# M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD v. STATE OF KARNATAKA & ORS

- **Citation:** [2019] 17 S.C.R. 559
- **Court:** Supreme Court of India
- **Decided:** 2019-12-03
- **Case number:** Civil Appeal No. 9170 of 2019
- **Bench:** R. F. Nariman, Aniruddha Bose, V. Ramasubramanian
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-embassy-property-developments-pvt-ltd-v-state-of-karnataka-ors-33665
- **Pages:** 40

## Headnote

Constitution of India: Arts.226/227 - Scope of interference
- Corporate insolvency resolution process initiated against a
corporate debtor - Corporate debtor held a mining lease granted
by Government of Karnataka which was to expire - Resolution
Professional sought benefit of deemed extension of lease - State
Government rejected the proposal for deemed extension of mining
lease - The said order challenged by Resolution Professional -
NCLT set aside the order of State Government on the ground that
the same was in violation of moratorium declared in terms of s.14(1)
of IBC, 2016 and directed the State Government to execute Lease
Deeds in favour of Corporate Debtor - By impugned order, High
Court granted stay of operation of directions contained in the order
of NCLT - Whether High Court ought to have interfered under
Art.226/227 of the Constitution, with an order passed by NCLT in
proceeding under the IBC, 2016, despite the availability of a
statutory alternative remedy of appeal to NCLAT - Held: The
decision of the State Government to refuse the benefit of deemed
extension of lease, is in the public law domain and, therefore, the
correctness of the said decision can be called into question only
in a superior court which is vested with the power of judicial review
over administrative action - The NCLT, being a creature of a special
statute to discharge certain specific functions, cannot be elevated
to the status of a superior court having such powers - The NCLT
is not even a Civil Court, which has jurisdiction 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 - Though NCLT and NCLAT have jurisdiction to enquire
into questions of fraud, they would not have jurisdiction to
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559
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adjudicate upon disputes such as those arising under MMDR Act,
1957 and the rules issued thereunder, especially when the disputes
revolve around decisions of statutory or quasi-judicial authorities,
which can be corrected only by way of judicial review of
administrative action - The moratorium provided for in s.14 could
not have any impact upon the right of the Government to refuse
the extension of lease - The purpose of moratorium is only to
preserve the status quo and not to create a new right - Therefore,
NCLT did not have jurisdiction to entertain an application against
the State Government for a direction to execute Supplemental Lease
Deeds for the extension of the mining lease - Since NCLT chose
to exercise a jurisdiction not vested in it in law, the High Court
was justified in entertaining the writ petition, on the basis that NCLT
was coram non judice - Mines and Minerals (Development and
Regulation) Act, 1957 - Insolvency and Bankruptcy Code, 2016
- Judicial review.
Insolvency and Bankruptcy Code, 2016: Scope of the
jurisdiction and the nature of the powers exercised by NCLT and
NCLAT under the provisions of IBC, 2016 - Discussed.
Insolvency and Bankruptcy Code, 2016: Whether the
questions of fraud can be inquired into by the NCLT/NCLAT in the
proceedings initiated under the IBC Code - Held: NCLT has
jurisdiction to enquire into allegations of fraud - As a corollary,
NCLAT will also have jurisdiction - Fraudulent initiation of CIRP
cannot be a ground to bypass the alternative remedy of appeal
provided in s.61.
Constitution of India: Arts.226/227 - Exercise of
jurisdiction, exception - In cases where a statutory alternative
remedy of appeal is available, one of the exceptions to the self
imposed restraint of the High Court is the lack of jurisdiction on
the part of the statutory/quasi-judicial authority, against whose
order a judicial review is sought - Traditionally, English courts
maintained a distinction between cases where a sta

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M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD.
v.
STATE OF KARNATAKA & ORS.
(Civil Appeal No. 9170 of 2019)
DECEMBER 03, 2019
[R. F. NARIMAN, ANIRUDDHA BOSE
AND V. RAMASUBRAMANIAN, JJ.]
Constitution of India: Arts.226/227 - Scope of interference
- Corporate insolvency resolution process initiated against a
corporate debtor - Corporate debtor held a mining lease granted
by Government of Karnataka which was to expire - Resolution
Professional sought benefit of deemed extension of lease - State
Government rejected the proposal for deemed extension of mining
lease - The said order challenged by Resolution Professional -
NCLT set aside the order of State Government on the ground that
the same was in violation of moratorium declared in terms of s.14(1)
of IBC, 2016 and directed the State Government to execute Lease
Deeds in favour of Corporate Debtor - By impugned order, High
Court granted stay of operation of directions contained in the order
of NCLT - Whether High Court ought to have interfered under
Art.226/227 of the Constitution, with an order passed by NCLT in
proceeding under the IBC, 2016, despite the availability of a
statutory alternative remedy of appeal to NCLAT - Held: The
decision of the State Government to refuse the benefit of deemed
extension of lease, is in the public law domain and, therefore, the
correctness of the said decision can be called into question only
in a superior court which is vested with the power of judicial review
over administrative action - The NCLT, being a creature of a special
statute to discharge certain specific functions, cannot be elevated
to the status of a superior court having such powers - The NCLT
is not even a Civil Court, which has jurisdiction 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 - Though NCLT and NCLAT have jurisdiction to enquire
into questions of fraud, they would not have jurisdiction to
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adjudicate upon disputes such as those arising under MMDR Act,
1957 and the rules issued thereunder, especially when the disputes
revolve around decisions of statutory or quasi-judicial authorities,
which can be corrected only by way of judicial review of
administrative action - The moratorium provided for in s.14 could
not have any impact upon the right of the Government to refuse
the extension of lease - The purpose of moratorium is only to
preserve the status quo and not to create a new right - Therefore,
NCLT did not have jurisdiction to entertain an application against
the State Government for a direction to execute Supplemental Lease
Deeds for the extension of the mining lease - Since NCLT chose
to exercise a jurisdiction not vested in it in law, the High Court
was justified in entertaining the writ petition, on the basis that NCLT
was coram non judice - Mines and Minerals (Development and
Regulation) Act, 1957 - Insolvency and Bankruptcy Code, 2016
- Judicial review.
Insolvency and Bankruptcy Code, 2016: Scope of the
jurisdiction and the nature of the powers exercised by NCLT and
NCLAT under the provisions of IBC, 2016 - Discussed.
Insolvency and Bankruptcy Code, 2016: Whether the
questions of fraud can be inquired into by the NCLT/NCLAT in the
proceedings initiated under the IBC Code - Held: NCLT has
jurisdiction to enquire into allegations of fraud - As a corollary,
NCLAT will also have jurisdiction - Fraudulent initiation of CIRP
cannot be a ground to bypass the alternative remedy of appeal
provided in s.61.
Constitution of India: Arts.226/227 - Exercise of
jurisdiction, exception - In cases where a statutory alternative
remedy of appeal is available, one of the exceptions to the self
imposed restraint of the High Court is the lack of jurisdiction on
the part of the statutory/quasi-judicial authority, against whose
order a judicial review is sought - Traditionally, English courts
maintained a distinction between cases where a statutory/quasijudicial authority exercised a jurisdiction not vested in it in law
and cases where there was a wrongful exercise of the available
jurisdiction - The distinction between lack of jurisdiction and
wrongful exercise of available jurisdiction, should certainly be
taken into account by High Courts, when Art.226 is sought to be
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invoked bypassing a statutory alternative remedy provided by a
special statute.
Constitution of India: Arts.226/227 - Scope of jurisdiction
and nature of the powers exercised by High Court under Art.226
of the Constitution - Discussed.
Constitution of India: Arts.226/227 - Scope of jurisdiction
of High Court over private individuals - Held: In view of the use
of the expression "any person" in Art.226 (1), the jurisdiction of
the High Court extends even over private individuals, provided the
nature of the duties performed by such private individuals, are
public in nature - Therefore, the remedies provided under Art.226
are public law remedies, which stand in contrast to the remedies
available in private law.
Mines and Minerals (Development and Regulation) Act,
1957: Object of enactment - Discussed - Constitution of India -
Seventh Schedule - Union List - Entry 54.
Companies Act, 2013: ss.408, 410 - Jurisdiction and powers
of NCLT - NCLT and NCLAT are constituted, not under the IBC,
2016 but under ss.408 and 410 of the Companies Act, 2013 -
ss.420 and 424 of the Companies Act, 2013 indicate in broad terms,
merely the procedure to be followed by the NCLT and NCLAT
before passing orders - However, there are no separate provisions
in the Companies Act, exclusively dealing with the jurisdiction and
powers of NCLT - In contrast, Sub-sections (4) and (5) of s.60 of
IBC, 2016 give an indication respectively about the powers and
jurisdiction of the NCLT - Sub-section (4) of s.60 of IBC, 2016
states that the NCLT will have all the powers of the DRT as
contemplated under Part III of the Code for the purposes of Subsection (2) - Insolvency and Bankruptcy Code, 2016 - s.60.
Insolvency and Bankruptcy Code, 2016: ss.60, 179 - Under
s.179 (1), it is the DRT which is the Adjudicating Authority in
relation to insolvency matters of individuals and firms - This is in
contrast to s.60(1) which names the NCLT as the Adjudicating
Authority in relation to insolvency resolution and liquidation of
corporate persons including corporate debtors and personal
guarantors - The object of Sub-section (2) of s.60 is to avoid any
confusion that may arise on account of s.179(1) and to ensure that
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whenever a CIRP is initiated against a corporate debtor, NCLT will
be the Adjudicating Authority not only in respect of such corporate
debtor but also in respect of the individual who stood as surety to
such corporate debtor, notwithstanding the naming of the DRT
under s.179(1) as the Adjudicating Authority for the insolvency
resolution of individuals.
Dismissing the appeals, the Court
HELD: 1.1 It is beyond any pale of doubt that IBC, 2016
is a complete Code in itself. It is an exhaustive code on the
subject matter of insolvency in relation to corporate entities and
others. It is also true that IBC, 2016 is a single Unified Umbrella
Code, covering the entire gamut of the law relating to insolvency
resolution of corporate persons and others in a time bound
manner. The code provides a three-tier mechanism namely (i)
the NCLT, which is the Adjudicating Authority (ii) the NCLAT
which is the appellate authority and (iii) this court as the final
authority, for dealing with all issues that may arise in relation to
the reorganisation and insolvency resolution of corporate
persons. In so far as insolvency resolution of corporate debtors
and personal guarantors are concerned, any order passed by the
NCLT is appealable to NCLAT under Section 61 of the IBC,
2016 and the orders of the NCLAT are amenable to the
appellate jurisdiction of this court under Section 62. [Para 11]
[578-D-G]
1.2 Article 226 (1) recognizes the power of every High
Court to issue (i) directions, (ii) orders or (iii) writs. They can
be issued to (i) any person or (ii) authority including the
Government. They may be issued (i) for the enforcement of any
of the rights conferred by Part III and (ii) for any other purpose.
But the exercise of the power recognized by Clause (1) of Article
226, is restricted by the territorial jurisdiction of the High Court,
determined either by its geographical location or by the place
where the cause of action, in whole or in part, arose. While the
nature of the power exercised by the High Court is delineated
in Clause (1) of Article 226, the jurisdiction of the High Court
for the exercise of such power, is spelt out in both Clauses (1)
and (2) of Article 226. [Para 13] [579-B-D]
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M/s Innoventive Industries Limited v. ICICI Bank, AIR
2017 SC 4084 : [2017] 8 SCR 33 - relied on.
1.3 Traditionally, the jurisdiction under Article 226 was
considered as limited to ensuring that the judicial or quasi-judicial
tribunals or administrative bodies do not exercise their powers
in excess of their statutory limits. But in view of the use of the
expression "any person" in Article 226 (1), courts recognized
that the jurisdiction of the High Court extended even over private
individuals, provided the nature of the duties performed by such
private individuals, are public in nature. Therefore, the remedies
provided under Article 226 are public law remedies, which stand
in contrast to the remedies available in private law. One of the
well recognized exceptions to the self-imposed restraint of the
High Courts, in cases where a statutory alternative remedy of
appeal is available, is the lack of jurisdiction on the part of the
statutory/quasi-judicial authority, against whose order a judicial
review is sought. [Paras 14, 15] [579-E-G]
Nilabati Behera @ Babita Behera v. State of Orissa
(1993) 2 SCC 746 : [1993] 2 SCR 581 - relied on.
2. Whether the case of the State of Karnataka fell under
the category of (1) lack of jurisdiction on the part of the NCLT
to issue a direction in relation to a matter covered by MMDR
Act, 1957 and the Statutory Rules issued thereunder or (2) mere
wrongful exercise of a recognised jurisdiction.
In the case on hand, the land which formed the subject
matter of mining lease, belongs to the State of Karnataka. The
liberties and privileges granted to the Corporate Debtor by the
Government of Karnataka under the mining lease, are delineated
in Part IV of the mining lease. The mining lease was issued in
accordance with the statutory rules namely Mineral Concession
Rules, 1960. Therefore, the relationship between the Corporate
Debtor and the Government of Karnataka under the mining lease
is not just contractual but also statutorily governed. The MMDR
Act, 1957 is a Parliamentary enactment traceable to Entry 54 in
List I of the Seventh Schedule. This Entry 54 speaks about
regulation of mines and development of minerals to the extent
to which such regulation and development under the control of
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the Union, is declared by Parliament by law to be expedient in
public interest. In fact the expression "public interest" is used only
in 3 out of 97 Entries in List I, one of which is Entry 54, the other
two being Entries 52 and 56. Interestingly, Entry 23 in List II
does not use the expression "public interest", though it also
deals with regulation of mines and mineral development, subject
to the provisions of List I. It is this element of "public interest"
that finds a place in Section 2 of the MMDR Act, 1957, in the
form of a declaration. Therefore, the decision of the Government
of Karnataka to refuse the benefit of deemed extension of lease,
is in the public law domain and hence the correctness of the said
decision can be called into question only in a superior court
which is vested with the power of judicial review over
administrative action. The NCLT, being a creature of a special
statute to discharge certain specific functions, cannot be elevated
to the status of a superior court having the power of judicial
review over administrative action. Judicial review, flows from the
concept of a higher law, namely the Constitution. 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. [Paras 25, 27, 29] [585-B-G; 586-A-B-F]
Sub-Committee on Judicial Accountability v. Union of
India (1991) 4 SCC 699 - relied on.
Thressiamma Jacob v. Deptt. of Mining & Geology
(2013) 9 SCC 725 : [2013] 7 SCR 863 - referred to.
3. Jurisdiction and powers of NCLT
3.1 NCLT and NCLAT are constituted, not under the IBC,
2016 but under Sections 408 and 410 of the Companies Act,
2013. Without specifically defining the powers and functions of
the NCLT, Section 408 of the Companies Act, 2013 simply states
that the Central Government shall constitute a National Company
Law Tribunal, to exercise and discharge such powers and
functions as are or may be, conferred on it by or under the
Companies Act or any other law for the time being in force.
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Insofar as NCLAT is concerned, Section 410 of the Companies
Act merely states that the Central Government shall constitute
an Appellate Tribunal for hearing appeals against the Orders of
the Tribunal. The matters that fall within the jurisdiction of the
NCLT, under the Companies Act, 2013, lie scattered all over
the Companies Act. Therefore, Sections 420 and 424 of the
Companies Act, 2013 indicate in broad terms, merely the
procedure to be followed by the NCLT and NCLAT before
passing orders. However, there are no separate provisions in
the Companies Act, exclusively dealing with the jurisdiction and
powers of NCLT. In contrast, Sub-sections (4) and (5) of Section
60 of IBC, 2016 give an indication respectively about powers
and jurisdiction of the NCLT. [Paras 30, 31] [586-G; 587-A-D]
3.2 Sub-section (4) of Section 60 of IBC, 2016 states that
the NCLT will have all the powers of the DRT as contemplated
under Part III of the Code for the purposes of Sub-section (2).
Sub-section (2) deals with a situation where the insolvency
resolution or liquidation or bankruptcy of a corporate guarantor
or personal guarantor of a corporate debtor is taken up, when
CIRP or liquidation proceeding of such a corporate debtor is
already pending before NCLT. The object of Sub-section (2) is
to group together the CIRP or liquidation proceeding of a
corporate debtor and the insolvency resolution or liquidation or
bankruptcy of a corporate guarantor or personal guarantor of the
very same corporate debtor, so that a single Forum may deal
with both. This is to ensure that the CIRP of a corporate debtor
and the insolvency resolution of the individual guarantors of the
very same corporate debtor do not proceed on different tracks,
before different Fora, leading to conflict of interests, situations
or decisions. [Para 32] [588-F-H; 589-A]
3.3 If the object of Sub-section (2) of Section 60 is to
ensure that the insolvency resolutions of the corporate debtor
and its guarantors are dealt with together, then the question that
arises is as to why there should be a reference to the powers of
the DRT in Sub-section (4). The answer to this question is to
be found in Section 179 of IBC, 2016. Under Section 179 (1), it
is the DRT which is the Adjudicating Authority in relation to
insolvency matters of individuals and firms. This is in contrast
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to Section 60(1) which names the NCLT as the Adjudicating
Authority in relation to insolvency resolution and liquidation of
corporate persons including corporate debtors and personal
guarantors. The expression "personal guarantor" is defined in
Section 5(22) to mean an individual who is the surety in a
contract of guarantee to a corporate debtor. Therefore the object
of Sub-section (2) of Section 60 is to avoid any confusion that
may arise on account of Section 179(1) and to ensure that
whenever a CIRP is initiated against a corporate debtor, NCLT
will be the Adjudicating Authority not only in respect of such
corporate debtor but also in respect of the individual who stood
as surety to such corporate debtor, notwithstanding the naming
of the DRT under Section 179(1) as the Adjudicating Authority
for the insolvency resolution of individuals. This is also why Subsection (2) of Section 60 uses the phrase "notwithstanding
anything to the contrary contained in this Code". [Para 33] [589B-E]
3.4 Sub-section (2) of Section 179 confers jurisdiction upon
DRT to entertain and dispose of (i) any suit or proceeding by or
against the individual debtor (ii) any claim made by or against
the individual debtor and (iii) any question of priorities or any
other question whether of law or facts arising out of or in relation
to insolvency and bankruptcy of the individual debtor. Clauses
(a), (b) and (c) of Sub-section (2) of Section 179 are identical to
Clauses (a), (b) and (c) of Sub-section (5) of Section 60.
Therefore the only reason why Sub-section (4) is incorporated
in Section 60 is to ensure that NCLT will exercise jurisdiction
- (1) not only to entertain and dispose of matters referred to in
Clauses (a), (b) and (c) of Sub-section (5) of Section 60 in relation
to the corporate debtor, (2) but also to entertain and dispose of
the matters specified in Clauses (a), (b) and (c) of Sub-section
(2) of Section 179, whenever the contingency stated in Section
60(2) arises. [Para 34] [589-F-H]
3.5 A combined reading of Sub-section (4) and Sub-section
(2) of Section 60 with Section 179 shows that none of them hold
the key to the question as to whether NCLT would have
jurisdiction over a decision taken by the government under the
provisions of MMDR Act, 1957 and the Rules issued thereunder. The only provision which can probably throw light on this
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question would be Sub-section (5) of Section 60, as it speaks
about the jurisdiction of the NCLT. 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 Subsection (5). [Para 36] [590-G-H; 591-A-B]
3.6 If NCLT has been conferred with jurisdiction to decide
all types of claims to property, of the corporate debtor, Section
18(f)(vi) would not have made the task of the interim resolution
professional in taking control and custody of an asset over which
the corporate debtor has ownership rights, subject to the
determination of ownership by a court or other authority. In fact
an asset owned by a third party, but which is in the possession
of the corporate debtor under contractual arrangements, is
specifically kept out of the definition of the term "assets" under
the Explanation to Section 18. This assumes significance in view
of the language used in Sections 18 and 25 in contrast to the
language employed in Section 20. Section 18 speaks about the
duties of the interim resolution professional and Section 25
speaks about the duties of resolution professional. These two
provisions use the word "assets", while Section 20(1) uses the
word "property" together with the word "value". Sections 18
and 25 do not use the expression "property". Another important
aspect is that under Section 25 (2) (b) of IBC, 2016, the
resolution professional is obliged to represent and act on behalf
of the corporate debtor with third parties and exercise rights
for the benefit of the corporate debtor in judicial, quasi-judicial
and arbitration proceedings. Wherever the corporate debtor has
to exercise rights in judicial, quasi-judicial proceedings, the
resolution professional cannot short-circuit the same and bring
a claim before NCLT taking advantage of Section 60(5).
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
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law, they cannot, through the resolution professional, take a
bypass and go before NCLT for the enforcement of such a right.
[Paras 39-40] [593-B-E-H; 594-A-B]
4. The moratorium provided for in Section 14 could not
have any impact upon the right of the Government to refuse the
extension of lease. The purpose of moratorium is only to
preserve the status quo and not to create a new right. Therefore
nothing turns on Section 14 of IBC, 2016. Even Section 14 (1)
(d), of IBC, 2016, which prohibits, during the period of
moratorium, the recovery of any property by an owner or lessor
where such property is occupied by or in the possession of the
corporate debtor, will not go to the rescue of the corporate
debtor, since what is prohibited therein, is only the right not to
be dispossessed, but not the right to have renewal of the lease
of such property. In fact the right not to be dispossessed, found
in Section 14 (1) (d), will have nothing to do with the rights
conferred by a mining lease especially on a government land.
What is granted under the deed of mining lease dated
04.01.2001, by the Government of Karnataka, to the Corporate
Debtor, was the right to mine, excavate and recover iron ore
and red oxide for a specified period of time. The Deed of Lease
contains a Schedule divided into several parts. Part-I of the
Schedule describes the location and area of the lease. Part-II
indicates the liberties and privileges of the lessee. The
restrictions and conditions subject to which the grant can be
enjoyed are found in Part-III of the Schedule. The liberties,
powers and privileges reserved to the Government, despite the
grant, are indicated in Part-IV. This Part-IV entitles the
Government to work on other minerals (other than iron ore and
red oxide) on the same land, even during the subsistence of the
lease. Therefore, what was granted to the Corporate Debtor was
not an exclusive possession of the area in question, so as to
enable the Resolution Professional to invoke Section 14 (1) (d).
Section 14 (1) (d) may have no application to situations of this
nature. Therefore, NCLT did not have jurisdiction to entertain
an application against the Government of Karnataka for a
direction to execute Supplemental Lease Deeds for the
extension of the mining lease. Since NCLT chose to exercise a
jurisdiction not vested in it in law, the High Court of Karnataka
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was justified in entertaining the writ petition, on the basis that
NCLT was coram non judice. [Paras 44, 45] [595-A-H]
5. Whether NCLT is competent to enquire into allegations
of fraud, especially in the matter of the very initiation of CIRP.
Section 65 specifically deals with fraudulent or malicious
initiation of proceedings. Even fraudulent tradings carried on by
the Corporate Debtor during the insolvency resolution, can be
inquired into by the Adjudicating Authority under Section 66.
Section 69 makes an officer of the corporate debtor and the
corporate debtor liable for punishment, for carrying on
transactions with a view to defraud creditors. Therefore, NCLT
is vested with the power to inquire into (i) fraudulent initiation
of proceedings as well as (ii) fraudulent transactions. Section
65(1) deals with a situation where CIRP is initiated fraudulently
"for any purpose other than for the resolution of insolvency or
liquidation". It is clear that NCLT has jurisdiction to enquire
into allegations of fraud. As a corollary, NCLAT will also have
jurisdiction. Hence, fraudulent initiation of CIRP cannot be a
ground to bypass the alternative remedy of appeal provided in
Section 61. [Paras 49-51] [597-C-G-H; 598-B]
The State of Uttar Pradesh v. Mohammad Nooh. [1958]
SCR 595 ; Official Trustee, West Bengal & Others v.
Sachindra Nath Chatterjee & Another [1969] 3 SCR
92 ; Hirday Nath Roy v. Ramachandra Barna Sarma.
ILR LXVIII Calcutta 138 ; Indian Farmers Fertiliser
Co-operative Ltd. v. Bhadra Products (2018) 2 SCC
534 : [2018] 1 SCR 848 ; Mafatlal Industries & Others
v. Union of India (1997) 5 SCC 536 : [1996] 10 Suppl.
SCR 585 ; M.L. Sethi v. R.P. Kapur (1972) 2 SCC
427 : [1973] 1 SCR 697 ; Hari Prasad Mulshanker
Trivedi v. V.B Raju (1974) 3 SCC 415 : [1974] 1 SCR
548 ; Union Bank of India v. Satyawati Tandon (2010)
8 SCC 110 : [2010] 9 SCR 1 ; Sadhana Lodh v.
National Insurance Co. (2003) 3 SCC 524 : [2003] 1
SCR 567 ; Nivedita Sharma v. Cellular Operators
Association of India (2011) 14 SCC 337 ; Cicily
Kallarackal v. Vehicle Factory (2012) 8 SCC 524 :
[2012] 8 SCR 95 - referred to.
M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD. v.
STATE OF KARNATAKA
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Anisminic Ltd. v. Foreign Compensation Commission
(1969) 2 WLR 163 ; Barnard and Others v. National
Dock Labour Board and Others (1953) 2 WLR 995 ;
Reg. v. Governor of Brixton Prison, Ex parte Armah
(1968) AC 192 ; Re Racal Communications Ltd (1981)
AC 374 ; O'Reilly v. Mackman (1983) 2 AC 237 ; R.
v. Lord President [1993] A.C. 682 ; Regina (Privacy
International) v. Investigatory Powers Tribunal, [2019]
UKSC 22 ; Smith v. East Elloe Rural District Council
(1956) AC 736 ; R v. Secretary of State for the
Environment, Ex p. Ostler
(1977) QB 122 ;
Wolverhampton New Waterworks Co. v. Hawkesford
[1859] 6 CB (NS) 336 - referred to.
Case Law Reference
[1958] SCR 595
referred to
Para 9
[2017] 8 SCR 33
relied on
Para 11
[1993] 2 SCR 581
relied on
Para 14
[1969] 3 SCR 92
referred to
Para 18
[2018] 1 SCR 848
referred to
Para 18
[1996] 10 Suppl. SCR 585
referred to
Para 19
[1973] 1 SCR 697
referred to
Para 20
[1974] 1 SCR 548
referred to
Para 21
[2010] 9 SCR 1
referred to
Para 23
[2003] 1 SCR 567
referred to
Para 23
(2011) 14 SCC 337
referred to
Para 23
[2012] 8 SCR 95
referred to
Para 23
[2013] 7 SCR 863
referred to
Para 27
(1991) 4 SCC 699
relied on
Para 28
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9170
of 2019.
From the Judgment and Order dated 12.09.2019 of the High
Court of Karnataka at Bengaluru in W.P. No. 41029 of 2019.
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With
Civil Appeal Nos. 9171, 9172 of 2019.
E. Om Prakash, Kapil Sibal, Arvind P. Datar, Mukul Rohatgi, Sr.
Advs., R. Murali, Charudatta Vijayrao Mahindrakar, Ms. Pinky Behera,
Ms. Madhusmita Bora, Pawan Kishore Singh, Dipankar Singh, Riju Raj
Singh Jamwal, Advs. for the Appellants.
K. K. Venugopal, AG, Gurukrishna Kumar, Sr. Adv., Omkar
Kambi, Ankur Mittal, Manendra Pal Gupta, Prakash Jadhav, V. N.
Raghupathy, Advs. for the Respondents.
The Judgment of the Court was delivered by
V. RAMASUBRAMANIAN, J.
1. Leave Granted.
2. Two seminal questions of importance namely:-
i) Whether the High Court ought to interfere, under Article
226/227 of the Constitution, with an Order passed by
the National Company Law Tribunal in a proceeding
under the Insolvency and Bankruptcy Code, 2016,
ignoring the availability of a statutory remedy of appeal
to the National Company Law Appellate Tribunal and
if so, under what circumstances; and
ii) Whether questions of fraud can be inquired into by the
NCLT/NCLAT in the proceedings initiated under the
Insolvency and Bankruptcy Code, 2016, arise for our
consideration in these appeals.
Brief background facts
3. There are three appeals on hand, one filed by the Resolution
Applicant, the second filed by the Corporate Debtor through the
Resolution Professional and the third filed by the Committee of Creditors,
all of which challenge an Interim Order passed by the Division Bench
of High Court of Karnataka in a writ petition, staying the operation of
a direction contained in the order of the NCLT, on a Miscellaneous
Application filed by the Resolution Professional.
M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD. v.
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4. The background facts leading to the filing of the above appeals,
in brief, are as follows:
i) A company by name M/s. Udhyaman Investments Pvt.
Ltd. which is the twelfth Respondent in the first of these
three appeals, claiming to be a Financial Creditor, moved
an application before the NCLT Chennai, under Section
7 of the Insolvency and Bankruptcy Code, 2016
(hereinafter referred to as the IBC, 2016), against M/
s. Tiffins Barytes Asbestos & Paints Ltd., the Corporate
Debtor (which is the fourth Respondent in the first of
these three appeals and which is also the appellant in
the next appeal).
ii) By an Order dated 12.03.2018, 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.
iii) At that time, the Corporate Debtor held a mining lease
granted by the Government of Karnataka, which was
to expire by 25.05.2018. Though a notice for premature
termination of the lease had already been issued on
09.08.2017, on the allegation of violation of statutory
rules and the terms and conditions of the lease deed,
no order of termination had been passed till the date of
initiation of the Corporate Insolvency Resolution Process
(hereinafter referred to as CIRP).
iv) Therefore, the Interim Resolution Professional appointed
by NCLT addressed a letter dated 14.03.2018 to the
Chairman of the Monitoring Committee as well as the
Director of Mines & Geology informing them of the
commencement of CIRP. He also wrote a letter dated
21.04.2018 to the Director of Mines & Geology, seeking
the benefit of deemed extension of the lease beyond
25.05.2018 upto 31.3.2020 in terms of Section 8-A (6)
of the Mines & Minerals (Development and Regulation)
Act, 1957 (hereinafter referred to as MMDR Act,
1957).
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v) Finding that there was no response, the Interim
Resolution Professional filed a writ petition in WP No.
23075 of 2018 on the file of the High Court of
Karnataka, seeking a declaration that the mining lease
should be deemed to be valid upto 31.03.2020 in terms
of Section 8A(6) of the MMDR Act, 1957.
vi) During the pendency of the writ petition, the
Government of Karnataka passed an Order dated
26.09.2018, 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
Energy Minerals) Rules, 2016.
vii) In view of the Order of rejection passed by the
Government of Karnataka, the Corporate Debtor,
represented by the Interim Resolution Professional,
withdrew the Writ Petition No.23075 of 2018, on
28.09.2018, with liberty to file a fresh writ petition.
viii) However, instead of filing a fresh writ petition (in
accordance with the liberty sought), the Resolution
Professional moved a Miscellaneous Application No.632
of 2018, before the NCLT, Chennai praying for setting
aside the Order of the Government of Karnataka, and
seeking a declaration that the lease should be deemed
to be valid upto 31.03.2020 and also a consequential
direction to the Government of Karnataka to execute
Supplement Lease Deeds for the period upto
31.03.2020.
ix) By an Order dated 11.12.2018, NCLT, Chennai allowed
the Miscellaneous Application setting aside the Order
of the Government of Karnataka on the ground that the
same was in violation of the moratorium declared on
12.03.2018 in terms of Section 14(1) of IBC, 2016.
Consequently the Tribunal directed the Government of
Karnataka to execute Supplement Lease Deeds in
favour of the Corporate Debtor for the period upto
31.03.2020.
M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD. v.
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x) Aggrieved by the order of the NCLT, Chennai, the
Government of Karnataka moved a writ petition in WP
No.5002 of 2019, before the High Court of Karnataka.
When the writ petition came up for hearing, it was
conceded by the Resolution Professional before the High
Court of Karnataka that the order of the NCLT could
be set aside and the matter relegated to the Tribunal,
for a decision on merits, after giving an opportunity to
the State to respond to the reliefs sought in the
Miscellaneous Application. It is relevant to note here that
the Order of the NCLT dated 11.12.2018, was passed
ex-parte, on the ground that the State did not choose to
appear despite service of notice.
xi) Therefore, by an Order dated 22.03.2019, the High Court
of Karnataka set aside the Order of the NCLT and
remanded the matter back to NCLT for a fresh
consideration of the Miscellaneous Application No.632
of 2018.
xii) Thereafter, the State of Karnataka filed a Statement of
Objections before the NCLT, primarily raising two
objections, one relating to the jurisdiction of the NCLT
to adjudicate upon disputes arising out of the grant of
mining leases under the MMDR Act, 1957, between the
State-Lessor and the Lessee and another relating to the
fraudulent and collusive manner in which the entire
resolution process was initiated by the related parties
of the Corporate Debtor themselves, solely with a view
to corner the benefits of the mining lease.
xiii) Overruling the objections of the State, the NCLT
Chennai passed an Order dated 03.05.2019 allowing the
Miscellaneous Application, setting aside the order of
rejection and directing the Government of Karnataka to
execute Supplemental Lease Deeds.
xiv) Challenging the Order of the NCLT, Chennai, the
Government of Karnataka moved a writ petition in WP
No.41029 of 2019 before the High Court of Karnataka.
When the writ petition came up for orders as to
admission, the Corporate Debtor represented by the
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Resolution Professional appeared through counsel and
took notice and sought time to get instructions.
Therefore, the High Court, by an Order dated
12.09.2019 adjourned the matter to 23.09.2019 and
granted a stay of operation of the direction contained
in the impugned Order of the Tribunal. Interim Stay was
necessitated in view of a Contempt Application moved
by the Resolution Professional before the NCLT against
the Government of Karnataka for their failure to execute
Supplement Lease deeds.
xv) It is against the said ad Interim Order granted by the
High Court that the Resolution Applicant, the Resolution
Professional and the Committee of Creditors have come
up with the present appeals.
Rival Contentions
5. Sh. K. V. Viswanathan, learned Senior Counsel appearing on
behalf of the Resolution Applicant assailed the impugned Order on the
ground that when an efficacious alternative remedy is available under
Section 61 of IBC, 2016, the High Court of Karnataka ought not to
have entertained a writ petition and that too against an Order passed
by the Chennai Bench of NCLT. He drew our attention to a series of
judgments, wherein it was held that when a statutory forum is created
for the redressal of grievances, a writ petition should not be entertained.
Since the essence of IBC, 2016 is the revival of a Corporate Debtor
and the resolution of its problems to enable it to survive as a going
concern, through the maximization of the value of its assets, the learned
Senior Counsel contended that the Interim Resolution Professional/
Resolution Professional had a right to move the NCLT for appropriate
reliefs for the preservation of the properties of the Corporate Debtor
and therefore the only way the steps taken by the Resolution
Professional could be set at naught, is to take recourse to the provisions
of the IBC alone. Relying upon the observations made by this Court in
a couple of decisions that IBC, 2016 is a unified umbrella of code, the
learned Senior Counsel contended that the remedies provided
thereunder are all pervasive and exclusive.
6. Sh. Mukul Rohatgi, learned Senior Counsel appearing for the
Resolution Applicant supplemented the aforesaid arguments and
contended that though he would not go to the extent of saying that the
M/S EMBASSY PROPERTY DEVELOPMENTS PVT. LTD. v.
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jurisdiction of the High Court stood completely ousted, the High Court
was obliged to switch over to the hands off mode, in matters of this
nature. The learned Senior Counsel also contended that the NCLT has
already approved the Resolution Plan, by an order dated 12.06.2019
and that therefore the High Court cannot do anything that will tinker
with or destroy the very Resolution Plan approved by the NCLT.
7. Sh. Kapil Sibal, the learned Senior Counsel appearing for the
Resolution Professional contended that the whole object of IBC, 2016
will get defeated, if the Orders of NCLT are declared amenable to
review by the High Court under Article 226/227. He also contended
that the provisions of IBC, 2016 are given overriding effect under
Section 238, over all other statutes. It is his further contention that after
taking a stand in their first writ petition in WP No.5002 of 2019 that
the dispute relating to the refusal to grant deemed extension of the mining
lease falls squarely within the jurisdiction of the Mining Tribunal and
after raising a plea that the rejection of the benefit of deemed extension,
ought to have been challenged by way of a revision before the Central
Government under Section 30 of the MMDR Act, 1957 the State of
Karnataka agreed to go back to the NCLT for raising all contentions.
Therefore, according to the learned counsel, it was not open to the
Government to question the jurisdiction of the NCLT in the next round
of litigation. Since the expression "Property" as defined in Section 3
(27) of IBC, 2016 includes every description of interest including
present or future or vested or contingent interest arising out of or
incidental to property, and also since the right to deemed extension of
lease would come within the purview of the expression "Property", it
was contended by the learned Senior Counsel that the Resolution
Professional has a duty to preserve the property. The only ground on
which the Government of Karnataka opposed the Miscellaneous
Application of the Resolution Professional, according to the learned
Senior Counsel, was fraud and collusion on the part of the Corporate
Debtor and the creditor who initiated the CIRP. Therefore, it is
contended by him that in view of the sweep of the jurisdiction conferred
upon NCLT under Section 60 (5) (c) of the IBC, 2016, the Tribunal
was entitled to investigate even into allegations of fraud. Once it is
conceded that NCLT will have jurisdiction even to enquire into allegations
of fraud, then the question of invoking the jurisdiction of the High Court
under Article 226 as against an order passed by NCLT, according to
the learned counsel, does not arise.