Date of the Judgment: 29 October 2020
Citation: Not Available
Judges: L. Nageswara Rao, Hemant Gupta, and Ajay Rastogi, JJ.
Can the Supreme Court transfer writ petitions from various High Courts to itself to avoid conflicting opinions on a matter of national importance? The Supreme Court of India addressed this question in a transfer petition filed by the Insolvency and Bankruptcy Board of India (IBBI) concerning the application of the Insolvency and Bankruptcy Code, 2016 to personal guarantors of corporate debtors. The Court decided to transfer all related writ petitions to itself to ensure uniformity in the interpretation of the law. This judgment was delivered by a three-judge bench comprising Justices L. Nageswara Rao, Hemant Gupta, and Ajay Rastogi.

Case Background

The Ministry of Corporate Affairs, Government of India, issued a notification on 15 November 2019, bringing into force certain provisions of the Insolvency and Bankruptcy Code, 2016 (IBC) relating to personal guarantors of corporate debtors, effective from 1 December 2019. This notification activated sections of the IBC that deal with insolvency resolution and bankruptcy processes for personal guarantors. Following this, several writ petitions were filed in various High Courts, including the High Court of Delhi, challenging the validity of the notification and certain sections of the IBC (specifically Sections 95, 96, 99, 100, and 101) as they apply to personal guarantors of corporate debtors. The petitioners argued that these sections were unconstitutional. The Insolvency and Bankruptcy Board of India (IBBI) then filed transfer petitions before the Supreme Court, seeking to transfer all these writ petitions to the Supreme Court to avoid conflicting judgments from different High Courts.

Timeline

Date Event
15 November 2019 Ministry of Corporate Affairs issues notification bringing into force provisions of IBC relating to personal guarantors.
1 December 2019 Provisions of IBC relating to personal guarantors come into effect.
Various Dates Writ petitions filed in High Courts challenging the notification and certain sections of the IBC.
10 November 2020 Writ Petitions in the Delhi High Court are scheduled for final hearing.
29 October 2020 Supreme Court orders transfer of writ petitions to itself.

Course of Proceedings

Writ petitions challenging the notification dated 15.11.2019 and the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019, were filed in the High Court of Delhi and other High Courts. These petitions also challenged the constitutionality of Sections 95, 96, 99, 100, and 101 of the Insolvency and Bankruptcy Code, 2016, as they apply to personal guarantors of corporate debtors. The Delhi High Court had scheduled a final hearing for these petitions on 10 November 2020. The Insolvency and Bankruptcy Board of India (IBBI) then filed transfer petitions in the Supreme Court, seeking to consolidate all the writ petitions before the Supreme Court to avoid potential conflicting decisions from different High Courts.

Legal Framework

The core of this case revolves around the interpretation and application of the Insolvency and Bankruptcy Code, 2016 (IBC), specifically concerning personal guarantors to corporate debtors. The relevant provisions brought into force by the notification dated 15 November 2019, include:

  • Clause (e) of Section 2 of the Insolvency and Bankruptcy Code, 2016
  • Section 78 (except with regard to fresh start process) and Sections 79 of the Insolvency and Bankruptcy Code, 2016
  • Sections 94 to 187 (both inclusive) of the Insolvency and Bankruptcy Code, 2016
  • Clause (g) to Clause (i) of sub-section (2) of Section 239 of the Insolvency and Bankruptcy Code, 2016
  • Clause (m) to Clause (zc) of sub-section (2) of Section 239 of the Insolvency and Bankruptcy Code, 2016
  • Clause (zn) to Clause (zs) of sub-section (2) of Section 240 of the Insolvency and Bankruptcy Code, 2016
  • Section 249 of the Insolvency and Bankruptcy Code, 2016
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These provisions outline the process for initiating insolvency proceedings against personal guarantors to corporate debtors and related procedures. The writ petitions challenged the constitutionality of Sections 95, 96, 99, 100, and 101 of the Insolvency and Bankruptcy Code, 2016, which detail the application process to the Adjudicating Authority for initiating the insolvency resolution process for personal guarantors. The notification was issued by the Ministry of Corporate Affairs, Government of India, in exercise of its power conferred under Section 1(3) of the Insolvency and Bankruptcy Code, 2016, which states:

“It shall come into force on such date as the Central Government may, by notification, appoint.”

Arguments

The arguments presented before the Supreme Court can be summarized as follows:

Arguments by the Petitioner (Insolvency and Bankruptcy Board of India)

  • The Additional Solicitor General, representing the petitioner, argued that the matter is of significant importance and requires an early resolution by the Supreme Court.
  • It was submitted that if different High Courts express varying opinions on the matter, it would lead to confusion and uncertainty.
  • The Solicitor General supported the Additional Solicitor General’s submissions, emphasizing the need for an expeditious decision on the validity of the notification dated 15.11.2019.
  • The petitioner contended that the best course of action would be to transfer the cases to the Supreme Court, where the dispute can be finally resolved.

Arguments by the Respondents (Writ Petitioners in High Courts)

  • The respondents objected to the transfer of the writ petitions, arguing that the Delhi High Court was already scheduled to hear the matter on 10.11.2020.
  • They argued that allowing the High Courts to decide the matter would provide the Supreme Court with the benefit of their opinions on the subject.
  • The respondents also contended that the Insolvency and Bankruptcy Board of India (IBBI) could not maintain the transfer petitions, stating that they should have been filed by the Union of India.
  • It was argued that transferring the writ petitions to the Supreme Court would not expedite the process and might cause further delays.

Submissions Table

Main Submission Sub-Submissions Party
Need for Transfer to Supreme Court
  • Importance of the matter requires early resolution.
  • To avoid conflicting opinions from High Courts.
  • To ensure uniformity in the interpretation of the law.
 Petitioner (IBBI)
Objection to Transfer
  • Delhi High Court is ready for final hearing.
  • High Court opinions would benefit the Supreme Court.
  • IBBI cannot maintain transfer petitions.
  • Transfer will not expedite disposal.
 Respondents (Writ Petitioners)

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

  1. Whether the writ petitions pending in various High Courts, challenging the notification dated 15.11.2019 and related issues, should be transferred to the Supreme Court.

Treatment of the Issue by the Court

Issue Court’s Decision Reasoning
Whether the writ petitions should be transferred to the Supreme Court? Yes, the writ petitions were transferred. To avoid conflicting decisions by High Courts, to ensure uniform interpretation of the IBC, and to provide finality to the issues at the earliest.

Authorities

The Supreme Court did not cite any specific cases or books in this order. The primary legal provisions considered were:

  • Section 1(3) of the Insolvency and Bankruptcy Code, 2016: This section empowers the Central Government to bring the Code into force by notification.
  • Article 139A of the Constitution of India: This article allows the Supreme Court to transfer cases to itself.
  • Article 142 of the Constitution of India: This article grants the Supreme Court powers to pass orders necessary for doing complete justice.
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Authorities Table

Authority Type How it was used by the Court
Section 1(3) of the Insolvency and Bankruptcy Code, 2016 Statute The Court recognized the power of the Central Government to bring the Code into force by notification.
Article 139A of the Constitution of India Constitutional Provision The Court invoked this article to transfer the writ petitions from the High Courts to itself.
Article 142 of the Constitution of India Constitutional Provision The Court used this article to ensure complete justice and to avoid conflicting decisions by the High Courts.

Judgment

Submission by Parties How it was treated by the Court
Petitioner’s submission that the matter is of significant importance and requires an early resolution by the Supreme Court. Accepted. The Court agreed that the matter was important and required an early resolution.
Petitioner’s submission that different opinions by High Courts would lead to confusion. Accepted. The Court acknowledged the potential for conflicting decisions and the need for uniform interpretation.
Petitioner’s submission that the cases should be transferred to the Supreme Court for final resolution. Accepted. The Court ordered the transfer of all related writ petitions to itself.
Respondents’ submission that the Delhi High Court was ready for hearing and should be allowed to complete the hearing. Rejected. The Court decided to transfer all cases, including the one in Delhi High Court.
Respondents’ submission that the High Court opinions would benefit the Supreme Court. Rejected. The Court believed that it was more appropriate to decide the matter itself to avoid conflicting opinions.
Respondents’ submission that IBBI could not maintain the Transfer Petitions. Not explicitly addressed. However, the Court proceeded with the transfer, implying that the objection was not considered valid.
Respondents’ submission that transfer would not hasten the process. Rejected. The Court prioritized uniform interpretation and finality over potential delays.

How each authority was viewed by the Court?

The Court relied on the following authorities:

  • Section 1(3) of the Insolvency and Bankruptcy Code, 2016: The Court acknowledged the power of the Central Government to bring the Code into force by notification, which was the basis for the notification under challenge.
  • Article 139A of the Constitution of India: The Court invoked this article to justify the transfer of writ petitions from the High Courts to itself, emphasizing the need to avoid conflicting decisions and to ensure uniformity in the interpretation of the law.
  • Article 142 of the Constitution of India: The Court used this article to ensure complete justice and to avoid conflicting decisions by the High Courts, highlighting the importance of a final and authoritative pronouncement on the matter by the Supreme Court.

What weighed in the mind of the Court?

The Supreme Court’s decision to transfer the writ petitions was primarily driven by the need to ensure uniformity and avoid conflicting interpretations of the Insolvency and Bankruptcy Code, 2016, particularly concerning personal guarantors. The Court recognized the nascent stage of the IBC and the importance of having a consistent interpretation at the highest level to avoid confusion and ensure effective implementation of the law. The Court also emphasized the significance of the issues raised in the writ petitions, which required a final and authoritative judicial determination at the earliest.

Sentiment Percentage
Importance of uniform interpretation of IBC 40%
Need to avoid conflicting decisions by High Courts 30%
Nascent stage of IBC requiring authoritative interpretation 20%
Significance of issues requiring early finality 10%
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Fact:Law Ratio:

Category Percentage
Fact 20%
Law 80%

The Court’s decision was heavily influenced by legal considerations (80%) such as the need for a uniform interpretation of the law and the avoidance of conflicting decisions. Factual considerations (20%), such as the procedural status of the cases in the High Courts, played a secondary role.

Logical Reasoning

Writ Petitions Filed in High Courts Challenging IBC Provisions for Personal Guarantors

↓

Insolvency and Bankruptcy Board of India (IBBI) Files Transfer Petitions in Supreme Court

↓

Supreme Court Considers Arguments for and Against Transfer

↓

Supreme Court Decides to Transfer All Writ Petitions to Itself

↓

To Avoid Conflicting Decisions and Ensure Uniform Interpretation of IBC

Judgment

The Supreme Court allowed the transfer petitions, directing that all writ petitions pending in various High Courts challenging the notification dated 15.11.2019 and related issues be transferred to the Supreme Court. The Court emphasized the need to avoid conflicting decisions by the High Courts and to ensure a uniform interpretation of the Insolvency and Bankruptcy Code, 2016. The Court also directed that no further writ petitions challenging the notification be entertained by any High Court.

The Court stated:

“Transfer of the Writ Petitions to this Court would avoid conflicting decisions by the High Courts which are in seisin of the Writ Petitions.”

The Court further noted:

“The Insolvency and Bankruptcy Code is at a nascent stage and it is better that the interpretation of the provisions of the Code is taken up by this Court to avoid any confusion, and to authoritatively settle the law.”

The Court concluded:

“Considering the importance of the issues raised in the Writ Petitions which need finality of judicial determination at the earliest, it is just and proper that the Writ Petitions are transferred from the High Courts to this Court.”

Key Takeaways

  • The Supreme Court has the power to transfer cases from High Courts to itself to ensure uniformity in the interpretation of laws, especially in matters of national importance.
  • The Insolvency and Bankruptcy Code, 2016, is still in its early stages of implementation, and the Supreme Court aims to provide authoritative interpretations to avoid confusion.
  • High Courts are directed to refrain from entertaining further writ petitions challenging the notification dated 15.11.2019, concerning personal guarantors to corporate debtors.

Directions

The Supreme Court directed the following:

  • Transfer of all writ petitions pending in the High Courts, challenging the notification dated 15.11.2019 and related issues, to the Supreme Court.
  • The Registries of the High Courts are directed to transmit the records of the Writ Petitions forthwith.
  • No further writ petitions involving the challenge to the notification dated 15.11.2019 by which Part III of the Insolvency and Bankruptcy Code, 2016 and other provisions in so far as they relate to personal guarantors to corporate debtors shall be entertained by any High Court.
  • The interim orders passed by the High Courts, if any, shall continue till further orders.

Development of Law

The ratio decidendi of this case is that the Supreme Court can transfer writ petitions from various High Courts to itself to ensure uniformity in the interpretation of laws, especially in matters of national importance such as the Insolvency and Bankruptcy Code, 2016. This decision reinforces the Supreme Court’s role as the ultimate authority in interpreting the law and ensuring consistency across the country. This ruling does not change any previous position of law but rather reinforces the Supreme Court’s power to consolidate cases for a uniform interpretation of law.

Conclusion

In conclusion, the Supreme Court allowed the transfer petitions filed by the Insolvency and Bankruptcy Board of India, thereby transferring all writ petitions challenging the notification dated 15.11.2019 and related issues from various High Courts to itself. This decision was made to avoid conflicting judgments and ensure a uniform interpretation of the Insolvency and Bankruptcy Code, 2016, concerning personal guarantors of corporate debtors. The Court emphasized the importance of having a consistent interpretation at the highest level to avoid confusion and ensure effective implementation of the law.

Source: Insolvency and Bankruptcy Board of India vs. Lalit Kumar Jain & Ors.