Search Judgments

The Insolvency and Bankruptcy Code Section 14 and 238 – This judgment addresses the interplay between various statutes in the context of the NSEL scam and the recovery of dues to investors. The Supreme Court framed two key questions regarding the priority of secured creditors’ interests versus assets attached under the Prevention of Money Laundering Act, 2002 (PMLA) and the Maharashtra Protection of Investors and Depositors Act, 1999 (MPID Act), and the availability of attached properties for decree execution considering the moratorium under the Insolvency and Bankruptcy Code, 2016 (IBC).

The Court examined the legislative competence and objectives of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act), PMLA, MPID Act, and IBC, considering the constitutional framework of federalism and distribution of legislative powers. It emphasized that the exercise of power under Article 142 of the Constitution of India should not override express statutory provisions and that incidental encroachment does not affect the vires of the law.

Arbitration Act, 1940 – Section 30 & Indian Contract Act, 1872 – Section 74 – This case concerns an appeal against a High Court judgment that partially set aside an arbitral award. The dispute arose from an agreement where the respondent was to supply machinery to the appellant for alcohol production with a guaranteed yield.

The appellant claimed damages for delays, failure to achieve the guaranteed yield, and overall non-performance of the machinery. Initially, the Arbitral Tribunal awarded a significant sum, but this was challenged and remanded.

The Payment of Subsistence Allowance Act, 1981 Section  3(3) ,3(4) – This judgment concerns writ petitions filed by The Kancheepuram Central Co-operative Bank Ltd. challenging orders for subsistence allowance under the Tamil Nadu Payment of Subsistence Allowance Act, 1981, to a suspended employee. The employee, a Manager, was suspended in 2005, superannuated the same year, but his disciplinary inquiry prolonged for over 15 years, leading to his death in 2021 without full settlement of benefits.

The Bank argued that its by-laws under the Tamil Nadu Co-operative Societies Act, 1983, and Section 3(4) of the Payment of Subsistence Allowance Act, 1981, disentitled post-superannuation allowance.

Advocates Act – Advocate-client relationship- This appeal arises from a judgment and decree passed by the III Additional City Civil Court of Chennai in O.S. No.2521/2019, which cancelled an agreement of sale dated 24.11.2016 executed in favor of the appellant (defendant) and awarded Rs.10,00,000/- as damages to the respondent (plaintiff).

The plaintiff claimed that the defendant, an advocate, took advantage of his vulnerable situation after his family’s tragic deaths and misrepresented an agreement of sale as a rental agreement. The defendant allegedly obtained the plaintiff’s signature on the agreement under false pretenses, later demolished part of the property, and issued misleading advertisements regarding the property’s title deeds.

• Insolvency and Bankruptcy Code, 2016 (IBC) – Sections 13, 15, 18, 31, 53, 238; Electricity Act, 2003; Tamil Nadu Electricity Supply Code, 2004 – Regulation 17(9)(c): While a Resolution Plan (RP) approved under Section 31(1) of the IBC generally binds all stakeholders, including the Central and State Governments, and extinguishes claims not part of the RP (“clean slate” theory), this principle has limitations.
• “Clean Slate” Theory – Exceptions/Limitations: The “clean slate” theory does not provide immunity to a successful resolution applicant from claims if the debt was:
  • Known to the Corporate Debtor/Promoters/IRP: If a statutory debt, especially one subject to pending litigation, was within the knowledge of the corporate debtor, its promoters, or the Interim Resolution Professional (IRP), and was not disclosed or claimed during the Corporate Insolvency Resolution Process (CIRP), the debt may not be extinguished.
  • Failure of IRP/RP to Collect Information: The IRP/Resolution Professional (RP) has a duty under Section 18(a) of the IBC and related regulations (e.g., Regulation 4 of IBBI Regulations, 2016) to collect all information regarding assets, finances, and operations of the corporate debtor, including from information utilities. A failure to collect and disclose known or discoverable statutory debts during the CIRP is a serious lapse.
• Statutory Dues & Reconnection of Electricity: TANGEDCO (Electricity Board) can refuse to provide electricity reconnection to a subsequent purchaser of a premises for uncleared statutory debts of the erstwhile owner, even if the former owner underwent CIRP, if there was a failure to disclose the sub-judice debt during the CIRP. Regulation 17(9) of the Tamil Nadu Electricity Supply Code, which fastens liability on the premises, can be invoked in such circumstances.
• Prior Judgments – Harmonious Reading: The judgments in Ghanashyam Mishra and Sons Pvt. Ltd.