TMI Blog2023 (4) TMI 1140X X X X Extracts X X X X X X X X Extracts X X X X ..... n drawing up the proceedings and directing forest clearances to be submitted by the corporate debtor, the petitioner, in exercise of powers conferred under the statute. Therefore, they are in the realm of public law. The Tribunal had no jurisdiction to direct functioning/continuing of the windmill without the forest clearances, merely because the State had granted such permission at an earlier point in time. The submission of the learned senior counsel for the Company is that if the State had passed an order, then the Tribunal would have no jurisdiction. According to him, the one that is passed is not an order. The said submission is noted only to be rejected, as it is a communication from the hands of the State and it is understood by the Company also to be an order only, as the averments in the application filed before the Tribunal demolishes the contention of the learned senior counsel for the Company. Therefore, none of the contentions of the learned senior counsel for the Company would merit acceptance. It is open to the Company to produce all the necessary clearances as is sought by the State if the Company wants to continue with the operations. In the event, the Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l drew up certain proceedings on 07-05-2022. In the proceedings, the State resolves to immediately suspend operations of the windmill till further orders and directed that documents be placed before Government for continuance of operation of the windmill. The said proceeding led to a communication dated 07-05-2022 bringing it to the notice of the Company that it is a long pending issue and it may be treated as urgent, otherwise it would be recommended for closure of the file. The Company does not challenge these orders before any competent fora but knocks at the doors of the Tribunal in pending case by filing an application under sub-section (5) of Section 60 of the Code for passing of an interim order. The Tribunal by the impugned order dated 06-07-2022 directs the State Government to permit functioning of the windmill by holding that it was essential to resolve insolvency of the corporate debtor i.e., the Company. Pursuant thereto the State Government knocks at the doors of this Court calling in question the said order of the Tribunal. 4. Heard Sri Dhyan Chinnappa, learned Additional Advocate General appearing for the State and Sri K.G.Raghavan, learned senior counsel appearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corporate person is located. (2) Without prejudice to sub-section (1) and notwithstanding anything to the contrary contained in this Code, where a corporate insolvency resolution process or liquidation proceeding of a corporate debtor is pending before a National Company Law Tribunal, an application relating to the insolvency resolution or liquidation or bankruptcy of a corporate guarantor or personal guarantor, as the case may be, of such corporate debtor shall be filed before such National Company Law Tribunal. (3) An insolvency resolution process or liquidation or bankruptcy proceeding of a corporate guarantor or personal guarantor, as the case may be, of the corporate debtor pending in any court or tribunal shall stand transferred to the Adjudicating Authority dealing with insolvency resolution process or liquidation proceeding of such corporate debtor. (4) The National Company Law Tribunal shall be vested with all the powers of the Debts Recovery Tribunal as contemplated under Part III of this Code for the purpose of subsection (2). (5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statute supra and its interpretation by the Apex Court in several judgments. 10. The learned senior counsel for the Company contends that the entire issue stands covered by the judgment rendered by the Apex Court in the case of EMBASSY PROPERTY DEVELOPMENTS PRIVATE LIMITED v. STATE OF KARNATAKA AND OTHERS [(2020) 13 SCC 308] . The Apex Court in the said judgment holds as follows: 3.2. By an order dated 12-3-2018 [Udhyaman Investments (P) Ltd. v. Tiffins Barytes Asbestos Paints Ltd., 2018 SCC OnLine NCLT 13809] , 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. ... 3.6. During the pendency of the writ petition, the Government of Karnataka passed an Order dated 26-9-2018, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the British Parliament with the Crown is supreme and its powers are unlimited and courts have no power of judicial review of legislation. 30. The NCLT is not even a civil court, which has jurisdiction by virtue of Section 9 of the Code of Civil Procedure 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. Hence, let us now see the jurisdiction and powers conferred upon NCLT. 41. 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 law, they cannot, through the resolution professional, take a bypass and go before NCLT for the enforcement of such a right. 42. In fact the resolution professional in this case appears to have understood this legal position correctly, in the initial stages. This is why when the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant has been presented initially in the articulate and carefully reasoned submissions made by Ms Ranjitha Ramachandran, learned counsel. Mr Shyam Diwan, learned Senior Counsel has then urged his submissions. The following submissions were urged in relation to the jurisdiction of NCLT/NCLAT under Section 60(5) of IBC: 35.1. Section 60(5) must be interpreted in the context of Section 25(2)(b) of IBC, which provides that the RP has to exercise the rights for the benefit of the corporate debtor in judicial, quasi-judicial or arbitration proceedings . Hence, if NCLT is conferred with the exclusive jurisdiction in relation to the corporate debtor, this section would be rendered redundant. This Court in Embassy Property Developments (P) Ltd. v. State of Karnataka [Embassy Property Developments (P) Ltd. v. State of Karnataka, (2020) 13 SCC 308] (hereinafter referred to as Embassy Property ) has held that the RP cannot sidestep the jurisdiction of other authorities and approach NCLT for the enforcement of the corporate debtor's rights. Although this judgment was in the context of a renewal of a mining lease by a statutory authority, the interpretation of Section 60(5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a modification. 35.6. The submission of the respondents that property under Section 3(27) of IBC includes an actionable claim and hence the dispute falls under the jurisdiction of NCLT is erroneous in view of the judgment in Embassy Property [Embassy Property Developments (P) Ltd. v. State of Karnataka, (2020) 13 SCC 308] . 35.7. The contention of the respondents that there is a direct connection between the termination of PPA by the appellant and the insolvency resolution process should be rejected because the issue in the present case is not of interpretation of the insolvency resolution process but of PPA, and only the State Commission has the jurisdiction to interpret PPA. 35.8. The respondents have relied on judgments under other statutes like the Companies Act, 1956, the Banking Regulation Act, 1949 and the Provincial Insolvency Act, 1920 with provisions corresponding to Section 60(5). However, these statutes do not contain any provisions equivalent to Sections 18 and 25(2)(b) of IBC. The interplay between these provisions and Section 60(5) must be considered for the purpose of determining NCLT's jurisdiction. Further, the facts of these judgments are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate debtor. However, in doing so, we issue a note of caution to NCLT and NCLAT to ensure that they do not usurp the legitimate jurisdiction of other courts, tribunals and fora when the dispute is one which does not arise solely from or relate to the insolvency of the corporate debtor. The nexus with the insolvency of the corporate debtor must exist. 70. It is appropriate to refer to the observations in the report of the BLRC, wherein it noted the role of NCLT, as the adjudicating authority for CIRP, in the following terms: An adjudicating authority ensures adherence to the process At all points, the adherence to the process and compliance with all applicable laws is controlled by the adjudicating authority. The adjudicating authority gives powers to the insolvency professional to take appropriate action against the Directors and management of the entity, with recommendations from the creditors committee. All material actions and events during the process are recorded at the adjudicating authority. The adjudicating authority can assess and penalise frivolous applications. The adjudicator hears allegations of violations and fraud while the process is on. The adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave jurisdiction over a dispute arising under the Mines and Minerals (Development and Regulation) Act, 1957, in relation to the refusal of the State of Karnataka to extend a mining lease. The primary consideration which weighed with this Court while coming to its decision was that NCLT cannot have jurisdiction on matters of public law. This Court held : (SCC p. 331, para 37) 37. 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). (emphasis in original) In the present case the decision to terminate PPA has not been taken by any governmental or statutory authority acting within the domain of its public law functions. The decision has been simply taken by a contracting party solely on account of the initiation of insolvency proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction of NCLT under Section 60(5)(c). This Court observed that : (SCC pp. 262-63, para 69) 69. NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of corporate debtor The nexus with the insolvency of corporate debtor must exist. (emphasis supplied) Thus, the residuary jurisdiction of NCLT cannot be invoked if the termination of a contract is based on grounds unrelated to the insolvency of corporate debtor. 29. It is evident that the appellant had time and again informed corporate debtor that its services were deficient, and it was falling foul of its contractual obligations. There is nothing to indicate that the termination of the facilities agreement was motivated by the insolvency of corporate debtor. The trajectory of events makes it clear that the alleged breaches noted in the termination notice dated 10-6-2019 were not a smokescreen to terminate the agreement because of the insolvency of corporate debtor. Thus, we are of the view that NCLT does not have any residuary jurisdiction to entertain the present contractual dispute which has arisen dehors the insolvency of corporate debtor. In the abse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual matrix). 177. The terms of our intervention in the present case are limited. Judicial intervention should not create a fertile ground for the revival of the regime under Section 22 of SICA which provided for suspension of wide-ranging contracts. Section 22 of the SICA cannot be brought in through the back door. The basis of our intervention in this case arises from the fact that if we allow the termination of PPA which is the sole contract of corporate debtor , governing the supply of electricity which it generates, it will pull the rug out from under CIRP, making the corporate death of corporate debtor a foregone conclusion. (emphasis supplied) 31. The narrow exception crafted by this Court in Gujarat Urja [Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, (2021) 7 SCC 209: (2021) 4 SCC (Civ) 1] must be borne in mind by NCLT and NCLAT even while examining prayers for interim relief. The order of NCLT dated 18-12-2019 [BMW Financial Services (P) Ltd. v. S.K. Wheels (P) Ltd., 2019 SCC OnLine NCLT 28273] does not indicate that NCLT has applied its mind to the centrality of the facilities agreement to the success of CIRP and corporate debtor's survival as a g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ENERCON (India) limited (presently Wind World (India) limited). The FC lease period ended on 19-06-2018. Wind World (India) Limited applied for renewal of FC lease on 09-01-2020 which was accepted by the office of the PCCF on 07-03-2020 and online link was transferred to the DCF on 22- 05-2020 for field verification and further processing of the proposal. Meanwhile, the user Agency had requested this office to permit them to start the Wind Mills stating that the wind mills, if not worked for long time, will get damaged. The user Agency had also requested to issue direction to the BESCOM to release the revenue which was withheld on the directions of the DCF. The request of the User Agency was examined by this office. It was observed that the FC renewal proposal involved some deviations from the approved lease area and was likely to attract penalty from Government of India in the form of regularization under the Forest (Conservation) Act, 1980. The request of User Agency was considered provided that the Government interests could be safeguarded to take care of the financial liabilities arising at the time of FC renewal. It was felt that the Government inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and came to a consensus that continuation of the windmill is not tenable in this situation. Hence, following decisions were taken:- 1. To immediately suspend the operations of the Wind Mills till further orders. 2. The User Agency to comply to all EDS queries raised by Chief Conservator of Forests Bellary and CCF to submit the completed FC proposal within a week without fail. 3. Chief Conservator of Forests, Bellary to contact BESCOM for Withholding all further payments in respect of the project. Sd/- Principal Chief Conservator of Forests (Forest Conservation) (Emphasis added) The proceedings are that the Company has been taking undue advantage of indulgence of the State and has not taken any steps to submit a complete forest clearance proposal for renewal of the lease and has been continuing with the operation on ad hoc basis. This is communicated to the Company by the Forest Department on 07-05-2022. The Communication reads as follows: To, M/s Wind World (India) Ltd., Wind Towers, Plot No.A-9, Veera Industrial Estate, Veera Desai Road, Veera desai Road Andheri (West), Mumbai 400 053. Sir, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended(sic) to the higher authorities for closure of life. Yours faithfully, Sd/- Deputy Conservator of Forests, Chitradurga Division, Chitradurga (Emphasis added) Challenging this, the Company could not have knocked at the doors of the Tribunal as it completely falls beyond the purview of the Code, being in the realm of public law, since the State has exercised its jurisdiction in drawing up the proceedings and directing forest clearances to be submitted by the corporate debtor, the petitioner, in exercise of powers conferred under the statute. Therefore, they are in the realm of public law. The Tribunal had no jurisdiction to direct functioning/continuing of the windmill without the forest clearances, merely because the State had granted such permission at an earlier point in time. 14. The submission of the learned senior counsel for the Company is that if the State had passed an order, then the Tribunal would have no jurisdiction. According to him, the one that is passed is not an order. The said submission is noted only to be rejected, as it is a communication from the hands of the State and it is understood by the Company also to be an or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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