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TMI Blog2021 (7) TMI 778X X X X Extracts X X X X X X X X Extracts X X X X ..... umentality is expected to act fairly and in a non-arbitrary manner, the PFC REC are also driven by a profit motive and their functions cannot be fettered to drive them towards financial disadvantage. This would lead to their ruin endanger large number of other power companies and persons dependent on them. Any restructuring proposal or contract like a loan contract is time bound. Time is the essence of such contract. The Petitioners should have known this while accepting the restructuring proposal. The Petitioners did not appear serious about benefitting from the restructuring proposal and the same was a subterfuge to delay the inevitable consequences of its financial failure - The petitioners cannot be allowed to use the model code of conduct, as a rule to cover up their own omissions. The petitioners have not demonstrated that they have fulfilled the conditions of the Initial DSRA or the main DSRA. The petitioner could not have any legitimate expectation of continuation of the restructuring proposal indefinitely. The omissions and failures of the petitioners were duly recorded in the minutes of meeting dated 17th February, 2021, there was substantial notice of cancellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 became due and payable by the end of the year 2020. At the request of the petitioner no. 1, the respondent Nos. 3 and 4 agreed to a restructuring of the dues. The restructuring was conditional. The conditions inter alia were as follows : a) The cutoff date of the Restructuring proposal was 30.09.2021 b) A pass through in fuel charges was to be within a range of 20 paisa/kwh of the variable cost of the last 2 months as on 28th February, 2021. Such tariff would have to be approved by the WBERC respondent no.1. c) The initial Debt Service Reserve Account (DSRA) was required to be maintained equivalent to the next succeeding month. d) A priority debt of 83 crores was also required to be made available by the petitioner prior to implementation of resolution plan. e) Working capital of about 125 crores was also to be made available by the petitioner. f) A regular DSRA to meet 2 months of existing debt of rescheduled loans was also required to be maintained. Upon fulfillment of the said conditions the restructuring plan was to take effect from 19th February, 2021. There were a large number of other conditions which the petitioner no. 1 was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported in 2020 SCC Online SC 847 and Unitech Limited and others Vs. Telangana State Industrial Infrastructure Corporation (TSIIC) and others reported in 2021 SCC Online SC 99 to the effect that even in the area of private contracts the actions of the State can be questioned by a writ court. Counsel placed paragraph 23 of the Sudhir Kumar Singh decision (supra) :- 23. It may be added that every case in which a citizen/person knocks at the doors of the writ court for breach of his or its fundamental rights is a matter which contains a public law element , as opposed to a case which is concerned only with breach of contract and damages flowing therefrom. Whenever a plea of breach of natural justice is made against the State, the said plea, if found sustainable, sounds in constitutional law as arbitrary State action, which attracts the provisions of Article 14 of the Constitution of India - see Nawabkhan Abbaskhan v. State of Gujarat (1974) 2 SCC 121 at paragraph 7. The present case is, therefore, a case which involves a public law element in that the petitioner (Respondent No. 1 before us) who knocked at the doors of the writ court alleged breach of the audi alteram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power. (See Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1].) And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction. (emphasis supplied) Mr. Mookherjee has laboriously placed various paragraphs of the decision of the Supreme Court in Joshi Technologies International INC. Versus Union of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 4 as on the cutoff date for which it required debt restructuring. The actions of the respondent nos.3 and 4 in the instant case are purely contractual in nature and were guided specifically by the terms and conditions of the restructuring proposal. In matters of this nature, the respondent nos.3 and 4 are guided by and must act strictly on commercial considerations, for recovery of their financial dues. The respondents appear to have given substantial leverage to the writ petitioner no.1 to comply with the terms and conditions of the restructuring proposal which the petitioner has failed. It is however true that the issuance and passing of the tariff order was not within the control of the writ petitioner no.1. The same was required to have been done by the respondent no.1. The said tariff order was issued albeit with some discrepancies only on 31.05.2021. The writ petitioners have already filed an application for review of the said order in view of the discrepancies thereat. The compliance and actual tariff at which the electricity would be sold by the writ petitioner no.1 to the WBSEDCL was not clear even in the middle of June, 2021 or even as on date. The REC and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IBC is an independent proceeding which is unaffected by winding up proceedings that may be filed qua the same company. Given the object sought to be achieved by the IBC, it is clear that only where a company in winding up is near corporate death that no transfer of the winding up proceeding would then take place to the NCLT to be tried as a proceeding under the IBC. Short of an irresistible conclusion that corporate death is inevitable, every effort should be made to resuscitate the corporate debtor in the larger public interest, which includes not only the workmen of the corporate debtor, but also its creditors and the goods it produces in the larger interest of the economy of the country. It is, thus, not possible to accede to the argument on behalf of the Appellant that given Section 446 of the Companies Act, 1956/Section 279 of the Companies Act, 2013, once a winding up petition is admitted, the winding up petition should trump any subsequent attempt at revival of the company through a Section 7 or Section 9 petition filed under the IBC. While it is true that Sections 391 to 393 of the Companies Act, 1956 may, in a given factual circumstance, be availed of to pull the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll promote entrepreneurship as the persons in management of the corporate debtor are removed and replaced by entrepreneurs. When, therefore, a resolution plan takes off and the corporate debtor is brought back into the economic mainstream, it is able to repay its debts, which, in turn, enhances the viability of credit in the hands of banks and financial institutions. Above all, ultimately, the interests of all stakeholders are looked after as the corporate debtor itself becomes a beneficiary of the resolution scheme-workers are paid, the creditors in the long run will be repaid in full, and shareholders/investors are able to maximise their investment. Timely resolution of a corporate debtor who is in the red, by an effective legal framework, would go a long way to support the development of credit markets. Since more investment can be made with funds that have come back into the economy, business then eases up, which leads, overall, to higher economic growth and development of the Indian economy. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngaged in business it cannot be put to any more disadvantage than a private player. The State cannot also be required to grant concessions outside the contract and outside what a private player would ordinarily be required to give. Under the garb of requiring fairness in action even State business entities cannot be imposed with terms conditions for non-commercial considerations. One must note that the State entities are required to compete with private corporations who are far too quick opportunistic in commercial matters. While it is indeed true that a State instrumentality is expected to act fairly and in a non-arbitrary manner, the PFC REC are also driven by a profit motive and their functions cannot be fettered to drive them towards financial disadvantage. This would lead to their ruin endanger large number of other power companies and persons dependent on them. The dicta of the Supreme Court in Para 70 of decision Joshi Technologies (supra) is of useful reference. Interference under Article 226 in contractual matters of the State is definitely permitted, but the same is done sparingly and only in exceptional cases. 70. Further, the legal position which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities was without giving any hearing and violation of principles of natural justice after holding that action could not have been taken without observing principles of natural justice. 70.8. If the contract between private party and the State/instrumentality and/or agency of the State is under the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitution of India and invoking its extraordinary jurisdiction. 70.9. The distinction between public law and private law element in the contract with the State is getting blurred. However, it has not been totally obliterated and where the matter falls purely in private field of contract, this Court has maintained the position that writ petition is not maintainable. The dichotomy between public law and private law rights and remedies would depend on the factual matrix of each case and the distinction between the public law remedies and private law field, cannot be demarcated with precision. In fact, each case has to be examined, on its facts whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posal. No prejudice could therefore have been caused to the petitioners by non-issuance of a formal recall notice of the loans or cancellation of restructuring proposal. In the facts of the case it would have been a useless formality. The Directions of the RBI, 2019 have been placed by Mr. Mukherjee to argue that since the restructuring was done thereunder, the action of the respondent nos. 3 4 can be scrutinized under Art. 226. The restructuring was already done as per the 2019 Directions. The Petitioners have not been able to indicate exactly which Directions has been violated or has not been followed by the REC and PFC. The 2019 Directions appear to have been referred to in a desperate attempt to attract cause of action under Art. 226. The petitioners were afforded a restructuring proposal essentially by reason of the 2019 Directions and could not take advantage thereof. There is some doubt as to whether the Directions have statutory or binding force. This Court therefore finds no arbitrariness or unfairness in the actions of the respondent no. 3 and 4. There is no violation of Article 14 of the Constitution of India. No violation of Natural Justice is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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