Construction Company, reiterated some of the submissions of Dr. Singhvi and argued, based on a reading of Section 87 as introduced by the 2019 Amendment Act and Section 26 of the 2015 Amendment Act, that Section 87 is nothing but a re-hash of Section 26 and this being so, is therefore a direct attack on the judgment of this Court in BCCI (supra), without removing its basis. He also added that since there is no set-off mechanism provided by the Insolvency Code, the provisions of the Insolvency Code will have to be held to be manifestly arbitrary so far as his client is concerned, to this extent. 11. Shri C.A. Sundaram, learned Senior Advocate appearing for M/s Patel Engineering Ltd. in I.A. No. 157742 of 2019 in W.P (C) No. 1074 of 2019, reiterated the submissions that Section 87, being directly contrary to this Court's judgment in BCCI (supra), needs to be set aside. He also argued that it retrospect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e qua application of the amended Section 36. He then argued that even though Section 15 of the 2019 Amendment Act has deleted Section 26 of the 2015 Amendment Act, this has not changed the basis on which the judgment in BCCI (supra) was delivered, as there is no vested right to resist the enforcement of an arbitral award, and that arbitration proceedings and court proceedings are distinct sets of proceedings as recognized by Section 87 itself. Further, classification of parties on the basis of this cut-off date has no rational nexus to the object sought to be achieved by the Arbitration Act, 1996. Finally, he urged that the Counter-Affidavit filed by the Union of India, after referring to this Court's judgment, then mouthed the same reasons for introducing Section 87 as were in the Srikrishna Committee Report, which was prior to, and could not have taken into account, this Court's judgment in BCCI (supra). Therefore, to state that even after this Court settled the law in BCCI (supra) there would still be 'uncertainty' would itself show that the provision contained in Section 87 would be manifestly arbitrary. He then argued, based on a treatise by Ian F. Fletcher on the law of insol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... most, it was contended that the petitioner has mislead this Court by stating that a sum of INR 6070 crores is liable to be paid by the Government entities mentioned therein, as such sums amount to awards that have not been stayed by any Court. He referred to and relied upon a chart appended to the Counter-Affidavit of the Union of India dated 21.10.2019, in which he was at pains to point out that in each of the awards in favour of the Petitioner No.1 in Writ Petition No.1074 of 2019, the contract value was much less than the actual amount paid on completion of work, in addition to which, deposit orders have been passed by courts in all these cases, which have not been appealed against. He further argued that there was a gross suppression of facts and figures by Petitioner No.1, as a result of which the Writ Petition ought to be dismissed at the threshold. He contended that what was deliberately hidden by the Petitioner No.1 was the fact that the Respondent Public Sector Undertakings (hereinafter referred to as "PSUs") have deposited/paid substantial amounts that are due against them under arbitral awards, amounting percentage wise to 83.3%. He also pointed out that insofar as IRCON ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en entities mentioned in Section 3(23). Thus, being mutually exclusive, nothing from Section 3(23) which defines 'person' can possibly be imported into Section 3(7) which defines 'corporate person'. He further argued that this Court's judgment in K. Kishan v. Vijay Nirman Company Pvt. Ltd. (2018) 17 SCC 662 made it clear that arbitral awards that are pending adjudication under Section 34 would show that a pre- existing dispute exists in such cases, and therefore would in any case be outside the strong arm of the law contained in the Insolvency Code. 17. Ms. Pinky Anand, learned Additional Solicitor General, supported the submissions of both the learned Attorney General and the Solicitor General. She further argued, based on a copious reading of the Counter-Affidavit filed on behalf of the Union of India, that no inroads have been made into the objects sought to be achieved by the 2015 Amendment Act by merely following a particular cut-off date. In any case, the fixing of such cut-off date, being the sole prerogative of the Parliament, cannot be interfered with by the courts as this pertains to policy matters. She also cited some judgments of this Court to buttress her submissions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... York Convention was physically before the legislature and available for its consideration when it enacted the 1996 Act. Article II of the Convention provides that each contracting State shall recognise an agreement and submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not concerning a subject-matter capable of settlement by arbitration. Once the agreement is there and the court is seized of an action in relation to such subject-matter, then on the request of one of the parties, it would refer the parties to arbitration unless the agreement is null and void, inoperative or incapable of performance." 21. What is important so far as the UNCITRAL Model Law is concerned is Article 36(2) thereof, which states as follows: "Article 36. Grounds for refusing recognition or enforcement- xxx xxx xxx (2) If an application for setting aside or suspension of an award has been made to a court referred to in paragraph (1)(a)(v) of this article, the court where recognition or enforcement is sought may, if it considers it proper, adjourn its decision and may also, on the application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s impermissible. On facts of this case, there being no exceptional situation which would compel us to ignore such statutory provision, and to use our jurisdiction under Article 142, we restrain ourselves from passing any such order, as prayed for by the applicant. 11. However, we do notice that this automatic suspension of the execution of the award, the moment an application challenging the said award is filed under Section 34 of the Act leaving no discretion in the court to put the parties on terms, in our opinion, defeats the very objective of the alternate dispute resolution system to which arbitration belongs. We do find that there is a recommendation made by the Ministry concerned to Parliament to amend Section 34 with a proposal to empower the civil court to pass suitable interim orders in such cases. In view of the urgency of such amendment, we sincerely hope that necessary steps would be taken by the authorities concerned at the earliest to bring about the required change in law." 24. When this court speaks of "the mandatory language of Section 34" of the Arbitration Act, 1996 obviously what is meant is the language of Section 36 of the Arbitration Act, 1996, as noted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Act, 1996) which then becomes enforceable under the CPC, the award being treated as a decree for this purpose. 27. This also finds support from the language of Section 9 of the Arbitration Act, 1996, which specifically enables a party to apply to a Court for reliefs "...after the making of the arbitration award but before it is enforced in accordance with Section 36." The decisions in NALCO (supra) and Fiza Developers and Intra-trade Pvt. Ltd. (supra) overlook this statutory position. These words in Section 9 have not undergone any change by reason of the 2015 or 2019 Amendment Acts. 28. Interpreting Section 9 of the Arbitration Act, 1996, a Division Bench of the Bombay High Court in Dirk India Pvt. Ltd. v. Maharashtra State Power Generation Company Ltd. 2013 SCC Online Bom 481 held that: "13....The second facet of Section 9 is the proximate nexus between the orders that are sought and the arbitral proceedings. When an interim measure of protection is sought before or during arbitral proceedings, such a measure is a step in aid to the fruition of the arbitral proceedings. When sought after an arbitral award is made but before it is enforced, the measure of protection is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect. The resultant position is that Section 36 - even as originally enacted - is not meant to do away with Article 36(2) of the UNCITRAL Model Law, but is really meant to do away with the two bites at the cherry doctrine in the context of awards made in India, and the fact that enforcement of a final award, when read with Section 35, is to be under the CPC, treating the award as if it were a decree of the court. 31. In any event, on this aspect of the case, the BCCI judgment (supra) referred, in paragraph 25 thereof, to the 246th Law Commission Report on Section 36 as follows: "25. At this point, it is instructive to refer to the 246th Law Commission Report which led to the Amendment Act. This Report, which was handed over to the Government in August 2014, had this to state on why it was proposing to replace Section 36 of the 1996 Act: "AUTOMATIC STAY OF ENFORCEMENT OF THE AWARD UPON ADMISSION OF CHALLENGE "43. Section 36 of the Act makes it clear that an arbitral award becomes enforceable as a decree only after the time for filing a petition under Section 34 has expired or after the Section 34 petition has been dismissed. In other words, the pendency of a Section 34 petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court's judgment in NALCO (supra) as follows: "67. In 2004, this Court's judgment in National Aluminium Co. [National Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd., (2004) 1 SCC 540] had recommended that Section 36 be substituted, as it defeats the very objective of the alternative dispute resolution system, and that the section should be amended at the earliest to bring about the required change in law. It would be clear that looking at the practical aspect and the nature of rights presently involved, and the sheer unfairness of the unamended provision, which granted an automatic stay to execution of an award before the enforcement process of Section 34 was over (and which stay could last for a number of years) without having to look at the facts of each case, it is clear that Section 36 as amended should apply to Section 34 applications filed before the commencement of the Amendment Act also for the aforesaid reasons." (emphasis supplied) 32. Section 36, as amended by the 2015 Amendment Act, now reads as follows: "36. Enforcement --(1) Where the time for making an application to set aside the arbitral award under section 34 has expired, then, subject to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Conciliation (Amendment) Act, 2015; (b) apply only to arbitral proceedings commenced on or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 and to court proceedings arising out of or in relation to such arbitral proceedings." By Section 15 of the same Amendment Act, Section 26 of the 2015 Amendment Act was omitted as follows: "15. Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 shall be omitted and shall be deemed to have been omitted with effect from the 23rd October, 2015." Section 26 of the 2015 Amendment Act reads as follows: "26. Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of Section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act." 35. This Court's judgment in BCCI (supra) had occasion to deal with the important question as to the true interpretation of Section 26 of the 2015 Amendment Act. This Court, in paragraph 28, referred to the transitory provision contained in Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Court then made a reference to the Statement of Objects and Reasons for the 2015 Amendment Act and stated as follows: "77. However, it is important to remember that the Amendment Act was enacted for the following reasons, as the Statement of Objects and Reasons for the Amendment Act states: "2. The Act was enacted to provide for speedy disposal of cases relating to arbitration with least court intervention. With the passage of time, some difficulties in the applicability of the Act have been noticed. Interpretation of the provisions of the Act by courts in some cases have resulted in delay of disposal of arbitration proceedings and increase in interference of courts in arbitration matters, which tend to defeat the object of the Act. With a view to overcome the difficulties, the matter was referred to the Law Commission of India, which examined the issue in detail and submitted its 176th Report. On the basis of the said Report, the Arbitration and Conciliation (Amendment) Bill, 2003 was introduced in the Rajya Sabha on 22-12-2003. The said Bill was referred to the Department-related Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice for examinat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur should be made to dispose of the matter within a period of sixty days; (iv) to provide that while considering any application for appointment of arbitrator, the High Court or the Supreme Court shall examine the existence of a prima facie arbitration agreement and not other issues; (v) to provide that the Arbitral Tribunal shall make its award within a period of twelve months from the date it enters upon the reference and that the parties may, however, extend such period up to six months, beyond which period any extension can only be granted by the Court, on sufficient cause; (vi) to provide for a model fee schedule on the basis of which High Courts may frame rules for the purpose of determination of fees of Arbitral Tribunal, where a High Court appoints arbitrator in terms of Section 11 of the Act; (vii) to provide that the parties to dispute may at any stage agree in writing that their dispute be resolved through fast-track procedure and the award in such cases shall be made within a period of six months; (viii) to provide for neutrality of arbitrators, when a person is approached in connection with possible appointment as an arbitrator; (ix) to provide that applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian law" is now to be understood as laid down in Renusagar, 1994 Supp (1) SCC 644. "Justice or morality" has been tightened and is now to be understood as meaning only basic notions of justice and morality i.e. such notions as would shock the conscience of the Court as understood in Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204. Section 28(3) has also been amended to bring it in line with the judgment of this Court in Associate Builders, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204, making it clear that the construction of the terms of the contract is primarily for the arbitrator to decide unless it is found that such a construction is not a possible one."] It would be important to remember that the 246th Law Commission Report has itself bifurcated proceedings into two parts, so that the Amendment Act can apply to court proceedings commenced on or after 23-10-2015. It is this basic scheme which is adhered to by Section 26 of the Amendment Act, which ought not to be displaced as the very object of the enactment of the Amendment Act would otherwise be defeated." (emphasis supplied) In paragraph 83, the Court then concluded: "83. In view of the above, the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been expressly referred to in the concerned Statement of Objects and Reasons. We are afraid that we cannot agree with this line of argument. What is important is to see whether, in substance, the basis of a particular judgment is in fact removed, whether or not that judgment is referred to in the Statement of Objects and Reasons of the amending act which seeks to remove its basis. 42. In Shri Prithvi Cotton Mills Ltd. and Anr. v. Broad Borough Municipality and Ors. (1969) 2 SCC 283, this Court held: "4....Granted legislative competence, it is not sufficient to declare merely that the decision of the Court shall not bind for that is tantamount to reversing the decision in exercise of judicial power which the Legislature does not possess or exercise. A court's decision must always bind unless the conditions on which it is based are so fundamentally altered that the decision could not have been given in the altered circumstances." 43. In State of Tamil Nadu v. Arooran Sugars Ltd. (1997) 1 SCC 326, this Court after setting out what was held in Shri Prithvi Cotton Mills (supra) stated: "16...The same view was reiterated in the cases of West Ramnad Electric Distribution Co. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome the judicial pronouncement it is so only at first blush; a closer scrutiny would confer legitimacy on such an exercise as the same is a normal adjunct of the legislative power. The whole exercise is one of viewing the different spheres of jurisdiction exercised by the two bodies i.e. the judiciary and the legislature. The balancing act, delicate as it is, to the constitutional scheme is guided by the well-defined values which have found succinct manifestation in the views of this Court in Bakhtawar Trust [Bakhtawar Trust v. M.D. Narayan, (2003) 5 SCC 298]." 45. Given the aforesaid judgments, Section 15 of the 2019 Amendment Act removes the basis of BCCI (supra) by omitting from the very start Section 26 of the 2015 Amendment Act. Since this is the provision that has been construed in the BCCI judgment (supra), there can be no doubt whatsoever that one fundamental prop of the said judgment has been removed by retrospectively omitting Section 26 altogether from the very day when it came into force. This argument must therefore be rejected. 46. Equally, Shri Neeraj Kishan Kaul's argument that Section 87 is nothing but a re-hash of Section 26, and therefore in substance there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... October 2015 from the application of the 2015 Amendment Act. The 2015 Amendment Act would, however, apply to fresh or pending court proceedings in relation to arbitral proceedings commenced prior to 23 October 2015. (c) The wording "arbitral proceedings" in section 26 cannot be construed to include related court proceedings. Accordingly, the 2015 Amendment Act applied to all arbitrations commenced on or after 23 October 2015. As far as court proceedings are concerned, the 2015 Amendment Act would apply to all court proceedings from 23October 2015, including fresh or pending court proceedings in relation to arbitration commenced before, on or after 23 October 2015. Thus, it is evident that there is considerable confusion regarding the applicability of the 2015 Amendment Act to related court proceedings in arbitration commenced before 23 October 2015.The Committee is of the view that a suitable legislative amendment is required to address this issue. The committee feels that permitting the 2015 Amendment Act to apply to pending court proceedings related to arbitrations commenced prior to 23 October 2015 would result in uncertainty and prejudice to parties, as they may have to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a summary proceeding not in the nature of a regular suit - see Canara Nidhi Ltd. v. M. Shashikala 2019 SCC Online SC 1244 at paragraph 20. As a result, a court reviewing an arbitral award under Section 34 does not sit in appeal over the award, and if the view taken by the arbitrator is possible, no interference is called for - see Associated Construction v. Pawanhans Helicopters Ltd. (2008) 16 SCC 128 at paragraph 17. 50. Also, as has been held in the recent decision Ssangyong Engineering & Construction Co. Ltd. v. NHAI 2019 SCC Online 677, after the 2015 Amendment Act, this Court cannot interfere with an arbitral award on merits (see paragraph 28 and 76 therein). The anomaly, therefore, of Order XLI Rule 5 of the CPC applying in the case of full-blown appeals, and not being applicable by reason of Section 36 of the Arbitration Act, 1996 when it comes to review of arbitral awards, (where an appeal is in the nature of a rehearing of the original proceeding, where the chance of succeeding is far greater than in a restricted review of arbitral awards under Section 34), is itself a circumstance which militates against the enactment of Section 87, placing the amendments made in the 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not ordinarily interfere with the fixation of cut-off dates, unless such fixation appears to be arbitrary or discriminatory (see for e.g., UOI v. Parameswaran Match Works (1975) 1 SCC 305 at paragraph 10 ("10....The choice of a date as a basis for classification cannot be always be dubbed as arbitrary even if no particular reason is forthcoming for the choice unless it is shown to be capricious or whimsical in the circumstances. Where it is seen that a line or point there must be, and there is no mathematical or logical way of fixing it precisely, the decision of the legislature or its delegate must be accepted unless we can say that it is very wide of the reasonable mark.") and Govt. of A.P. v. N. Subbarayudu (2008) 14 SCC 702 at paragraphs 5 to 9 ("5....This Court is also of the view that fixing cut-off dates is within the domain of the executive authority and the court should not normally interfere with the fixation of a cut-off date by the executive authority unless such Court order appears to be on the face of it blatantly discriminatory and arbitrary.") 53. In the present case, the challenge is not to the fixing of 23.10.2015 as a cut-off date, as the aforesaid date is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person" means a company as defined in clause (20) of section 2 of the Companies Act, 2013 (18 of 2013), a limited liability partnership, as defined in clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), or any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider; (8) "corporate debtor" means a corporate person who owes a debt to any person; (23) "person" includes- (a)an individual; (b)a Hindu Undivided Family; (c) a company; (d)a trust; (e)a partnership; (f) a limited liability partnership; (g)any other entity established under a statute; and includes a person resident outside India." 57. As correctly argued by the learned Solicitor General, Shri Tushar Mehta, the first part of 'corporate person', as defined in Section 3(7) of the Insolvency Code, means a company as defined in Clause 20 of Section 2 of the Companies Act 2013. Sections 2(20) and 2(45) of the Companies Act, 2013, which define 'company' and 'Government company' respectively, are set out here-in-below: "2(20). "company" means a company incorporated under this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to the provisions of this Act, to acquire, hold and dispose of property, both movable and immovable, and to contract and shall by the said name sue and be sued. [(3) The Authority shall consist of- (a) a Chairman; (b) not more than six full-time members; and (c) not more than six part-time members, to be appointed by the Central Government by notification in the Official Gazette: Provided that the Central Government shall, while appointing the part-time members, ensure that at least two of them are non- Government professionals having knowledge or experience in financial management, transportation planning or any other relevant discipline.] xxx xxx xxx 12. Transfer of assets and liabilities of the Central Government to the Authority- (1) On and from the date of publication of the notification under section 11.- (a) all debts, obligations and liabilities incurred, all contracts entered into and all matters and things engaged to be done by, with, or for, the Central Government, immediately before such date for or in connection with the purposes of any national highway or any stretch thereof vested in, or entrusted to, the Authority under that section, shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Government. (2) Subject to the provisions of sub-section (1), the form and manner in which any contract shall be made under this Act shall be such as may be provided by regulations. (3) No contract which is not in accordance with the provisions of this Act and the regulations shall be binding on the Authority. 16. Functions of the Authority.--- (1) Subject to the rules made by the Central Government in this behalf, it shall be the function of the Authority to develop, maintain and manage the national highways and any other highways vested in, or entrusted to, it by the Government. (2) Without prejudice to the generality of the provisions contained in sub-section (1), the Authority may, for the discharge of its functions- (a) survey, develop, maintain and manage highways vested in, or entrusted to, it; (b) construct offices or workshops and establish and maintain hotels, motels, restaurants and rest-rooms at or near the highways vested in, or entrusted to, it; (c) construct residential buildings and townships for its employees; (d) regulate and control the plying of vehicles on the highways vested in, or entrusted to, it for the proper management thereof; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under this Act. 18. Funds of the Authority.-- (1) There shall be constituted a Fund to be called the National Highways Authority of India Fund and there shall be credited thereto- (a) any grant or aid received by the Authority; (b) any loan taken by the Authority or any borrowings made by it; (c) any other sums received by the Authority. (2) The Fund shall be utilised for meeting- (a) expenses of the Authority in the discharge of its functions having regard to the purposes for which such grants, loans or borrowings are received and for matters connected therewith or incidental thereto; (b) salary, allowances, other remuneration and facilities provided to the members, officers and other employees of the Authority; (c) expenses on objects and for purposes authorised by this Act. 19. Budget.--The Authority shall prepare, in such form and at such time in each financial year as may be prescribed, its budget for the next financial year, showing the estimated receipts and expenditure of the Authority and forward the same to the Central Government. 20. Investment of funds.---The Authority may invest its funds (including any reserve fund) in the securities of the Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all appointed by the Central Government. The assets and liabilities of the Central Government in relation to national highways are then transferred to the Authority under Section 12. Under Sections 14 and 15, contracts that can be made on behalf of the Authority can only be made, if they exceed a certain value, after previous approval by the Government. Section 16 deals with the functions of the Authority, which makes it clear that these are governmental functions to be carried out only by the Government or by its agent appointed in this behalf. 62. Under Section 19, the budget prepared for the Authority has to be sent to the Central Government, capital and grants to the authority being made by the Central Government into the fund of the Authority (see Sections 17 and 18 of the NHAI Act supra). Likewise, an annual report is to be given to the Central Government under Section 22. Accounts and audit have to be made in consultation with the Comptroller and Auditor General of India, and furnished to the Central Government, which have then to be laid before the Parliament [see Sections 22 to 24 of the NHAI Act (supra)]. Under Section 33, the Central Government can issue directions on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existing dispute which culminates at the first stage of the proceedings in an award, continues even after the award, at least till the final adjudicatory process under Sections 34 and 37 has taken place." 65. In this view of the matter, the moment challenges are made to the arbitral awards, the amount said to be due by an operational debtor would become disputed, and therefore be outside the clutches of the Insolvency Code. Looked at from any point of view, therefore, proceeding against the NHAI under the Insolvency code by the Petitioner No.1 is not possible. 66. Dr. Singhvi then argued that under Section 5(9) of the Insolvency Code, 'financial position' is defined, which is only taken into account after a resolution professional is appointed, and is not taken into account when adjudicating 'default' under Section 3(12) of the Insolvency Code. This does not in any manner lead to the position that such provision is manifestly arbitrary. As has been held by our judgment in Pioneer Urban Land and Infrastructure Limited and Anr. v. Union of India and Ors. (2019) 8 SCC 416, the Insolvency Code is not meant to be a recovery mechanism (see paragraph 41 thereof) - the idea of the Insolv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ality of goods or service is referred to in (b), this again postulates some contractual or other relationship in law by which one party may sue the other. 70. In Mobilox (supra), after setting out the definition of 'dispute', this Court held: "34. Therefore, the adjudicating authority, when examining an application under Section 9 of the Act will have to determine: i. Whether there is an "operational debt" as defined exceeding Rs. 1 lakh? (See Section 4 of the Act) ii. Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid? And iii. Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt in relation to such dispute? If any one of the aforesaid conditions is lacking, the application would have to be rejected. Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IRCON, NHPC and NHAI before this Court regarding the status of arbitral awards against them in favour of the Petitioner company (as on 30.09.2019), which detailed, inter alia, (i) the value of the contract between the Petitioner company and the Respondent PSU; (ii) the amount already paid by the Respondent PSU to the Petitioner under the said contract; (iii) the Petitioner's principal claim against the Respondent PSU in the arbitration; (iv) the amount awarded in favour of the Petitioner in the arbitration; (v) the amounts paid/deposited by the Respondent PSU by which the competent Court had granted stay; (vi) the balance amount due to the Petitioner; and (vii) whether stay orders were granted by competent Courts in respect of the arbitral awards. On the basis of these charts, the Union of India contended that the Petitioner company had deliberately suppressed the fact that these Respondent PSUs had stay orders in their favour in respect of some of these arbitral awards, and that these PSUs had already paid/deposited a substantial amount (approximately 83.30%) payable by them under the arbitral awards, after which stay orders in respect of these arbitral awards were granted. The f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Petitioner company then itself challenged as incorrect some of the figures and statements placed on record by the Union of India in its Counter Affidavit, particularly those on the status of Court proceedings in relation to arbitral-awards in favour of the Petitioner company. 78. A perusal of the rival contentions makes it clear that there is a factual dispute between the parties relating to: (I) the exact quantum of the arbitral-awards in favour of the Petitioner company due from the Respondent PSUs; (II) the amounts which may have already been paid and/or deposited by the Respondent PSUs in favour of the Petitioner company under the said arbitral awards; and (III) whether stay orders of competent Courts were passed in respect of these arbitral awards, and if so, whether they were under the automatic-stay mode or not. 79. It is settled law that when exercising its jurisdiction under Article 32 of the Constitution, this Court cannot embark on a detailed investigation of disputed facts. A five-Judge bench of this Court in Gulabdas & Co. v. Asstt. Collector of Customs AIR 1957 SC 733, was seized of a batch of Writ Petitions filed under Article 32, wherein the petitioners (who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 25 of the Guardians & Wards Act read with Section 6 of the Act and while deciding such a question, welfare of the minor child is of primary consideration. Allegations and counter-allegations have been made in this case by the petitioner and Respondent 2 against each other narrating circumstances as to how the estrangement took place and how each one of them is entitled to the custody of the child. Since these are disputed facts, unless the pleadings raised by the parties are examined with reference to evidence by an appropriate forum, a proper decision in the matter cannot be taken and such a course is impossible in a summary proceeding such as writ petition under Article 32 of the Constitution." (emphasis supplied) 82. This Court cannot, therefore, in exercise of its jurisdiction under Article 32 of the Constitution undertake a detailed investigation to determine the status of monies paid/deposited pursuant to arbitral-awards in favour of the Petitioner company. Consequently, no directions in respect thereof can be made in the present proceedings. 83. Dr. Singhvi then argued that the NITI Aayog Office's Memorandum dated 05.09.2016, which contained a scheme by which contracto ..... X X X X Extracts X X X X X X X X Extracts X X X X
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