In a delayed but welcome development, the Supreme Court finally got down to laying down its ruling on which decisions of the NCLT, acting as the Adjudicating Authority under the IBC, can be reviewed by the High Courts when exercising their jurisdiction under Articles 226 and 227 of the Constitution. This was in Embassy Property Developments v. State of Karnataka.
In the case before the Court, NCLT Chennai had directed the government of Karnataka to execute a mining lease in favour of the corporate debtor after the insolvency resolution process had commenced. In doing so, it had assumed the jurisdiction to adjudicate upon disputes arising out of the grant of mining leases under the Minds and Minerals (Development and Regulation) Act, 1957. Now, Section 60(5)(c) gives the NCLT the right to decide “any question of law facts, arising out of or in relation to the insolvency resolution or liquidation proceedings”. While noting the broad sweep of this language, the Supreme Court held that it still did not cover a decision taken by the government or a statutory authority in relation to a matter which is in the realm of public law. So far so good.
The Court next applied itself to the question of which judicial authority could decide challenges to a decision of the NCLT, like the one taken by NCLT Chennai. The IBC provides a straight appeal from decisions of the NCLT to the NCLAT, and from there to the Supreme Court, on a question of law. Would it be an interference with this statutory scheme if High Courts heard and decided writ petitions against the decision of an NCLT? To what extent was such an interference permissible?
I found the Supreme Court’s approach to these questions to be wayward and mystifying. For some reason, perhaps as they had been cited during oral arguments, the Supreme Court undertook a lengthy analysis of the development of the law in English judgments on ouster of jurisdiction clauses, from Anisminic v. Foreign Compensation Commission going down to the 2019 UK Supreme Court judgement in R (Privacy International) v. Investigatory Powers Tribunal. There was no similar clause involved here. After this, the Court abruptly concluded that Anisminic could not be relied upon since the present question pertained to whether Article 226 could be availed of despite the presence of an alternative statutory remedy. What was the purpose of going into it at such length then?
I would respectfully submit that the correct line of authorities to be considered in this regard were the several judgements, going as far back as Justice Vivian Bose’s decision in Mohammed Nooh to the recent Supreme Court judgement in Maharashtra Chess Association which deal directly with the extent to which High Courts can exercise their jurisdiction when there is an alternate statutory remedy. Mohammed Nooh was even cited before the Court in oral arguments, but was not referred to in its reasoning. The law laid down in these judgements is that High Courts should, as a self-imposed limitation on the writ jurisdiction, exercise these powers only if there is no adequate alternate remedy. Since (by the same reasoning by which the Supreme Court had held that the NCLT had no jurisdiction when the question involved was whether a mining lease should be extended) an appeal to the NCLAT was not an adequate remedy, the only possible remedy was a writ petition before the High Court.
However, the Supreme Court did not say any of this.
Moreover, it cited no authorities for reaching its ultimate conclusion, which was that a writ would lie only when the NCLT had exercised a jurisdiction that it lacked, as opposed to a wrongful exercise by NCLT of a jurisdiction that it possessed, by “for instance, asking a wrong question or applying a wrong test or granting a wrong relief”. Why should a writ not lie against the latter? The Court does not tell us. To use some of the examples that Lord Reid gives in (ironically) Anisminic, if the NCLT, even when exercising its proper jurisdiction, gives its decision in bad faith, or fails to comply with the requirements of natural justice, or bases its decision on some matter which under the provisions setting it up it had no right to take into account, I see no reason why a writ should not be maintainable, and the Supreme Court certainly does not provide any. In earlier cases where an alternate remedy was available against a tribunal’s order, such as Guwahati Carbon Ltd. and Whirlpool Corporation, the Court has upheld the right to file a writ against orders that are not in accordance with the enactment in question or contravene the principles of natural justice.Why should the NCLT be any different?
In sum, I think Embassy Property unduly narrows the range of NCLT orders against which a writ is the proper remedy, and I won’t be surprised if it gets steadily diluted as time goes by.
