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TMI Blog2019 (12) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... vour of the Petitioner company under the said arbitral awards; and (III) whether stay orders of competent Courts were passed in respect of these arbitral awards, and if so, whether they were under the automatic-stay mode or not. It is settled law that when exercising its jurisdiction under Article 32 of the Constitution, this Court cannot embark on a detailed investigation of disputed facts - This Court cannot, therefore, in exercise of its jurisdiction under Article 32 of the Constitution undertake a detailed investigation to determine the status of monies paid/deposited pursuant to arbitral-awards in favour of the Petitioner company. Consequently, no directions in respect thereof can be made in the present proceedings. A look at the circular dated 05.09.2016 shows that the scheme is in order that the hardship felt by the construction sector, thanks to the automatic-stay regime under Section 36 as originally enacted, be mitigated. It can thus be seen that the scheme is so that the construction sector can get the fruits of arbitral awards in their favour, which otherwise was not available at the time under the law. Dr. Singhvi s client was free to avail of the circular on its terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitration and Conciliation (Amendment) Act, 2015 (hereinafter referred to as the "2015 Amendment Act") by Section 15 of the 2019 Amendment Act. Apart from the aforesaid challenge, a challenge is also made to various provisions of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "Insolvency Code") which, as stated by the Petitioners, result in discriminatory treatment being meted out to them. 2. The facts relevant for the determination of these matters may be gleaned from Writ Petition (Civil) No.1074 of 2019. The Petitioner No.1 therein, i.e. Hindustan Construction Company Limited, is an infrastructure construction company involved in the business of construction of public-utilities and projects like roads, bridges, hydropower and nuclear plants, tunnels and rail facilities. The Petitioner company, inter alia, undertakes these building projects as a contractor for government bodies such as the National Highways Authority of India ("NHAI", i.e. Respondent No.5 in the Writ Petition), NHPC Ltd. ("NHPC", i.e. Respondent No.6), NTPC Ltd. ("NTPC", i.e. Respondent No.8), IRCON International Ltd. ("IRCON", i.e. Respondent No.7) and the Public Works Department ("PWD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r suspension of an award, in which the other party may provide appropriate security. Contrary to Article 36 of the UNCITRAL Model Law, Section 36 of the Arbitration Act, 1996 has been construed by judgments of this Court as granting an 'automatic-stay' the moment a Section 34 application is filed within time. According to the learned Senior Advocate, from the plain language of Section 36, automatic-stay does not follow, and the judgments of this Court which have so held would require a revisit by this larger bench. In any case, the 246th Report of the Law Commission of India titled, 'Amendments to the Arbitration and Conciliation Act, 1996' (August, 2014) (hereinafter referred to as the "246th Law Commission Report") recommended that Section 36 be amended, which was in fact done by the 2015 Amendment Act, so that automatic-stays are now things of the past. However, despite the fact that the 2015 Amendment Act made large-scale changes to the Arbitration Act, 1996, keeping in view the objects of the Arbitration Act, 1996 of minimum judicial intervention, speedy determination and recovery of amounts contained in arbitral awards, yet, another 'High-Level Committee to Review the Institu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osal. 7. Dr. Singhvi then trained his guns against Section 87, stating that it is violative of Articles 14, 19(1)(g), 21 and 300-A of the Constitution of India, as it is contrary to the object of the principal Arbitration Act, 1996 itself; takes away the vested right of enforcement and binding nature of an arbitral award; and without removing the basis of the BCCI judgment (supra), acts in the teeth of the said judgment, making the said section unreasonable, excessive, disproportionate as well as arbitrary. He then argued that in effect, the 2019 Amendment Act reverses the beneficial effects of the 2015 Amendment Act which remedied the original mischief contained in the Arbitration Act, 1996, that too after a period of more than 19 years. To bring back this mischief of automatic-stays would result in manifest arbitrariness, rendering the provision constitutionally infirm. He argued that the Srikrishna Committee Report also did not take into account the enforcement of the Insolvency Code. On the one hand, arbitral awards for crores of rupees will get automatically stayed through the application of Section 87, and on the other hand, non-payment of any amount beyond INR one lakh by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her with the absence of a mechanism for forcing debtors of a corporate debtor to make payments to avoid insolvency of such corporate debtors. He then referred to the principle of 'casus omissus' and how the modern view is that such casus omissus can be supplied by the Courts, so as to save the provisions of the Insolvency Code from the vice of manifest arbitrariness. He also argued that there is no level playing field so far as his client is concerned, as a statutory authority can initiate the resolution process against persons like his client, but not vice-versa. He then made an impassioned plea that, in any event, this Court ought to follow its earlier judgments and restate the principle that payment of a money-decree under an award, even when under challenge, is the rule - stay being the exception. Also in cases like the present, even if deposits are made as a condition of stay of money-decrees, withdrawal ought to be permitted - not on onerous conditions such as bank guarantees - but on other conditions such as corporate guarantees and the like, so that such monies are available for payment to other creditors, including operational creditors, who are free to invoke the Insolven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra). 12. Shri Ritin Rai, learned Senior Advocate appearing for M/s Gammon Engineers and Contractors Private Limited, i.e. the Petitioner No.1 in W.P.(C) 1276 of 2019, pointed out various paragraphs of the Counter-Affidavit of the Union of India to show that there is no real answer to the submission that Section 87 directly interferes with the judgment of this Court in BCCI (supra), and that the introduction of Section 87 is manifestly arbitrary. In any case, he relied upon Section 6 of the General Clauses Act, 1897 to save the application of Section 36 as amended by the 2015 Amendment Act. When it came to the provisions of the Insolvency Code, he referred to this Court's judgment in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. (2018) 1 SCC 353 and stated that Section 5(6) of the Insolvency Code, which defines 'disputes', read with Section 8(2) of the Insolvency Code, would make it clear that there is no bar to applying an Order VIII-A of the CPC type procedure to proceedings under the Insolvency Code, so that when his client's sub-contractor triggers the Insolvency Code against his client, his client in-turn should be able to make its principal employer a party to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omatic-stay provision would render persons like his client unable to pay debts, his client, though otherwise financially healthy, would suddenly become vulnerable to being declared insolvent under the Insolvency Code. 15. The learned Attorney General for India, Shri K.K. Venugopal, defended the repeal of Section 26 of the 2015 Arbitration Amendment and the insertion of Section 87 into the Arbitration Act, 1996 by the 2019 Amendment Act. He argued that in BCCI's case (supra), the interpretation of Section 26 of the 2015 Amendment Act is only declaratory in nature. Since the said judgment neither sets aside any executive action, nor any provision of a statute, it does not require a validating act to neutralise its effect. It is open to Parliament, if it finds that a view expressed by the Apex Court does not reflect its original intent, to clarify its original intent through amendment. This is in fact what was done by deleting Section 26 of the 2015 Amendment Act, and inserting Section 87 into the Arbitration Act, 1996. He relied on the clarificatory aspect of the amendment by referring to paragraph 6(vi) of the Statement of Objects and Reasons to the Arbitration and Conciliation (Am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... influence the arbitrator by providing unsolicited facilities to the arbitrator, and actually getting orders drafted on behalf of the arbitrator by the lawyer of the Petitioners and otherwise providing undue favours to the arbitrator; all of which is the subject matter of adjudication pending in the Delhi High Court. When it came to the challenge to the Insolvency Code, he argued that except for the sums owing under some arbitral awards, none of the PSUs have any other dues that are owing to the Petitioner No.1. He also pointed out that whether a person is an operational creditor has to be decided based upon the fact situation in each case. The very fundamental basis of the Petitioner's argument that the Insolvency Code is unconstitutional because it does not give the Petitioners a right to recover monies from their debtors - and that the same Insolvency Code gives the debtor a right to recover from the Petitioner No.1 - is flawed, because the Insolvency Code is not a statute for recovery of debts, but is a statute for reorganisation of corporate persons and resolution of stressed assets of corporate persons. According to him, three of the five entities who have arbitral awards aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 36 of the Arbitration Act, 1996 and the judgments interpreting it. Section 36 (prior to the 2015 Amendment Act) stated as follows: "36. Enforcement.-Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court." 19. The UNCITRAL Model Law is important in understanding the provisions of the Arbitration Act, 1996 as the said Act is explicitly based upon it. The preamble of the Arbitration Act, 1996 specifically states as follows: "Preamble. -- WHEREAS the United Nations Commission on International Trade Law (UNCITRAL) has adopted the UNCITRAL Model Law on International Commercial Arbitration in 1985; AND WHEREAS the General Assembly of the United Nations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice; AND WHEREAS the UNCITRAL has adopted the UNCITRAL Concilia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curity." 22. Shri Dewan has argued that under the UNCITRAL Model Law, Articles 34 and 35 provide for two bites at the cherry: (i) in cases in which an award is sought to be set aside, and (ii) thereafter when not set aside, sought to be recognised and enforced in the same country in which it has been made. He is right in stating that Section 36 of the Arbitration Act, 1996 does not follow the two bites at the cherry doctrine, for the reason that when an award made in India becomes final and binding, it shall straightaway be enforced under the CPC, and in the same manner as if it were a decree of the Court, there being no recourse to the self-same grounds when it comes to recognition and enforcement. In point of fact, the raison d'etre for Section 36 is only to make it clear that when an arbitral award is not susceptible to challenge, either because the time for making an application to set it aside has expired, or such application having been made is refused, the award, being final and binding, shall be enforced under the CPC as if it were a decree of the court. This becomes clear when Section 36 and 35 of the Arbitration Act, 1996 are read together. Section 35 of the Arbitrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ragraph 6). In Fiza Developers and Inter-trade Pvt. Ltd. v. AMCI (India) Pvt. Ltd. and Anr. (2009) 17 SCC 796, this Court held: "20. Section 36 provides that an award shall be enforced in the same manner as if it were a decree of the court, but only on the expiry of the time for making an application to set aside the arbitral award under Section 34, or such application having been made, only after it has been refused. Thus, until the disposal of the application under Section 34 of the Act, there is an implied prohibition of enforcement of the arbitral award. The very filing and pendency of an application under Section 34, in effect, operates as a stay of the enforcement of the award." 25. To state that an award when challenged under Section 34 becomes unexecutable merely by virtue of such challenge being made because of the language of Section 36 is plainly incorrect. As has been pointed out hereinabove, Section 36 was enacted for a different purpose. When read with Section 35, all that Section 36 states is that enforcement of a final award will be under the CPC, and in the same manner as if it were a decree of the Court. In fact, this is how Section 36 has been read by a three- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere again the measure of protection is a step in aid of enforcement. It is intended to ensure that enforcement of the award results in a realisable claim and that the award is not rendered illusory by dealings that would put the subject of the award beyond the pale of enforcement." 29. This being the legislative intent, the observation in NALCO (supra) that once a Section 34 application is filed, "there is no discretion left with the Court to pass any interlocutory order in regard to the said Award…" flies in the face of the opening words of Section 9 of the Arbitration Act, 1996, extracted above. 30. Thus, the reasoning of the judgments in NALCO (supra), and Fiza Developers and Intra-trade Pvt. Ltd. (supra) being per incuriam in not noticing Sections 9, 35 and the second part of Section 36 of the Arbitration Act, 1996, do not commend themselves to us and do not state the law correctly. (In NALCO (supra), this Court was concerned with two questions - the second question being whether the appropriate Court, for the purpose of challenging or seeking modification of an award, was the Supreme Court, or the principal Civil Court of original jurisdiction under Section 2(e) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. v. Pressteel & Fabrications (P) Ltd. [National Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd., (2004) 1 SCC 540] held that by virtue of Section 36, it was impermissible to pass an order directing the losing party to deposit any part of the award into Court. While this decision was in relation to the powers of the Supreme Court to pass such an order under Section 42, the Bombay High Court in Afcons Infrastructure Ltd. v. Port of Mumbai [Afcons Infrastructure Ltd. v. Port of Mumbai, (2014) 1 Arb LR 512 (Bom)] applied the same principle to the powers of a court under Section 9 of the Act as well. Admission of a Section 34 petition, therefore, virtually paralyses the process for the winning party/award creditor. 44. The Supreme Court, in National Aluminium [National Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd., (2004) 1 SCC 540] , has criticised the present situation in the following words: (SCC p. 546, para 11) '11. However, we do notice that this automatic suspension of the execution of the award, the moment an application challenging the said award is filed under Section 34 of the Act leaving no discretion in the court to put the parties on terms, in our o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were a decree of the court. (2) Where an application to set aside the arbitral award has been under section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose. (3) Upon filing of an application under sub- section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing: Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908 (5 of 1908)." Given the fact that we have declared that the judgments in NALCO (supra), National Buildings Construction Corporation Ltd. (supra) and Fiza Developers (supra) have laid down the law incorrect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 31, referred to the debates on the floor of the House. In paragraph 32, this Court referred to the differences between Section 26 and Section 85-A as proposed, and then held: "33. What can be seen from the above is that Section 26 has, while retaining the bifurcation of proceedings into arbitration and court proceedings, departed somewhat from Section 85-A as proposed by the Law Commission." 36. Section 26 was then stated to have bifurcated proceedings with a great degree of clarity into two sets of proceedings - arbitral proceedings themselves, and court proceedings in relation thereto. Paragraph 39 of the judgment refers to this and states as follows: "39. Section 26, therefore, bifurcates proceedings, as has been stated above, with a great degree of clarity, into two sets of proceedings - arbitral proceedings themselves, and court proceedings in relation thereto. The reason why the first part of Section 26 is couched in negative form is only to state that the Amendment Act will apply even to arbitral proceedings commenced before the amendment if parties otherwise agree. If the first part of Section 26 were couched in positive language (like the second part), it would have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein the Committee recommended that since many provisions of the said Bill were contentious, the Bill may be withdrawn and a fresh legislation may be brought after considering its recommendations. Accordingly, the said Bill was withdrawn from the Rajya Sabha. 3. On a reference made again in pursuance of the above, the Law Commission examined and submitted its 246th Report on "Amendments to the Arbitration and Conciliation Act, 1996" in August 2014 and recommended various amendments in the Act. The proposed amendments to the Act would facilitate and encourage Alternative Dispute Mechanism, especially arbitration, for settlement of disputes in a more user- friendly, cost-effective and expeditious disposal of cases since India is committed to improve its legal framework to obviate in disposal of cases. 4. As India has been ranked at 178 out of 189 nations in the world in contract enforcement, it is high time that urgent steps are taken to facilitate quick enforcement of contracts, easy recovery of monetary claims and award of just compensation for damages suffered and reduce the pendency of cases in courts and hasten the process of dispute resolution through arbitration, so as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amendments proposed in the Bill will ensure that arbitration process becomes more user-friendly, cost-effective and lead to expeditious disposal of cases." 78. The Government will be well-advised in keeping the aforesaid Statement of Objects and Reasons in the forefront, if it proposes to enact Section 87 on the lines indicated in the Government's Press Release dated 7-3-2018. The immediate effect of the proposed Section 87 would be to put all the important amendments made by the Amendment Act on a back-burner, such as the important amendments made to Sections 28 and 34 in particular, which, as has been stated by the Statement of Objects and Reasons, "… have resulted in delay of disposal of arbitration proceedings and increase in interference of courts in arbitration matters, which tend to defeat the object of the Act", and will now not be applicable to Section 34 petitions filed after 23-10-2015, but will be applicable to Section 34 petitions filed in cases where arbitration proceedings have themselves commenced only after 23-10- 2015. This would mean that in all matters which are in the pipeline, despite the fact that Section 34 proceedings have been initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ministry of Law and Justice and the learned Attorney General for India in view of what is stated in paras 77 and 78 supra." 38. After construing Section 26 in the manner stated in the judgment, this Court cautioned the Government by stating that the immediate effect of enacting the proposed Section 87 would be directly contrary to the Statement of Objects and Reasons of the 2015 Amendment Act, which made it clear that the law prior to the 2015 Amendment Act resulted in delay of disposal of arbitral proceedings, and an increase in interference by courts in arbitration matters, which tends to defeat a primary object of the Arbitration Act, 1996 itself. It was therefore stated that all the amendments made by the 2015 Amendment Act, and important amendments in particular that were made to Sections 28 and 34, would now be put on a backburner, which would be contrary not only to what the 246th Law Commission had in mind, but also directly contrary to the salutary provisions that were made to correct defects that were found in the working of the Arbitration Act, 1996. 39. At this point it is important to refer to the relevant paragraphs of the Statement of Objects and Reasons of the 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sharma v. Union of India [(1968) 3 SCR 41 : AIR 1968 SC 1138] ; Tirath Ram Rajindra Nath v. State of U.P. [(1973) 3 SCC 585 : 1973 SCC (Tax) 300] ; Krishna Chandra Gangopadhyaya v. Union of India [(1975) 2 SCC 302] ; Hindustan Gum & Chemicals Ltd. v. State of Haryana [(1985) 4 SCC 124] ; Utkal Contractors and Joinery (P) Ltd. v. State of Orissa [1987 Supp SCC 751] ; D. Cawasji & Co v. State of Mysore [1984 Supp SCC 490 : 1985 SCC (Tax) 63] and Bhubaneshwar Singh v. Union of India [(1994) 6 SCC 77] . It is open to the legislature to remove the defect pointed out by the court or to amend the definition or any other provision of the Act in question retrospectively. In this process it cannot be said that there has been an encroachment by the legislature over the power of the judiciary. A court's directive must always bind unless the conditions on which it is based are so fundamentally altered that under altered circumstances such decisions could not have been given. This will include removal of the defect in a statute pointed out in the judgment in question, as well as alteration or substitution of provisions of the enactment on which such judgment is based, with retrospective eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected. When contrasted with Section 26, Section 87 is in two parts: Section 87(a) negatively stating that the 2015 Amendment Act shall not apply to Court proceedings arising out of arbitral proceedings irrespective of whether such court proceedings are commenced before or after the commencement of the 2015 Amendment Act; and positively applying only to court proceedings in case they arise out of arbitral proceedings that are commenced on or after the commencement of the 2015 Amendment Act. It can thus be seen that the scheme of Section 87 is different from that of Section 26, and is explicit in stating that court proceedings are merely parasitical on arbitral proceedings. It is therefore clear that only arbitral proceedings have to be looked at to see whether the 2015 Amendment Act kicks in. It is therefore not possible to accept Shri Kaul's argument that in the present case there is a direct assault on a judgment of this Court without first removing its basis. Constitutional Challenge to the 2019 Amendment Act 47. This now sets the stage for the examination of the constitutional validity of the introduction of Section 87 into the Arbitration Act, 1996, and deletion of Section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment Act applicable to fresh court proceedings in relation to such arbitrations, as it may result in an inconsistent position. Therefore, it is felt that it may be desirable to limit the applicability of the 2015 Amendment Act to arbitrations commenced on or after 23 October 2015 and related court proceedings." (emphasis supplied) 48. The Srikrishna Committee Report is dated 30.07.2017, which is long before this Court's judgment in the BCCI case (supra). Whatever uncertainty there may have been because of the interpretation by different High Courts has disappeared as a result of the BCCI judgment (supra), the law on Section 26 of the 2015 Amendment Act being laid down with great clarity. To thereafter delete this salutary provision and introduce Section 87 in its place, would be wholly without justification and contrary to the object sought to be achieved by the 2015 Amendment Act, which was enacted pursuant to a detailed Law Commission report which found various infirmities in the working of the original 1996 statute. Also, it is not understood as to how "uncertainty and prejudice would be caused, as they may have to be heard again", resulting in an 'inconsistent position'. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this reason also, Section 87 must be struck down as manifestly arbitrary under Article 14. The petitioners are also correct in stating that when the mischief of the misconstruction of Section 36 was corrected after a period of more than 19 years by legislative intervention in 2015, to now work in the reverse direction and bring back the aforesaid mischief itself results in manifest arbitrariness. The retrospective resurrection of an automatic-stay not only turns the clock backwards contrary to the object of the Arbitration Act, 1996 and the 2015 Amendment Act, but also results in payments already made under the amended Section 36 to award-holders in a situation of no-stay or conditional-stay now being reversed. In fact, refund applications have been filed in some of the cases before us, praying that monies that have been released for payment as a result of conditional stay orders be returned to the judgment-debtor. 51. Also, it is important to notice that the Srikrishna Committee Report did not refer to the provisions of the Insolvency Code. After the advent of the Insolvency Code on 01.12.2016, the consequence of applying Section 87 is that due to the automatic-stay doctrine laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . For this reason, the aforesaid judgments have no application. Instead, what has been found to be manifestly arbitrary is the non-bifurcation of court proceedings and arbitration proceedings with reference to the aforesaid date, resulting in improvements in the working of the Arbitration Act, 1996 being put on a backburner. This argument of the learned Attorney General for India also therefore must be rejected. 54. The result is that the BCCI judgment (supra) will therefore continue to apply so as to make applicable the salutary amendments made by the 2015 Amendment Act to all court proceedings initiated after 23.10.2015. 55. In this view of the matter, it is unnecessary to examine the constitutional challenge to the 2019 Amendment Act based on Articles 19(1)(g), 21 and 300-A of the Constitution of India. Constitutional Challenge to the Insolvency Code 56. It now falls on us to decide the second part of the challenges made in the present Writ Petitions, i.e. the challenge to the constitutionality of the Insolvency Code. As mentioned above, Dr. Singhvi has argued that the provisions of the Insolvency Code would operate arbitrarily on his client inasmuch as, on the one hand, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company law;" "2(45). "Government company" means any company in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary company of such a Government company." 58. From a reading of the aforesaid definition, Shri Tushar Mehta is clearly right in stating that the three entities who owe monies under arbitral awards to the Petitioner No.1, being Government companies, would be subsumed within the first part of the definition. However, so far as NHAI is concerned, Dr. Singhvi's argument of either deleting certain words in Section 3(7) of the Insolvency Code, or adding certain words in Section 3(23)(g) of the Insolvency Code into Section 3(7) cannot be accepted. 59. It is clear from a reading of the Statement of Objects and Reasons of the NHAI Act, that the development and maintenance of national highways is a government function that falls within Entry 23 of List I of the Seventh Schedule to the Constitution of India. Further, under Section 5 of the National Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been incurred, entered into and engaged to be done by, with, or for, the Authority; (b) all non-recurring expenditure incurred by or for the Central Government for or in connection with the purposes of any national highway or any stretch thereof, so vested in, or entrusted to, the Authority, up to such date and declared to be capital expenditure by the Central Government shall, subject to such terms and conditions as may be prescribed, be treated as capital provided by the Central Government to the Authority; (c) all sums of money due to the Central Government in relation to any national highway or any stretch thereof, so vested in, or entrusted to, the Authority immediately before such date shall be deemed to be due to the Authority; (d) all suits and other legal proceedings instituted or which could have been instituted by or against the Central Government immediately before such date for any matter in relation to such national highway or any stretch thereof may be continued or instituted by or against the Authority. (2) If any dispute arises as to which of the assets, rights or liabilities of the Central Government have been transferred to the Authority, such dispute sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovide consultancy and construction services in India and abroad and carry on research activities in relation to the development, maintenance and management of highways or any facilities thereat; (f) provide such facilities and amenities for the users of the highways vested in, or entrusted to, it as are, in the opinion of the Authority, necessary for the smooth flow of traffic on such highways; (g) form one or more companies under the Companies Act, 1956 to further the efficient discharge of the functions imposed on it by this Act; [(h) engage, or entrust any of its functions to, any person on such terms and conditions as may be prescribed;] (i) advise the Central Government on matters relating to highways; (j) assist, on such terms and conditions as may be mutually agreed upon, any State Government in the formulation and implementation of schemes for highway development; (k) collect fees on behalf of the Central Government for services or benefits rendered under section 7 of the National Highways Act, 1956, as amended from time to time, and such other fees on behalf of the State Governments on such terms and conditions as may be specified by such State Governments; an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such other manner as may be prescribed. 21. Borrowing powers of the Authority.--- (1) The Authority may, with the consent of the Central Government or in accordance with the terms of any general or special authority given to it by the Central Government, borrow money from any source by the issue of bonds, debentures or such other instruments as it may deem fit for discharging all or any of its functions under this Act. (2) Subject to such limits as the Central Government may, from time to time, lay down, the Authority may borrow temporarily by way of overdraft or otherwise, such amounts as it may require for discharging its functions under this Act. (3) The Central Government may guarantee in such manner as it thinks fit the repayment of the principal and the payment of interest thereon with respect to the borrowings made by the Authority under sub-section (1). 22. Annual report.---The Authority shall prepare, in such form and at such time in each financial year as may be prescribed, its annual report, giving a full account of its activities during the previous financial year, and submit a copy thereof to the Central Government. 23. Accounts and audit.---The account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icy, which would then be binding on the Authority. 63. From a conspectus of the above provisions, what is clear is that NHAI is a statutory body which functions as an extended limb of the Central Government, and performs governmental functions which obviously cannot be taken over by a resolution professional under the Insolvency Code, or by any other corporate body. Nor can such Authority ultimately be wound-up under the Insolvency Code. For all these reasons, it is not possible to accede to Dr. Singhvi's argument to either read in, or read down, the definition of 'corporate person' in Section 3(7) of the Insolvency Code. 64. Even otherwise, on the footing that the NHAI can be roped in under the Insolvency Code, this Court in K. Kishan (supra) has held: "22. Following this judgment, it becomes clear that operational creditors cannot use the Insolvency Code either prematurely or for extraneous considerations or as a substitute for debt enforcement procedures. The alarming result of an operational debt contained in an arbitral award for a small amount of say, two lakhs of rupees, cannot possibly jeopardise an otherwise solvent company worth several crores of rupees. Such a compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a mechanism which is triggered in order that resolution of stressed assets then takes place. For this purpose, the definitions of 'dispute' under Section 5(6), 'claim' under Section 3(6), 'debt' under Section 3(11), and 'default' under Section 3(12), have all to be read together. Also, the Insolvency Code, belonging to the realm of economic legislation, raises a higher threshold of challenge, leaving the Parliament a free play in the joints, as has been held in Swiss Ribbons (P) Ltd. v. UOI (2019) 4 SCC 17 (see paragraphs 17 to 24 thereof). For all these reasons, this contention of Dr. Singhvi must needs be rejected. 67. Dr. Singhvi's argument as to the need to fill in a casus omissus in the Code in order that his client get relief is again not tenable. The argument that an Order VIII-A CPC type mechanism is missing, and can be provided by us through interpretation - there being no third-party procedure by which debts owed to persons like the Petitioner can then be, by some theory of contribution or indemnity, fastened on to PSUs when operational creditors invoke the Insolvency Code against persons like the Petitioner - is again an argument which is answered by stating that the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned in Section 9(5) of the Act." 71. It is clear therefore that a dispute must be between the parties as understood under the Insolvency Code, which does not contain an Order VIII-A CPC type mechanism. This contention must also therefore be rejected. 72. For all these reasons, we find the challenge to the provisions of Insolvency Code, insofar as the present Writ Petitions are concerned, to be wholly devoid of merit. Conclusion on facts 73. In the Writ Petition No.1074 of 2019 filed on 16.08.2019, the Petitioner company had alleged that a sum of INR 6070 crores was the sum awarded to the Petitioner company under various arbitral awards from 2008 to 2019 which had been challenged by the Respondent PSUs before various Courts, but the operation of which had not been stayed by such courts. On this factual premise, the Petitioner sought interim reliefs from this Court for the repayment of the said amounts from the Respondent PSUs, so as to enable it to repay its pending dues to its own operational creditors. This Court recorded as much in its order dated 13.09.2019 in Writ Petition No.1074 of 2019 as follows: "The two interlocutory applications are filed for two reliefs. One is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es mentioned in the charts were succinctly summarised in a table in the Counter Affidavit, which is reproduced below: NAME OF THE PSU TOTAL AMOUNT OF AWARDS IN FAVOUR OF THE PETITIONER TOTAL AMOUNT PAID/DEPOSITED BY THE PSU PENDING THE STATUTORY CHALLENGE OF THE AWARD NHPC 1063.82 932.03 NHAI 2343.23 2025.62 IRCON 268.10 119.06 NTPC 116.15 81.70 TOTAL 3791.30 3158.41 [83.30%] (Figures in INR Crores) 75. Pertinently, the Union of India alleged that none of the stay orders obtained by the Respondent PSUs in respect of these arbitral awards were under the automatic-stay mode, or under Section 87 of the 2019 Amendment Act. Instead, it was contended that the said stay orders were granted by the competent Court on an application filed by the Respondent PSUs, a hearing of the said application on merits, and upon the condition that portions of the arbitral awards be paid/deposited in the Court. 76. The Union of India also strongly denied the Petitioner company's contention that it was in financial distress due to the non- payment of contractual dues owed to it by the Respondent PSUs, which allegedly left it susceptible to being proceeded against under the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Indian importers of stationary articles) alleged that the Central Board of Revenue had acted erroneously by imposing tax upon 'crayons' imported by them, which were not taxable, incorrectly assuming them to be 'colour pencils'. Dismissing these Writ Petitions, this Court held as follows: "15. The contention that the impugned orders are manifestly erroneous, because "Crayons" have been treated as 'coloured pencils' is not a contention which can be gone into on an application under Article 32 of the Constitution. It has no bearing on the question of the enforcement of a fundamental right, nor can the question be decided without first determining what constitutes the distinction between a 'coloured pencil' and a 'crayon', a distinction which must require an investigation into disputed facts and materials. This was a matter for the Customs authorities to decide, and it is obvious that this Court cannot, on an application under Article 32 of the Constitution, embark on such an investigation." (emphasis supplied) 80. To similar effect is the decision in Surendra Prasad Khugsal v. Chairman, MMTC. 1994 Supp. (1) SCC 87, where this Court held: "6. We have heard both the parties in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere able to retrieve 75% of awarded amounts together with interest thereon - referred to as "pay-out amount" - is arbitrary only to a limited extent. He had no quarrel with the fact that a bank guarantee should be given under the scheme to secure the pay-out amount, but argued that an additional bank guarantee of 10% per year on the pay-out amount, which is then compounded annually, is arbitrary and should be struck down under Article 14. This being severable, he contended that the scheme can remain, with the requirement of a 'top-up' bank guarantee of 10% per annum being struck down. A look at the circular dated 05.09.2016 shows that the scheme is in order that the hardship felt by the construction sector, thanks to the automatic-stay regime under Section 36 as originally enacted, be mitigated. It can thus be seen that the scheme is so that the construction sector can get the fruits of arbitral awards in their favour, which otherwise was not available at the time under the law. Dr. Singhvi's client was free to avail of the circular on its terms, or not to avail of the said circular. Having availed of the benefit contained in the circular, it is not possible for his client to now t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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