This
case arose out of an interim order passed by the High Court of Madras, whereby
the operation of an NCLT Order was stayed. The NCLT Order had allowed a
Miscellaneous Application filed by the Resolution Professional of the Corporate
Debtor, thereby granting the prayer for setting aside an Order of rejection of
the proposal for deemed extension of a mining lease in favour of the Corporate
Debtor in terms of Section 8A(6) of the Mines & Minerals (Development and
Regulation) Act 1957 (“MMDR Act”).
Aggrieved
by the stay of the Order of the NCLT by the High Court, the Resolution
Professional, the Resolution Applicant and the Committee of Creditors
approached the Supreme Court, and argued that the jurisdiction of the High
Court could not be invoked in matters relating to the IBC. The Order of the
High Court was defended by the Government of Karnataka, inter alia, on the
ground that the interference of the High Court was called for since the NCLT
Order was one without jurisdiction.
The
Supreme Court, inter alia, held that:
(i)
The decision of the Government of
Karnataka to refuse deemed extension of lease is in the public law domain, and
can be subjected to judicial review by a superior Court. The NCLT, being a
creature of a special statute to discharge certain special functions, cannot be
elevated to the status of a superior Court having the power of judicial review
over administrative action;
(ii)
A decision by a Government authority or
statutory authority cannot be brought within the fold of “arising out of or in
relation to the insolvency resolution” occurring in Section 60(5)(c). Further,
Section 25(2) (b) was also relied upon to conclude that the resolution
professional could not short circuit judicial and quasi judicial proceedings to
bring all matters before the NCLT under Section 60(5);
(iii)
Such being the case, the NCLT Order was
without jurisdiction, and the High Court was held to have rightly exercised
jurisdiction under Article 226.
(iv)
On a second question, as to whether the
NCLT was competent to enquire into allegations of fraud such as in the matter
of initiation of CIRP, the Court relied upon Section 65 to hold that the NCLT
was indeed so empowered.
The
appeals were dismissed on the basis of the above conclusions.
1. Jagjeet Singh Lyallpuri (Dead)
through Lrs. & Ors. Vs. M/s Unitop Apartments & Builders Ltd.
[Judgment dated 3.12.2019 in Civil
Appeal No. 692 of 2016]
The
Appellants aggrieved by the Order passed by the High Court of Punjab and
Haryana, had challenged the same vide this Civil Appeal. The High Court vide
the said order in an application filed by the Respondent u/s 34 of the
Arbitration and Conciliation Act 1996 (‘Act’), held that the procedure followed
by the Ld. Arbitrator was contrary to the law (since the Respondent herein had
not been given the opportunity to cross-examine the witnesses) and had remanded
the matter to the sole Arbitrator for providing opportunity of leading evidence
to both the parties and also grant opportunity to cross-examine the witnesses
and thereafter decide each and every claim and counter claim separately on
merits.
After
perusing the appeals the Supreme Court and referring to Section 19 of the Act,
observed that:
(i)
Since it is open for the parties to
agree on the procedure to be followed by the Arbitral Tribunal, and it was
recorded in the presence of the parties and their counsels that the parties do
not wish to cross-examine the witnesses, having consented to the said
procedure, it would not be open for the respondent to approbate and reprobate
so as to raise a different contention later on;
(ii)
The Single Judge erred in allowing the
application filed by the Respondent for setting aside the Arbitral award u/s 34
of the Act.
With
the observation above mentioned the impugned order was set aside.
2. M/s Unicorn Industries v. Union of
India & Others
[Judgment dated 6.12.2019 in C.A.
No. 9237 of 2019]
A
bench of 3 judges of the Supreme Court considered the question as to whether an
exemption notification providing fiscal incentives in the form of exemption
from duties of excise could be said to include an exemption from levy of
education cess, higher education cess, and National Calamity Contingent Duty
(“NCCD”), in the absence of a specific mention of the above in the said
exemption notification.
The
assessee in the case had placed reliance upon two recent decisions of the
Supreme Court rendered by two Judges each, viz., SRD Nutrients Private Limited v. Commissioner of Central Excise,
Guwahati and Bajaj Auto Limited v.
Union of India & Ors.. In SRD
Nutrients, inter alia, reliance was placed on two Circulars of the CBEC to
hold that the said Circulars conclusively established that once the excise duty
was exempt, even the education and higher education cess was exempt. It was
further held that since education cess was to be calculated @ 2% of the excise
duty. Once excise duty was exempt, there was no question of levy of education
cess thereon. The decision in Bajaj Auto applied
the same principle, relying on SRD
Nutrients, to NCCD.
Upon
an analysis of the aforesaid decisions, the 3 Judge Bench concluded that the
same were per incuriam on account of
having ignored the prior 3 Judge Bench decision in Union of India v. Modi Rubber Limited. In Modi Rubber (as also in the present case), a case was made out by
the assessee that the exemption notification also provided for exemption from
special duties of excise imposed subsequent to the exemption notification, on
account of the use of the words ‘duties of excise’ in the exemption
notification. The words ‘duties of excise’ had been interpreted in Modi Rubber and it was concluded that
the Government could not be seen to have issued blanket exemptions from duties
which were not even in contemplation of the Government on the date of the
exemption notification.
Further,
the reasoning of SRD Nutrients
(briefly summarized above) was also found to be incorrect, while holding that
even though excise duty was not leviable, the same could be calculated for
determining the education cess etc. payable. The mere fact that excise duty
payment was exempt could not lead to the conclusion that all other cesses to be
calculated basis the same were also exempt.
The
2 Judge Bench decisions were thus held to be per incuriam, and the decision of the High Court, which placed
reliance on Modi Rubber, was
affirmed.
3. BGS SGS Soma JV v. NHPC Ltd.
[Judgment dated 10.12.2019 in C.A.
Nos. 9307-09 of 2019]
The
case arose out of arbitration proceedings in respect of a contract between the
Petitioner and Respondent, whereby the arbitration proceedings were agreed to
be held at New Delhi/ Faridabad. The contract was to be performed by the
Petitioner in Assam & Arunachal Pradesh. The arbitration award rendered at
New Delhi in favour of the Petitioner was assailed by the Respondent under
Section 34 of the Arbitration and Conciliation Act, 1996 (“Act”) before the
District and Sessions Judge, Faridabad, Haryana. An application under Order VII
Rule 10 of the Civil Procedure Code, 1908 (“CPC”) and Section 2(1)(e)(i) of the
Act was filed by the Petitioner seeking return of the Section 34 application
for presentment before an appropriate Court in New Delhi or Assam. The Section
34 application subsequently came to be transferred to the newly established
Commercial Courts at Gurugram, which allowed the Petitioner’s application for
return of the plaint as aforesaid. An appeal was filed by the Respondent under
Section 13(1) of the Commercial Courts Act 2015 read with Section 37 of the Act
before the High Court at Chandigarh. The question of maintainability of the
appeal was answered in favour of the Respondent. The appeal came to be allowed
on the finding that New Delhi was merely the convenient venue for the Tribunal,
and the seat remained at Faridabad. Resultantly, it was held that the Section
34 application ought not to have been returned by the Commercial Court at
Gurugram.
On
the arguments advanced by the parties on either side, the Supreme Court laid
down the following principles:
(i)
Relying upon the decision in Kandla Export Corporation& Anr. v. M/s
OCI Corporation & Anr., it was held that to answer the question of
maintainability of an appeal under Section 37 of the Act, that provision alone,
and not Section 13(1) of the Commercial Courts Act, 2015 was to be looked,
since the latter merely provides the forum for filing of the appeal;
(ii)
An Order allowing an application for
return of the Section 34 application, under Order VII Rule 10 r/w Section
2(1)(e)(i) of the Act, could not be said to be an order refusing to set aside
an arbitral award in terms of Section 34 of the Act, so as to be appealable in
terms of Section 37(1)(c) of the Act;
(iii)
Paragraph 96 of the decision of the 5
Judge Bench in Bharat Aluminium
Company (BALCO) v. Kaiser Aluminium
Technical Service Inc. [2012(9)SCC 552] which appeared to have been
construed by a Division Bench of the Delhi High Court (as also some decisions
of the Bombay High Court) to suggest that the jurisdiction of Courts at the
‘seat’ of the arbitration proceedings, and the jurisdiction of Courts at places
where whole or part of cause of action arose ran concurrently; was explained by
the 3 Judge Bench. It was clarified that the specification of ‘seat’ of an
arbitration amounted to an exclusive jurisdiction clause, meaning thereby that
the Courts at the seat alone would have supervisory jurisdiction over all
proceedings arising out of the arbitration;
(iv)
On a detailed examination of case law on
the aspect of ‘seat’ and ‘venue’ of arbitral proceedings, it was concluded by
the Court that when parties to an arbitration clause designate a particular
place as a ‘venue’ for arbitration, without separately specifying the seat,
such venue could be construed to be the seat of the arbitration proceedings,
and sufficient indication of an intention of the parties to anchor the
arbitration proceedings to that place;
(v)
The Three Judge Bench decision of the
Supreme Court in Union of India v. Hardy
Exploration and Production India (Inc). was held not to be good law for having ignored
the view in BALCO on the above
mentioned principle of law.
Applying
the above principles to the facts of the present case, it was held that the
seat of the arbitration proceedings was New Delhi, in view of the facts of the
case which indicated that the parties had chosen and accepted New Delhi (from
among one of two seats viz., New Delhi/ Faridabad) as the seat of the
arbitration. The Appeals were thus allowed and the Section 34 application was
directed to be placed before the Courts in New Delhi.
4. Perkins Eastman Architects DPC
& Anr. v. HSCC (India) Ltd.
[Judgment dated 29.11.2019 in Arb.
Appln No. 32 of 2019]
The
decision was rendered by the Supreme Court on an Application under Section
11(6) of the Arbitration Act 1996 (“the Act”) in the context of a contract
between a Consortium consisting of the Applicant (an Architectural firm having its registered
office in New York) and an Indian partner, on the one hand, and HSCC (India)
Ltd.- the Respondent. The contract provided for appointment of an Arbitrator by
the CMD of the Respondent with a period of 30 days of the request for
appointment of a Sole Arbitrator by the Applicant.
It
was averred before the Supreme Court that the appointment, though made by the
Respondent, was by an authority other than the prescribed authority as per
contract; and that the appointment was made beyond the contractually prescribed
period. Further, the Applicant relied on the Supreme Court decision in TRF Limited v. Energo Engineering Projects
Limited to contend that the CMD of the Respondent was not empowered to make
an appointment in view of the changes brought about by the 2016 Amendments to
the Act.
After
addressing the preliminary issue as to maintainability (to the effect that the
case was not one of an International Commercial Arbitration) while relying on Larsen and Toubro Limited SCOMI Engineering
BHD v. MMMRDA, the Supreme Court held:
(i)
that the decision in TRF Limitedequally applied to a
situation where the Managing Director was not to act as an arbitrator, but only
to appoint an arbitrator, since the test was that if only one of the parties to
the contract were allowed a right to appoint a sole arbitrator, its choice will
always have an element of exclusivity in determining or charting the course of
dispute resolution;
(ii)
that the question, as to whether an
appointment under Section 11(6) could be made by the Chief Justice or his
designate once the Respondent had already made an appointment as per the
contractual procedure, stood answered in Walter
Bau AG, Legal Successor of the Original Contractor, Dykerhoff and Widman A.G.
v. MCGM, wherein it was held that unless the appointment under the
contractual procedure is ex facie
valid, acceptance of such an appointment as a fait accompli to debar jurisdiction under Section 11(6) cannot be
countenanced in law.
(iii)
having thus established grounds to
entertain the Application under Section 11(6), a retired Hon’ble Judge of the
Supreme Court was appointed as an arbitrator, since the procedure under the
contract did not require any specific qualification of the sole arbitrator.
The
Applications were thus allowed.
5. Genpact India Private Limited v.
Deputy Commissioner of Income Tax & Anr.
[Judgment dated 22.11.2019 in C.A.
No. 8945 of 2019]
The
Appellant-assessee in this case had challenged an Order of the High Court
dismissing its writ petition against an Order of the Respondent pursuant to a
notice under Section 143(3) of the Income Tax Act, 1961 (“Act”). Vide the order
under challenge before the High Court, the Respondent had held the assessee
liable to pay tax at the rate of 20% on the distributed income arising from buy
back of shares its shares from its sole shareholder and holding company in
Mauritius.
The
argument of the Appellant assessee on merits of the demand was that since the
buy back was pursuant to a scheme of arrangement approved by the High Court in
terms of the Companies Act (and not a buy back under Section 77A thereof),
Section 115QA of the Act was inapplicable. The challenge was laid by way of a
writ petition alleging that the demand under Section 115QA could not be said to
be an appealable order under the Act, since Section 115QA does not seek to tax
the ‘total income’ of the assessee, but the distributed income of the assessee-
being the difference between the payments made to the shareholders in a buy
back and the price at which the shares were issued.
The
High Court, after admitting the writ petition and granting interim relief
initially, finally rejected the writ petition on the ground of availability of
alternate efficacious remedy, while granting an opportunity to the Appellant to
exercise its appeal remedy in a time bound manner.
On
an analysis of the applicable provisions, facts and law, the Supreme Court
confirmed the decision of the High Court, while holding:
(i)
The grievance of the appellant was one
of ‘denial of liability to be assessed’ for which an appellate remedy was
squarely provided by Sections 246 and 246A of the Act, as the case may be.
There was no warrant for the suggestion that the demand for additional income
tax under Section 115QA would fall outside the ambit of these words;
(ii)
The proposition that the High Court cannot reject a writ petition on the
ground of availability of alternative remedy, once having admitted the same is
not an absolute proposition of law, as held in State of U.P. v. Rajya Khanij Vikas Nigam Sangharsh Samiti and Ors.
[2008(12)SCC 675].
The
decision of the High Court was thus affirmed.
6. Hindustan Construction Company
Limited & Anr. v. Union of India & Ors.
[Judgment dated 27.11.2019 in
W.P.(C) No. 1074 of 2019 and connected matters]
The
Petitioner in this case had challenged the vires of the changes brought about
by the Arbitration and Conciliation (Amendment) Act, 2019 (“2019 Amendment”)
viz., insertion of Section 87 of the Arbitration and Conciliation Act, 1996
(“Act”) and the repeal of Section 26 of the Act w.e.f 23.10.2015 [i.e. the date
of its insertion in the Act vide the Arbitration and Conciliation (Amendment)
Act, 2015- (“2015 Amendment”)]. Additionally, certain provisions of the
Insolvency & Bankruptcy Code, 2016 (“IBC”) had also been challenged.
The
principle grievance of the writ petitioner was that the effect of these
amendments in the Act was that arbitration awards were held to be automatically
stayed once an application under Section 34 challenging the award was filed.
The
principles laid down by the Supreme Court while disposing off the writ
petitions were as follows:
(i)
It was held that the view that (pre-2015
Amendments) an arbitration award stood automatically stayed as soon as an
application under Section 34 of the Act was filed, was incorrect. The decision
in National Aluminium Company Limited
(NALCO) v. Pressteel Fabrications (P) Ltd. and Anr. [2004(1)SCC 540] and
the decisions that followed it were per incuriam, on account of their ignorance
of Sections 9, 35 and the second part of Section 36 of the Act;
(ii)
The disservice done by the ‘automatic
stay’ view to the efficiency of the alternate dispute resolution mechanism was
recognized by 246th Law Commission Report, and in turn by the
judgment of the Supreme Court in BCCI v.
Kochi Cricket Pvt. Ltd. [2018(6)SCC 287] leading to its view that the 2015
Amendment to Section 36 ought to apply to Section 34 applications filed before
the 2015 Amendment;
(iii)
On a juxtaposition of Section 87 of the
Act with Section 26 of the 2015 Amendment, it was
concluded that Section 87 had in fact
removed the basis of the BCCI
judgment (notwithstanding the express caution by the Supreme Court to the
Government therein to desist from enacting such a provision);
(iv)
The deletion of Section 26 of the 2015
Amendment and the insertion of Section 87 by the 2019 Amendment, and the
reasons for the enactment thereof were found to be manifestly arbitrary, being
in teeth of the decision of the Supreme Court in BCCI and contrary to the object of the 2015 Amendment and public
interest;
(v)
Section 87 was also manifestly arbitrary
on account of the fact that while in case of civil suits, there was no
automatic stay of a decree; in the case of a Section 34 application, which is a
much narrower remedy, an automatic stay was sought to be introduced;
The
writ petitions were thus disposed off.
7. M/s Uttarakhand Purv Sainik Kalyan
Nigam Limited vs. Northern Coal Field Limited
[Judgment dated 27.11.2019 in SLP
(C) No. 11476 of 2018]
An
agreement dated 21.12.2010 was entered into between the parties, under which
the Petitioner- Contractor was to provide security to the Respondent- Company
around the clock on need basis, as per the agreed contractual rates, the said
agreement contained an Arbitration clause. A dispute arose between the parties
with respect to payment of amounts and the Petitioner- Contractor issued a
notice of Arbitration calling upon the Respondent to nominate a Sole Arbitrator
in terms of the Arbitration clause. The Respondent Company did not respond to
the notice of sent by the Petitioner. The Respondent Company also did not
respond to the notice sent by the Petitioner proposing for appointment of Sole-
Arbitrator. The Petitioner thereafter filed an application under section 11
invoking the default power of the High Court to make the appointment of a sole
arbitrator.
The
High Court vide its impugned order held that the claims of the Petitioner were
barred by limitation, and therefore an arbitrator could not be appointed.
Aggrieved by the said order the Petitioner
filed a petition before the Hon’ble Supreme Court.
The
Hon’ble Apex Court observed that:
(i)
Post amendment of Section 11, the scope of examination by the
High Court is only confined to the existence of the arbitration agreement at
the section 11 stage and nothing more.
(ii)
In view of the legislative amendment in
Section 11 (6A), the Court is now required only to examine the existence of the
arbitration agreement. All other preliminary or threshold issues left to be
decided by the Arbitrator under Section 16, which enshrines the Kompetenz-Kompetenz principle (which intends to minimize judicial
intervention)
(iii)
In view of the provisions of Section 16,
and the legislative policy to restrict judicial intervention at the
pre-reference stage, the issue of limitation would be required to be decided by
the arbitrator.
The
impugned order was set aside in view of the abovementioned observations.
Other
Notable Judgments
1.
In The
Maharashtra State Co-operative Bank Ltd. v. Babulal Lade & Ors.
(decided on 4.12.2019), the Supreme Court emphasized the distinction between
‘recovery of arrears of land revenue’ and ‘recovery of amounts other than land
revenue, in the same manner as arrears of
land revenue’ in the context of Section 169 of the Maharashtra Land Revenue
Code. While placing reliance on Builders
Supply Corporation v. Union of India [AIR 1965 SC 1061], it was reiterated
that such provisions occurring merely provide a mode for recovery of the
amounts, and cannot be read to convert the amounts into arrears of land
revenue.
2.
In The
Great Eastern Shipping Co. Ltd. v. State of Karnataka & Ors. (decided
on 4.12.2019), while dealing with the question whether a Time Charter Agreement
between the vessel owner and the Mangalore Port Trust in respect of a vessel
was subject to tax under Section 5C of the Karnataka Sales Tax Act, it was held
by the Supreme Court that the transaction was a deemed sale in the form of a
‘transfer of right to use’ within the meaning assigned to those words under
Article 366(29-A)(d) of the Constitution of India. It was further held that the
situs of the deemed sale was within the State of Karnataka, by applying the
principles as to situs as laid down in the Constitution Bench decision in 20th Century Finance Corporation
Ltd. v. State of Maharashtra which held that the situs of the sale is where
the transfer of property in the goods takes place.
3.
In The
Commissioner of Central Excise, Vadodara-II v. Gujarat Narmada Valley
Fertilizers Co. Ltd. (decided on 3.12.2019), a 3 Judge Bench answered the
reference made to it by a two Judge Bench on account of an apparent conflict
between the decisions of the Supreme Court in CCE v. Gujarat Narmada Fertilizers Co. Ltd. [2009(9)SCC 101] and CCE Vadodara v. Gujarat State Fertilizers
and Chemicals Ltd. [2008(15)SCC 46]. It was held that there was no conflict
between the two judgments. Further, on an independent examination, the decision
in Gujarat Narmada Fertilizers Co. Ltd.
was held to state the correct position on the interpretation of Rule 6(1) and
6(2) of the CENVAT Credit Rules, 2002 with regarding to availing of CENVAT
Credit for duty paid fuel inputs used in the manufacture of exempted goods.
