2021 (12) TMI 1419 - HC - Insolvency and Bankruptcy

Rights to Constitutional Remedies - case for issuance of writ of prohibition to the Tribunal, exists or not - assignment of debt by the bank - it is argued that this is a fit case in which this Court should issue a writ of prohibition to the Tribunal not to proceed further with the original application as the Tribunal has no jurisdiction to adjudicate such application in the absence of any debt - Seeking direction on Respondent No.2 to not proceed with the final hearing and adjudication of Original Application No.648 of 2018, till such time that the Resolution Plan is finally approved / confirmed by the Appellate Authorities under the provisions of the Insolvency and Bankruptcy Code, 2016 - seeking adjournment of scheduled hearings of Original Application No.648 of 2018 pending before the Respondent No.2. HELD THAT - A writ of prohibition is issued only when a patent lack of jurisdiction is made out. It is true that a High Court acting under Article 226 is not bound by the technical rules applying to the issuance of prerogative writs like the Certiorari, Prohibition and Mandamus in the United Kingdom, yet the basic principles and norms apply to the writ must be kept in view. In Thirumala Tirupathi Devasthanam and another vs. Thallappaka Ananthacharyulu and another 2003 (9) TMI 784 - SUPREME COURT , the Supreme Court has cautioned that unless there are some very cogent or strong reasons, the High Court should not prevent the competent Forum from deciding the various questions raised before it including the question of want of jurisdiction . It is also stated that allowing a Court of competent jurisdiction to proceed with the case and decide the same rightly or wrongly, would not result in violation of any Fundamental Rights. The net result of the authorities discussed in this case, is as follows (a) The writs of mandamus, certiorari and' prohibition, and for the matter of that, all high prerogative writs, are ordinarily not issued where there exists an alternative remedy equally efficient and adequate. (b) But there is no inflexible rule that such writs cannot be issued where the Court thinks it just and convenient to do so. The fact that it ordinarily does not do so is a question not of want of jurisdiction but of expediency. (c) Whether the alternative remedy is equally efficacious or adequate is a question of fact to be decided in each case. (d) Where a complaint is made against any act done or purported to be done under any statutory provision, the fact that there exists in the Statute itself a possible remedy, is an important fact, to be taken into consideration. Where such provisions exist the Court will be extremely reluctant to interfere by way of high prerogative writs and especially so if the applicant has actually taken recourse to his remedy under the Statute. (e) But the fact that there exists a remedy under the Statute does not take away the jurisdiction of the Courts to issue the writs in appropriate cases. (f) In the following cases it has been held that a writ of prohibition will be issued notwithstanding an alternative remedy, whether under a statutory provision or otherwise - (g) where an inferior tribunal assumes jurisdiction and the want of jurisdiction is patent on the face of it; (ii) where the proceedings complained of are against the principles of natural justice; and (iii) where the alternative remedy is too costly or ineffective or entails such delay that the applicant would be irreparably prejudiced or the remedy might prove valueless. THE RECOVERY OF DEBTS AND BANKRUPTCY ACT, 1993 - HELD THAT - The case on hand is not one in which it could be said that there is a patent lack of jurisdiction in the Debts Recovery Tribunal to look into all the issues discussed above. Had it been a case of patent lack of jurisdiction, this Court would have gone into the pivotal issue and answered the same. We are of the view that the Tribunal should be allowed to look into all the relevant aspects of the matter, more particularly, the pivotal issue as regards the assignment of debt vis-a-vis the liabilities of the guarantors under the guarantees deed. The pivotal point raised by the writ applicants is one for which detailed analysis has to be made by the Tribunal itself even to find out as to whether the facts on record would clothe the Tribunal with the necessary jurisdiction to decide the issues raised before it on merits. When we pose a question to ourselves as to instead of issuing a writ of prohibition, as prayed for, by the writ applicants, if by permitting the Tribunal to proceed further, whether any serious prejudice would be caused? We find that by adopting the said course, while no prejudice would be caused to the writ applicants, by issuing a writ as asked for, there is likelihood of a serious injustice being caused to the Bank by preventing a statutory forum from exercising the powers conferred on it by law without there being a strong or convincing grounds for issuing such a prohibition. Therefore, it would be wholly inappropriate at this stage to interfere with the Original Applications preferred by the Bank before the Debts Recovery Tribunal by issuing a writ of prohibition. The following conclusions have been arrived at a The writs of mandamus, certiorari and' prohibition, and for the matter of that, all high prerogative writs, are ordinarily not issued where there exists an alternative remedy equally efficient and adequate. b But there is no inflexible rule that such writs cannot be issued where the Court thinks it just and convenient to do so. The fact that it ordinarily does not do so is a question not of want of jurisdiction but of expediency. c Whether the alternative remedy is equally efficacious or adequate is a question of fact to be decided in each case. d Where a complaint is made against any act done or purported to be done under any statutory provision, the fact that there exists in the Statute itself a possible remedy, is an important fact, to be taken into consideration. Where such provisions exist the Court will be extremely reluctant to interfere by way of high prerogative writs and especially so if the applicant has actually taken recourse to his remedy under the Statute. e But the fact that there exists a remedy under the Statute does not take away the jurisdiction of the Courts to issue the writs in appropriate cases. f In the following cases it has been held that a writ of prohibition will be issued notwithstanding an alternative remedy, whether under a statutory provision or otherwise - g Where an inferior tribunal assumes jurisdiction and the want of jurisdiction is patent on the face of it; (ii) where the proceedings complained of are against the principles of natural justice; and (iii) where the alternative remedy is too costly or ineffective or entails such delay that the applicant would be irreparably prejudiced or the remedy might prove valueless. h Whether any debt within the meaning of Section 17 of the Act, 1993 exists as on date so as to confer jurisdiction upon the Debts Recovery Tribunal under Section 19 of the Act, 1993 to adjudicate the Original Applications, would come within the purview of the D.R.T. Act. The Tribunal will have to adjudicate and decide whether with the assignment of debt by the secured creditor (State Bank of India) to the Resolution Applicant (ArcelorMittal), all other liabilities and obligations of the writ applicants as guarantors stood discharged? These writ applications are declined as no case for issue of a writ of prohibition has been made out - application dismissed.

Summary

Issues Involved:

1. Jurisdiction of the Debts Recovery Tribunal (DRT) to adjudicate the original applications filed by the banks against the guarantors.
2. Impact of the assignment of debt by the secured creditor to the Resolution Applicant on the liabilities and obligations of the guarantors.
3. Applicability of Sections 133, 134, and 140 of the Indian Contract Act, 1872, concerning the discharge of the guarantor's liability.
4. Whether the writ of prohibition should be issued to restrain the DRT from proceeding further with the original applications.

Detailed Analysis:

1. Jurisdiction of the Debts Recovery Tribunal (DRT):

The primary issue is whether the DRT has jurisdiction to adjudicate the original applications filed by the banks against the guarantors. The court noted that the DRT has jurisdiction to entertain and decide applications from banks and financial institutions for the recovery of debts due to them under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act). Section 17 of the RDDBFI Act confers exclusive jurisdiction on the DRT to deal with matters related to the recovery of debts due to banks and financial institutions. The court emphasized that the DRT should be allowed to look into all relevant aspects, including the pivotal issue of the assignment of debt vis-a-vis the liabilities of the guarantors.

2. Impact of the Assignment of Debt:

The court examined whether the assignment of debt by the secured creditor (State Bank of India) to the Resolution Applicant (ArcelorMittal) discharged the guarantors of their liabilities. The court referred to the terms of the Resolution Plan, which indicated that upon acquiring 100% equity ownership of the corporate debtor, the Resolution Applicant acquired the debt along with all underlying securities, excluding corporate and personal guarantees. The court noted that the Resolution Plan provided for the assignment of rights under loan and security documents to the Resolution Applicant. The court highlighted that the DRT should closely examine the terms of the Resolution Plan, the terms of the guarantee, and the legal effect of the assignment of debt to determine whether the guarantors' liabilities were discharged.

3. Applicability of Sections 133, 134, and 140 of the Indian Contract Act, 1872:

The court discussed the applicability of Sections 133, 134, and 140 of the Indian Contract Act, 1872, which deal with the discharge of a surety's liability. Section 134 states that a surety is discharged by any contract between the creditor and the principal debtor by which the principal debtor is released. The court noted that in the present case, there was no contract between the bank and the principal debtor (ESIL) that released the principal debtor. The court also referred to the Supreme Court's decision in Lalit Kumar Jain vs. Union of India, which held that the approval of a resolution plan does not per se operate as a discharge of the guarantor's liability. The court emphasized that the DRT should examine whether the discharge of the principal debtor by the assignment of debt amounted to a discharge of the guarantors' liabilities under Section 134.

4. Issuance of Writ of Prohibition:

The court considered whether a writ of prohibition should be issued to restrain the DRT from proceeding further with the original applications. The court noted that a writ of prohibition is issued only when there is a patent lack of jurisdiction. The court emphasized that the DRT has the jurisdiction to decide whether it should proceed with the adjudication of the original applications. The court observed that the writ applicants could raise the issue of jurisdiction before the DRT, and the DRT has the power to decide the same. The court concluded that it would be inappropriate to interfere with the original applications at this stage and declined to issue a writ of prohibition.

Conclusion:

The court declined to entertain the writ applications and refused to issue a writ of prohibition. The court left it open to the DRT to decide the pivotal issue of the assignment of debt and its effect on the liabilities of the guarantors. The court emphasized that the DRT should proceed expeditiously with the adjudication of the original applications and decide the issues raised on their merits. The interim relief earlier granted was vacated, and all civil applications seeking impleadment as party respondents were disposed of, leaving it open to the applicants to file appropriate applications before the DRT.