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After attacking Article 75 before NCLT, the S.P. Group cannot ask this Court to go into the question of fixation of fair value compensation for exercising an exit option, and Article 75 of the Articles of Association is nothing but a provision for an exit option. This historical judgment was passed by the Hon’ble court in the matter of TATA CONSULTANCY SERVICES LIMITED v. CYRUS INVESTMENTS PVT. LTD. AND ORS. [CIVIL APPEAL NOs.440­441 0F 2020] resided by Chief Justice of India S.A. BOBDE.

Tata Sons (Private) Limited had come up with two appeals in Civil Appeal Nos.13­14 of 2020, challenging a final order dated 18­12­2019   passed   by   the   National   Company   Law   Appellate Tribunal (“NCLAT” for short) (i) holding as illegal, the proceedings of the sixth meeting of the Board of Directors of TATA Sons Limited held on 24.10.2016 in so far as it relates to the removal of Shri Cyrus Pallonji Mistry (“CPM” for short); (ii) restoring the position of CPM   as   the   Executive   Chairman   of   Tata   Sons   Limited   and consequently as a Director of the Tata Companies for the rest of the tenure; (iii) declaring as illegal the appointment of someone else in the place of CPM as Executive Chairman; (iv) restraining Shri Ratan N. Tata (“RNT” for short) and the nominees of Tata Trust from taking any decision in advance;  (v)  restraining the Company, its Board  of   Directors  and   Shareholders   from   exercising  the   power under Article 75 of the Articles of Association against the minority members except in exceptional circumstances and in the interest of the   Company;   and  (vi)  declaring   as   illegal,   the   decision   of   the Registrar   of   Companies   for   changing   the   status   of   Tata   Sons Limited from being a public company into a private company; while RNT had come up with two independent appeals in Civil Appeal Nos.19­20 of 2020 against the same Order of the NCLAT, on similar grounds.

Also, the two companies by name   Cyrus   Investments   Private Limited and   Sterling   Investment   Corporation   Private   Limited, forming part of the SP Group respectively acquired 48 preference shares and 40 equity shares of the paid-up share capital of Tata Sons, from an existing member by name Mrs. Rodabeh Sawhney. Over the years, the share­holding of SP Group in Tata Sons has grown to 18.37% of the total paid-up share capital.

Thereafter, the complainant companies filed one additional affidavit, one application for amendment, one application for stay, and one memo giving up some of the reliefs already sought.

The court held that “But it must be remembered that the shift under the Companies   Act, 2013   is focused on listed and unlisted public companies. The requirement under Section 149(4) to have at least one­third of the total number of Directors as independent Directors applies only to every listed public company.’

Also “The requirement under Section 151 to have one director elected by small shareholders is 222 also applicable only to listed companies.   The   requirement   to constitute   an   Audit   Committee   in   terms   of   Section   177(1), a Nomination and   Remuneration   Committee, and the Stakeholders Relationship Committee in terms of Section 178(1) are also only on listed public companies.”

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The appellant cannot raise an objection relying on Section 86(1)(f) of the 2003 Act and Section 86(1)(f) vests a statutory jurisdiction with the State Electricity Commission to adjudicate upon disputes between licensees and generating companies and to refer any dispute for arbitration. This judgement was passed by the Hon’ble supreme court of India by Justice Dr Dhananjaya Y Chandrachud in the matter of Chief General Manager (IPC) M P Power Trading Co Ltd & Anr Narmada Equipment’s Pvt Ltd [Civil Appeal No 1051 of 2021].

This appeal arose from a judgment where it appointed an Arbitrator in the dispute between the parties, in an application filed by the respondent under Section 11(6) of the Arbitration and Conciliation Act 1996. The genesis of the matter was from when the Madhya Pradesh Electricity Board3, entered into a Power Purchase Agreement (PPA) on 20 May 1999 with the respondent. Under the PPA, the respondent was to establish a mini hydro-electric project on a built and operate basis. However, the PPA was terminated on 27 September 2001 by the Board. The respondent initially filed a writ petition5 challenging the termination of the PPA. The High Court, by its order dated 4 November 2009, declined to entertain the petition in view of an arbitration agreement contained in Clause 12.36 of the PPA. Thereafter, the respondent filed a review petition which was dismissed by the High Court by an order dated 10 December 2009.

The respondent issued a notice to the Board under Clause 12.1 of the PPA, seeking to resolve the dispute by mutual discussion. Since the respondent did not receive a reply to the notice dated 28 December 2009 from the Board, on 30 May 2011, the respondent issued another notice to the Board invoking arbitration under Clause 12.3 of the PPA. In the notice, the respondent stated that if the Board did not act upon the notice within 30 days of its receipt, it would approach the High Court under Section 11(6) of the 1996 Act.  Having received no reply from the Board, an application was filed under Section 11(6) of the 1996 Act by the respondent seeking the appointment of an arbitrator.

The court held that “Section 86(1)(f) of the 2003 Act is a special provision which overrides the general provisions contained in Section 11 of the 1996 Act. Section 86(1)(f) vests a statutory jurisdiction with the State Electricity Commission to adjudicate upon disputes between licensees and generating companies and to refer any dispute for arbitration.”

Also “Section 174 of the 2003 Act provides overriding effect to the 2003 Act notwithstanding anything inconsistent contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than the 2003Act itself.”

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There was no substance to the second ground urged by the appellant regarding the maintainability of the application filed by the respondent financial creditor under Section 7 of the IB Code on the ground of being barred by limitation and that the code is a special enactment for the resolution of financial debt and it is in the larger public interest that financial debts are recovered and the debts of corporate person are restructured to revive the failing corporate entity. This extensive judgment was passed by the Hon’ble Supreme Court of India in the matter of LAXMI PAT SURANA v. UNION BANK OF INDIA & ANR. [CIVIL APPEAL NO. 2734 OF 2020] headed by Justice A.M. Khanwilkar.

In the concerned petition, there were two central issues:

• Whether an action under   Section   7   of the Insolvency and   Bankruptcy   Code, 2016   could be initiated by the financial creditor (Bank) against a corporate person (being a   corporate debtor) concerning guarantee offered by it in respect of a loan account of the principal borrower, who had committed default and is not a “corporate person” within the meaning of the Code?
• (ii) Whether an application under Section 7 of the Code filed after three years from the date of declaration of the loan account as   Non­performing   Asset, being the date of default, is not barred by limitation?

It was held by the adjudicating authority that “the action had been initiated against the Corporate Debtor, being coextensively liable to repay the debt of the Principal Borrower and having failed to do so despite the recall notice, became Corporate Debtor and thus liable to be proceeded with under Section 7 of the Code.”

This court stated that “The term “financial creditor” has been defined in Section 5(7) read with expression “Creditor” in Section 3(10) of the Code to mean a person to whom a financial debt is owed and includes a   person   to   whom   such   debt   has   been   legally   assigned   or transferred to.”

The appeal was disposed of stating “As no other issue arises for our consideration — except the two grounds urged by the appellant regarding the maintainability of the application for initiating CIRP by the financial creditor (Bank) under Section 7 of the Code, we dispose of this appeal leaving all “other grounds” and contentions available to both the sides open to be decided in the pending proceedings before the NCLT.  The same be decided uninfluenced by any observation(s) made in the impugned judgment or in the present judgment.”

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Section 16 of the Arbitration Act states that issues of jurisdiction ought to be raised before the Arbitrator at the earliest and such objection has to be decided as a preliminary ground. If the Tribunal thinks fit that the objections under Section 16 of the Act cannot be decided at the inception and further enquiry is required the Tribunal could consider framing a preliminary issue and deciding the same as soon as possible. This was held in SURENDER KUMAR SINGHAL & Ors V. ARUN KUMAR BHALOTIA & ORS [CM (M) 1272/2019] in the High Court of Delhi by single bench consisting of JUSTICE PRATHIBA M. SINGH.

Facts of the case are that a property dispute exists between the petitioners and respondents which was referred to arbitrator on account of application from one of the respondents. The Petitioners have filed an application under Section 16 of the Act and raised an objection to jurisdiction of Tribunal on grounds of being bonafide purchasers of one of the properties. Arbitrator held  that the objection as to jurisdiction would be decided along with the final award.

The The court while interpreting the law governing applications under Section 16 of the Arbitration & Conciliation Act, 1996 referred to the  principle of kompetenze-kompetenze. The High Court relied on the precedent laid down by the judgment of Supreme Court in McDermott International Inc. (supra), where in it was held that, “ It was required to be raised during arbitration proceedings or soon after initiation thereof. The jurisdictional question is required to be determined as a preliminary ground. A decision taken thereupon by the arbitrator would be the subject-matter of challenge under Section 34 of the Act. In the event the arbitrator opined that he had no jurisdiction in relation thereto an appeal there against was provided for under Section 37 of the Act.”

The court also referred to the judgement of Raj International v. Tripura Jute Mills Ltd where in it was observed that,“Without giving decision on the question of jurisdiction, the arbitrator has no right to proceed for making an arbitral award. He may accept or reject the plea as raised before him, but he cannot be abstained from giving any decision on such question of jurisdiction.”

Considering the precedents and the facts of the case court held that, the Tribunal ought to decide the objection with a sense of urgency. It is required to ensure that parties to whom the arbitral proceedings may not even be applicable are not entangled and also to maintain the efficiency of the system. If the application under Section 16 cannot, in the opinion of the ld. Arbitrator, be decided at this stage and would require completion of pleadings and admission and denial the same is also allowed, but it would have to be adjudicated first, prior to the passing of the final award.

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The judgment and order of the NCLT do not warrant interference and that the NCLAT rightly refused to stay the proceedings before the NCLT as Section 14 does not strictly apply, the principles of Section 14 can be invoked to grant relief to an applicant under Section 5 of the Limitation Act by purposively construing ‘sufficient cause’. It is well settled that omission to refer to the correct section of a statute does not vitiate an order. . This court dismissed the appeal in the matter of SESH NATH SINGH & ANR. V. BAIDYABATI SHEORAPHULI CO-OPERATIVE BANK LTD AND ANR. [CIVILAPPEAL NO. 9198 OF 2019] headed by Justice Indira Banerjee.

The appeal under Section 62 of the Insolvency and Bankruptcy Code 2016, hereinafter referred to as the ‘IBC’, was against a judgment and order dated 22nd November 2019, passed by the National Company Law Appellate Tribunal (NCLAT), dismissing Company Appeal (AT) (Insolvency) No.672 of 2019, filed by the Appellants, challenging an order dated 25th April 2019, of the National Company Law Tribunal (NCLT), Kolkata Bench, admitting the application filed by the Respondent No.1 as Financial Creditor, under Section 7 of the IBC being CP(IB) No.1202/KB/2018, thereby initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, Debi Fabtech Private Ltd.

The Corporate Debtor requested the Financial Creditor for a cash credit facility of Rs.1,00,00,000/- which remained unpaid. A writ petition was filed by the debtor under Article 226 of the Constitution of India challenging the said notices issued by the Financial Creditor under Section 13(2) and 13(4) of the SARFAESI Act, which favored the debtor.

Later, the creditor filed an application in the Kolkata Bench of NCLT for initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor under Section 7 of the IBC, and Notice of the petition under Section 7 of the IBC was duly served on the Corporate Debtor. Notice of the petition under Section 7 of the IBC was duly served on the Corporate Debtor. The maintainability of the application under Section 7 of IBC was also opposed before the NCLT, on the purported ground that a Special Officer had been appointed as Administrator over the Financial Creditor, only to hold elections. Such a Special Officer could not, therefore, initiate any proceeding on behalf of the Financial Creditor. The Corporate Debtor did not oppose the application under Section 7 of the IBC in the NCLT on the ground of the same being barred by limitation.

Being aggrieved by the NCLT, the creditor filed an appeal before the NCLAT and It was only in appeal before the NCLAT, that the Corporate Debtor, for the first time, contended, that the account of the Corporate Debtor had been declared NPA on 31st March 2013 whereas the application under Section 7 of IBC had been filed on 27th August 2018, after almost five years and five months from the date of accrual of the cause of action, and was therefore barred by limitation. The NCLAT dismissed the appeal, with the observation that the ground of limitation had been taken by the Corporate Debtor for the first time, in the appeal. There was no finding of the Adjudicating Authority on this issue.

The NCLAT examined the issue of limitation and held that “the Respondent had bona fide, within the period of limitation, initiated proceedings against the Corporate Debtor under the SARFAESI Act and was thus entitled to exclusion of time under Section 14(2) of the Limitation Act. The NCLAT, after exclusion of the period of about three years and six months till the date of the interim order of the High Court, during which the Financial Creditor had been proceeding under SARFAESI Act, found that the application of the Financial Creditor, under Section 7 of the IBC, was within limitation. The appeal was accordingly dismissed.”

it was stated that “the objective of the IBC is to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner, for maximization of the value of the assets of such persons, to promote entrepreneurship, availability of credit and to balance the interest of all the stakeholders.”

The court was of the opinion that “if a party were to file a suit in a wrong forum, to enforce payment of money secured by a mortgage or charge upon immovable property, for which the prescribed period of limitation is twelve years, after the expiry of three years from the date of accrual of the right to sue, and then file an application under Section 7 of the IBC after the dismissal of the suit for want of jurisdiction, that application under Section 7 of the IBC would be time-barred since such party would not be entitled to exclusion of any period of time beyond the date of institution and date of termination of the earlier proceeding.”

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