enmeshed in legal action Insolvency and Bankruptcy Code · 2018-10-01 · Adani Ports Asian Paints...
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10/1/2018 Insolvency and Bankruptcy Code enmeshed in legal action | Business Standard Column
https://www.business-standard.com/article/opinion/insolvency-and-bankruptcy-code-enmeshed-in-legal-action-118093000570_1.html 1/7
Sukumar Mukhopadhyay Last Updated at September 30, 2018 21:08 IST
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Insolvency and Bankruptcy Codeenmeshed in legal actionThe law laid down by the SC in a plethora of cases is that policy issues of the govt are not justiceable. Theprecedent laid down by the SC also cannot be violated by the apex court itself
A dawn of a new era. That is how the Insolvency and BankruptcyCode recently enacted and worked up was described in newsmedia and even by economists and analysts. Now after a group ofpower asset companies went to the Supreme Court and hasobtained time for no action till November 11, 2018, it is clear thatthe apex court has treated the issue of the Reserve Bank of India’s(RBI’s) policy initiative on realising dues from non-performingassets (NPA) as justiceable. Some analysts have pointed out thee�ect of this policy being enmeshed into litigation. The factsargued before the Supreme Court are based on hardship, etc, andno argument has been made out about the infringement offundamental rights. Here I am writing only on the legality of thescope of intervening in policy matters of the government and ofthe RBI.
It has always been accepted in various judgements of the SupremeCourt that economic policy is not justiceable. It is already a settledissue that the Court cannot intervene unless any fundamental righthas been violated. A very clear decision is the well-known case ofIndian Express Newspapers v.U.O.I reported in AIR 1986SC 515that a noti�cation is legislative in nature and so intervention is notpermissible. Here the Supreme Court interfered to strike down theexcessive tax on newsprint because it came to the conclusion thatthe imposition of high tax on it was violative of the fundamentalright of freedom of speech under Art 19(1) g. On a mere ground ofunreasonableness, an imposition of tax even by an amendment ofa noti�cation cannot be challenged, it said. Economic policy is not
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10/1/2018 Insolvency and Bankruptcy Code enmeshed in legal action | Business Standard Column
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justiceable unless it violates fundamental rights. There were manyjudgments after that. The Kasinka Trading vs. UOI – 1994(74) ELT782(SC) and Shrijee and Sales Corporation vs. UOI – 1997(89) ELT452 (SC) held that taxation policy cannot be pronounced upon bythe courts unless there is a violation of the Constitution.
The settled position is this. In the case of an ordinary �scal levy,mere excessiveness of tax is not justiceable. If the petitioner is ableto prove that the excessiveness of tax has created discriminationvis-a-vis his competitors or has otherwise completely ruined hisbusiness such that it has gone against his fundamental right to
trade or business, then it becomes justiceable. So far no such case has succeeded on this ground beforethe high courts and the Supreme Court. Only in the case of newsprint, the challenge to a levy, which wasfound to be burdensome, has been entertained by the Supreme Court as justiceable on the plea that itviolates Article 19(1) (g) and is a threat to democracy.
Now the question is whether the Supreme Court itself can go against the precedent laid down by it byseveral judgments. Here also the decision of the Supreme Court is that it cannot do that unless thenumber of judges in the new judgment is more than the number in the previous judgments. TheSupreme Court has held in the case of UjagaR Prints v U.O.I-1987 (27) ELT 567 (S.C) that judicial disciplinerequires that a Bench of two judges should not disregard the decision of a Bench of three judges, but ifthe Bench of two judges is inclined to disagree with the decision of three judges, the case should bereferred to a larger Bench. The court further said that for the purpose of imparting certainty andendowing due authority, decisions of this Court should be rendered by Division Benches of at least threejudges.
There is a status quo ordered by the Supreme Court not to initiate any insolvency proceeding tillNovember 11, 2018. There is no report that the Supreme Court has taken the cases as the infringementof the fundamental rights. If that is factually true, then the action on the part of the Supreme Court instaying the operations of the power companies tantamount to the court's taking the issue as justiceable.The law laid down by the Supreme Court in a plethora of cases is that such policy issues of thegovernment are not justiceable. The precedent laid down by the Supreme Court also cannot be violatedby the Supreme Court itself.
The writer is member, Central Board of Excise & Customs (retired)
Email: [email protected]
First Published: Sun, September 30 2018. 21:08 IST
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10/1/2018 Insolvency and Bankruptcy Code enmeshed in legal action | Business Standard Column
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10/1/2018 Insolvency and Bankruptcy Code enmeshed in legal action | Business Standard Column
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