Team Code – T15

UNIVERSITY MOOT COURT SELECTIONS

2019

BEFORE THE HONORABLE SUPREME COURT OF NARNIA

UNDER ARTICLE 32

(W.P. NO. 123 UMSC/2019)

IN THE MATTER OF

INNER-PEACE PRIVATE LIMITED ….PETITIONER

V.

UNION OF NARNIA …….RESPONDENT

UNDER ARTICLE 139A(1)

TAGGED ALONG WITH

INNER PEACE PRIVATE LIMITED

V.

1. LE TRANQUILLE PRIVATE LIMITED

2. MR. GERIATRIX

3. COMMITTEE OF CREDITORS OF LE TRANQUILLE PVT. LTD.

4. MR. ZENG

WRITTEN SUBMISSIONS ON BEHALF OF THE RESPONDENTS

 -TABLE OF CONTENTS-

TABLE OF CONTENTS

TABLE OF CONTENTS ........................................................................................................ I

LIST OF ABBREVIATIONS .............................................................................................. III

TABLE OF AUTHORITIES ............................................................................................... IV

STATEMENT OF JURISDICTION ................................................................................ VIII

STATEMENT OF FACTS ................................................................................................... IX

STATEMENT OF ISSUES .................................................................................................. XI

1. WHETHER THIS HON’BLE COURT HAS JURISDICTION TO ENTERTAIN

THE PETITION AND WHETEHR THE PETITION FILED BY INNER PEACE
PRIVATE LIMITED? .......................................................................................................... XI

2. WHETHER THE NCLT’S ORDER DATED 17TH NOVEMBER 2018 ADMITTING

THE PETITION UNDER SECTION 10 FILED BY LE TRANQUILLE PRIVATE
LIMITED AND CONSEQUENTIAL PROCEEDINGS THERETO SHOULD BE SET
ASIDE? .................................................................................................................................. XI

3. WHETHER THE NCLT WAS RIGHT IN ORDERING THE STAY OF THE

ARMRORICA EP BY WAY OF AN INTERIM ORDER?.............................................. XI

4. WHETHER SS. 10, 30(2)(B), 31(1) AND 65 OF THE IBC ARE

CONSTITUTIONAL? .......................................................................................................... XI

SUMMARY OF ARGUMENTS ......................................................................................... XII

ANALYSIS OF ISSUES .......................................................................................................... 1

1. THAT THE HON’BLE COURT HAS NO JURISDICTION TO ENTERTAIN

THE PETITION .................................................................................................................. 1

IPL’S FUNDAMENTAL RIGHTS HAVE NOT BEEN INFRINGED ....................... 1

THERE HAS BEEN NO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE

............................................................................................................................................ 2

2. THE WRIT PETITION AND THE PETITION TO SET ASIDE THE ORDER
OF ADMISSION IS NOT MAINTAINABLE .................................................................. 3

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS i

 -TABLE OF CONTENTS-

THE PETITIONER HAS NO LOCUS STANDI TO APPROACH THE COURT .... 3

CIRP PROCEEDINGS OF THE RESPONDENT HAVE NOT BEEN

CONDUCTED ARBITRARILY..................................................................................... 4

THERE IS AN ALTERNATIVE REMEDY AVAILABLE FOR THE

PETITIONER .................................................................................................................. 5

3. THAT THE ORDER OF ADMISSION PASSED BY THE NCLT AND THE

CONSEQUENTIAL PROCEEDINGS THERETO SHOULD NOT BE SET ASIDE.. 6

THE ADJUDICATING AUTHORITY IS NOT EMPOWERED TO CONSIDER EXTRANEOUS

FACTORS AND REJECT THE APPLICATION FILED U/S 10 GOING BEYOND THE PROVISIONS

OF LAW ............................................................................................................................... 6

THERE CANNOT BE AN OPPORTUNITY GIVEN TO THE PETITIONERS OF BEING HEARD .... 8

THERE EXISTS NO MALICIOUS INTENT ON PART OF THE CORPORATE DEBTOR .............. 10

4. THAT THE NCLT WAS RIGHT IN ORDERING THE STAY OF ARMORICA

EP BY WAY OF AN INTERIM ORDER ....................................................................... 11

THE NCLT HAD THE JURISDICTION TO ENTERTAIN THE APPLICATION ........................ 11

THE NCLT IS EMPOWERED TO PASS AN INTERIM ORDER .............................................. 11

THAT THE NCLT WAS CORRECT IN LAW TO STAY THE ARMORICA EP ........................ 13

5. THAT THE § 10, § 30(2)(B), §31(1) AND § 65 ARE CONSTITUTIONALLY

VALID AND DO NOT VIOLATE ARTICLE 14........................................................... 15

§10 OF IBC IS CONSTITUTIONALLY VALID AND DOES NOT VIOLATE

ARTICLE 14................................................................................................................... 15

§30(2)(B) OF IBC IS CONSTIUTIONALLY VALID ................................................. 17

§31(1) OF IBC IS CONSTITUTIONALLY VALID AND IS NOT ARBITRARY TO

EQUALITY PRINCIPLES ........................................................................................... 18

§65 OF IBC IS CONSTITUTIONALLY VALID AND NOT ARBITRARY ............ 20

PRAYER ................................................................................................................................... 1

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS ii

 -LIST OF ABBREVIATIONS-

LIST OF ABBREVIATIONS

Abbreviations Full Forms

AIR All India Reporter

BLRC Bankruptcy Law Reforms Committee

SC Supreme Court of India

SCC Supreme Court Cases

Co Company

CoC Committee of Creditors

IBBI Insolvency and Bankruptcy Board of India

IBC The Insolvency and Bankruptcy Code, 2016

IRP Interim Resolution Professional

NCLT National Company Law Tribunal

NCLAT National Company Law Appellate Tribunal

Ltd Limited

§ Section

No Number

CIRP Corporate Insolvency Regulation Process

Ors Others

Pvt Private

AA Adjudicating Authority

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS iii

 -TABLE OF AUTHORITIES-

TABLE OF AUTHORITIES

S T AT UT E S

CODE CIV. PROC. § 13 ................................................................................................................ 1

CODE CIV. PROC. § 44A. ............................................................................................................ 1

INDIA CONST. art. 32. .................................................................................................................. 1

Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 10(4). .................... 8

Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 10. ......................... 2

Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 13(1)(a). .............. 13

Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 14(1)(a). .............. 13

Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 3(11). .................... 6

Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 3(18)(1)(f)(i). ...... 15

Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 3(6)(a). .................. 7

Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 30(2)(b). .............. 18

Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 31(1). .................. 18

Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 5(20). .................... 4

Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 5(21). .................... 4

Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 5(7). ...................... 4

Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 5(8). ...................... 3

Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 65. ....................... 20

O T HE R A UT H O RI T I E S

A. KEAY & P. WALTON, INSOLVENCY LAW: CORPORATE AND PERSONAL, 17 (2nd

ed., Jordan Publishing House London, 2008). ....................................................................... 4

BANKRUPTCY LAW REFORMS COMMITTEE, THE REPORT OF THE BANKRUPTCY LAW REFORMS
COMMITTEE: VOLUME I: RATIONALE AND DESIGN, at 71, (2015). ....................................... 14
WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS iv
 -TABLE OF AUTHORITIES-

Cooper v. Wandsworth Board of Works, (1863) 143 ER 414. .................................................. 2

INSOLVENCY LAW COMMITTEE, THE REPORT OF THE INSOLVENCY LAW COMMITTEE, at 5.3,
(2018). .................................................................................................................................. 14

O’Gorman & Young v. Hartford Fire Insurance, 282 U.S. 251 (1931). .................................. 17

RM GOODE, PRINCIPLES OF CORPORATE INSOLVENCY 88 (3rd ed., Sweet and

Maxwell, London, 2005)........................................................................................................ 4

RODRIGO OLIVARES-CAMINAL, et al., DEBT RESTRUCTURING, (1st ed. Oxford

University Press, 2011). ......................................................................................................... 4

NCLT C A S E S

Col. Vinod Awasthy v. A.M.R. Infra. Ltd., (2017) SCC OnLine (NCLT) 16278. .................... 4

Mukesh Kumar v. A.M.R. Infra. Ltd., (2017) SCC OnLine (NCLT) 468................................. 4

Pawan Dubey v. J.B.K. Developers Pvt. Ltd., (2017) SCC OnLine (NCLT) 520. ................... 4

S.R.E.I. Infra. Finance Ltd. v. Sterling S.E.Z. and Infra. Ltd., C.P. 405 (NCLT) 2018. ......... 14

S.S.M.P. Industries Ltd. v. Perkan Food Processors Pvt. Ltd., C.C. Comm. 73 (NCLT) 2017.
.............................................................................................................................................. 14

TATA Chemicals Limited v. Raj Process Equipments and Systems Pvt. Ltd., C.P. No. 21
(NCLT) 2018. ...................................................................................................................... 10

H I G H C OU RT C AS E S

M/s Sabinsa v. Olive Life Sciences Pvt. Ltd., W.P. No. 52587 (Kar.) 2017. ............................ 8

Marine Geotechnics L.L.C. v. Coastal Marine Const. & Eng. Ltd., 2014 CR 2 (Bom.) 769. ... 9

Power Grid Corp. of India v. Jyoti Structures Ltd., (2018) 246 DLT 485. ............................. 14

NCLAT C AS E S

Antrix Diamond Exports Pvt. Ltd. v. Bank of India & Ors., (2018) SCC OnLine (NCLAT) 33.
................................................................................................................................................ 8

B.C.L. Homes Ltd. v. Canara Banks & Ors., (2018) SCC OnLine (NCLAT) 134. .................. 8

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS v

 -TABLE OF AUTHORITIES-

Gemini Innovations Pvt. Ltd. v. State Bank of India, (2018) SCC OnLine (NCLAT) 920. ..... 8

Jharkhand Bijli Vitran Nigam Ltd. v I.V.R.C.L. Ltd. & Anr., C.A. No. 285 (NCLAT) 2018.
.............................................................................................................................................. 15

Krishna Kraftex Pvt. Ltd. v. H.D.F.C. Bank & Ors., (2018) SCC OnLine (NCLAT) 357. ...... 8

M/s Deem Roll Tech Ltd. v. M/s R.L. Steel & Energy Ltd., C.A. No. 24 (NCLAT) 2017. ... 10

N.U.I. Pulp and Paper Industries Pvt. Ltd. v. M/s Roxcel Trading G.M.B.H., C.A. No. 664
(NCLAT) 2019..................................................................................................................... 12

Nissus Finance & Investment Managers L.L.P. v. Lokhandwala Kataria Construction Pvt. Ltd.,
(2017) SCC OnLine (NCLAT) 2300. .................................................................................. 12

Unigreen Global Private Limited v. Punjab National Bank, (2017) SCC OnLine (NCLAT) 566.
................................................................................................................................................ 7

V.R. Hemantraj v. Stanbic Bank Ghana Ltd., (2018) SCC OnLine (NCLAT) 451. ................. 6

RULES A ND R E G UL A T I O NS

Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate
Persons) Fourth Amendment Regulations, 2018. ................................................................ 18

The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, R. 7. . 6

The National Company Law Tribunal Rules, 2016, R. 11. ..................................................... 11

S U P RE M E C OU RT C A S E S

Andhra Industrial Works v. Chief Controller of Exports, AIR 1974 SC 1539. ......................... 1

Automotive Tyre Manufacturers Assn. v. Designated Authority, (2011) 2 SCC 258. .............. 2

Bhaskar Lal Sharma v. Monika, (2014) 3 SCC 383. ................................................................. 5

Bhushan Power & Steel Ltd. v. Rajesh Verma, (2014) 5 SCC 551. .......................................... 1

Charanjit Lal Chowdhury v. Union of India, AIR 1951 SC 41. .............................................. 16

Coffee Board v. Jt. Commercial Tax Officer, AIR 1970 SC 870. ............................................. 6

E. P. Royappa v. State of Tamil Nadu, (1974) 4 SCC 3. ......................................................... 16

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS vi

 -TABLE OF AUTHORITIES-

G.C. College Silchar v. Gauhati University, AIR 1973 SC 761. ............................................... 3

Hindi Hitrakshak Samiti v. Union of India, AIR 1990 SC 851. ................................................ 1

Khyerbari Tea Company v. State of Assam, AIR 1964 SC 925. ............................................... 1

M.H. Hoskot v. State of Maharashtra, AIR 1978 SC 1548. ...................................................... 2

M/s Innoventive Industries Ltd. v. I.C.I.C.I. Bank & Anr., (2018) 1 SCC 407......................... 7

Olga Tellis v. Bombay Municipal Corporation, AIR 1986 SC 180........................................... 3

Peter Johnson John v. K.E.C. International Ltd., (2019) SCC OnLine 375. ............................. 9

Pioneer Urban Land & Infrastructure Ltd. v. Union of India, (2019) SCC OnLine (SC) 1005
.............................................................................................................................................. 16

R.S.I.D.I. Corp. v. S.S. Co-operative Housing Society Jaipur, AIR 2013 SC 1226. ................. 1

Ram Krishna Dalmia v. Justice S.R. Tendulkar, AIR 1958 SC 538........................................ 17

State of Uttar Pradesh v. Mohammed Nooh, AIR 1958 SC 86. ................................................ 5

Swiss Ribbons Pvt. Ltd. v. Union of India & Anr., AIR 2019 SC 739. .................................. 12

Ujjam Bai v. State of Uttar Pradesh, AIR 1962 SC 1621. ......................................................... 2

Veena Sethi v. State of Bihar, AIR 1983 SC 339. ..................................................................... 3

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS vii

 -STATEMENT OF JURISDICTION-

STATEMENT OF JURISDICTION

The present writ petition is filed under Article 32 of the Constitution of Narnia and the Hon’ble
supreme court has the jurisdiction to hear the same if the case of infringement of fundamental
rights is duly proved. The Supreme Court under Article 139A(1) has transferred the appeal
pending before the NCLAT and tagged it along with the writ petition for hearing.

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS viii

 -STATEMENT OF FACTS-

STATEMENT OF FACTS
BACKGROUND

1. Mr. Oogway started a company in 1992 called the “Inner-Peace Private Limited”
(“IPL”) and became its Founder and Managing Director. Mr. Shifu was a
student of Oogway and was known for his keen financial acumen. Oogway’s
experiment resulted in the creation of a potion named “The Secret Ingredient
Potion” (“SIP”), which cured the insomnia. The SIP was a path-breaking
development in the medical field and was an instant success. Oogway appointed
Shifu as the General Manager of the Company in 1995. IPL had obtained several
intellectual property rights, including patents for the SIP developed by Oogway,
in Narnia as well as overseas.
2. One of the biggest markets for IPL was in the country of Armorica, where SIP
was sold the most. A few days later when small disagreements began to emerge
between Oogway and Shifu, over the sharing of profits of IPL and on 21.03.2018,
Shifu announced that he was taking a short break from his responsibilities in the
company.
3. On 07.05.2018, Shifu resigned from IPL without any advance intimation. After
his resignation, a lot of employees in the company also resigned. IPL ending up
with losses for the first time in 10 years. Once Oogway was in Armorica and
noticed a product Gifting – U – a Lively – Life - Potion (“GULLP”) with the
tagline “Why SIP, when you can GUL L P for a happy life? – a sure cure for
insomnia!” Oogway learnt that this product was sold by Shifu through Le
Tranquille, (a company started by former IPL Employee Mr. Vachir in which
Shifu acquired 60% of the shares) and targeted the customers of IPL and
breached the intellectual property rights of IPL in the country of Armorica.
4. IPL then initiated a suit against Le Tranquille for patent infringement in the
Court of Armorica. The court held Le Tranquille liable and demanded it to pay
30 Narnian Crores as damages. When IPL went for the execution of the default
judgment by attachment of a property of Le Tranquille in Armorica, Le
Tranquille contended that it has begun its CIRP and hence the property cannot
be attached. Thereafter, Oogway wrote a letter to Mr. Geriartrix (IRP) to
explain that Le Tranquille has initiated its CIRP with a malicious intent to divert
its funds and that IPL as legitimate creditor of Le Tranquille ought to have been

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS ix

 -STATEMENT OF FACTS-

notified about the proceedings and also urged that the said proceedings should
be stopped on account of fraudulent initiation.
5. However, Mr. Geriartrix did not respond to Oogway. Oogway then filed a writ
petition challenging the admission of CIRP application and questioning the
constitutional validity of Sections 10, 30(2)(b), 31(1) and 65 of the Insolvency and
Bankruptcy Code as violative of Article 14 of the Constitution. A Transfer
Petition was also filed to transfer the appeal before the NCLAT to the Supreme
Court and be tagged along with the W.P. No. 123 UMSC/2019.

-The Hon’ble Supreme Court listed the transfer petition tagged with writ petition
arising in all the aforementioned matters for hearing on 7th and 8th September 2019-

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS x

 -ISSUES RAISED-

STATEMENT OF ISSUES

1. WHETHER THIS HON’BLE COURT HAS JURISDICTIO N TO

ENTERTAIN THE PETITI ON AND WHETEHR THE PETITION
FILED BY INNER PEACE PRIVATE LIMITED?

2. WHETHER THE NCLT’S O RDER DATED 17 T H NOVEMBER 2018

ADMITTING THE PETITI ON UNDER SECTION 10 FILED BY LE
TRANQUILLE PRIVATE L IMITED AND CONSEQUENTIAL
PROCEEDINGS THERETO SHOULD BE SET ASIDE?

3. WHETHER THE NCLT WAS RIGHT IN ORDERING T HE STAY

OF THE ARMRORICA EP BY WAY OF AN INTERIM ORDER?

4. WHETHER SS. 10, 30(2 )(B), 31(1) AND 65 O F THE IBC ARE
CONSTITUTIONAL?

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS xi

 -SUMMARY OF ARGUMENTS-

SUMMARY OF ARGUMENTS

THE HON’BLE SUPREME COURT HAS NO JURISDCITION TO ENTERTAIN THE

PETITION

It is submitted that the Supreme Court does not have jurisdiction to entertain the writ petition
filed by IPL challenging the order of admission dated 17th November as well as the
constitutional validity of §10, §30(2)(b), §31(1) and §65 of IBC. There has been no
infringement of fundamental rights of IPL by Le Tranquille nor has there been any grave
injustice or violation of principles of natural justice.

THE WRIT PETITION AND THE PETITION TO SET ASIDE THE ORDER OF
ADMISSION IS NOT MAINTAINABLE

It is submitted before the honourable court that the writ petition challenging the order of
admission of CIRP and constitutional validity of the aforementioned sections is not
maintainable. The petitioners have no locus standi to approach the court. It is further submitted
NCLT has conducted the entire CIRP proceedings in accordance with law and the proceedings
are in consonance with the letter and spirit of IBC. Hence, the writ petition ought to be
dismissed in absence of any prominent legal grounds to question the CIRP proceedings.

THE ORDER OF ADMISSION AND CONSEQUENTIAL PROCEEDINGS THERETO

SHOULD NOT BE SET ASIDE

It is humbly submitted before this Hon’ble Court that the NCLT Order dated 17 th November
2018 admitting the petition filed by the corporate debtor and consequential proceedings thereto
should not be set aside since all the mandatory requirements u/s 10 have been complied with
and the Adjudicating Authority after the examination as required u/s 10 has admitted the
application. It is also submitted that there exists no malicious intent on the part of the
respondents as alleged by Inner-Peace Private Limited (hereinafter referred to as “IPL”) when
it seeks to set the Corporate Insolvency Resolution Process (CIRP) in motion.

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS xii

 -SUMMARY OF ARGUMENTS-

THE NCLT WAS RIGHT IN ORDERING THE STAY OF ARMORICA EP

It is humbly submitted before this Hon’ble Court that the NCLT was indeed right in ordering
the stay of Armorica EP by way of an interim order since the NCLT is empowered under law
to pass an interim Order and the NCLT exercised the said power to uphold the letter and spirit
of the Code.

§ 10, § 30(2)(B), §31(1) AND § 65 ARE CONSITUTIONALLY VALID

It is submitted before the honourable court that §10 of IBC is constitutionally valid as it neither
violates any fundamental rights nor does it entail provisions that are arbitrary in nature. It is
submitted that §30(2)(b) which talks about the payment of operational creditors is
constitutionally valid and does not violate Article 14. The said provision is also not arbitrary
as the legislative intent specifically indicates towards the differential treatment of operational
creditors and financial creditors. It is submitted that §31(1) of IBC that provides for the
approval of resolution plans is neither discriminatory nor arbitrary in nature. It provides for
various mandatory conditions to be fulfilled before the resolution plan can pass. It is submitted
that §65 of IBC which talks about imposing penalties on malicious initiation of CIRP is
constitutionally valid and does not violate any constitutional principles.

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS xiii

 -ANALYSIS OF ISSUES-

ANALYSIS OF ISSUES

1. THAT THE HON’BLE COURT HAS NO JURISDICTION TO

ENTERTAIN THE PETITI ON

IPL’S FUNDAMENTAL RIGHTS HAVE NOT BEEN INFRINGED

It is submitted that the writ petition filed by IPL to the Supreme Court was done in accordance
with the provisions of Article 321. The jurisdiction conferred on the Supreme Court under this
article cannot be enforced unless there has been a clear violation of fundamental rights.2 A writ
under Article 32 does not lie to create or acknowledge a legal right but is strictly confined to
enforce a fundamental right which has been breached.3 In the case at hand, IPL who neither
qualifies as a financial creditor or as an operational creditor has a mere inchoate right as against
Le Tranquille. The alleged fundamental right violation that IPL claims to suffer has arisen out
of a default judgment of a foreign court, which as per the provisions of Civil Procedure Code
(hereinafter referred to as “CPC”)4, needs to be adjudicated upon by a domestic court before
the execution of the same happens. The entire contention of IPL is backed by an authority
which cannot be duly recognised. Moreover, IPL’s major contention that the denial of
opportunity to be heard before admitting an application under §10 of IBC, is nothing more than
a mere concoction as none of the provisions of this § mandate any such requirement to be
fulfilled before the initiation of Corporate Insolvency Resolution Process (hereinafter referred
to as “CIRP”). Hence, it is impossible to reckon that IPL’s fundamental right has been
infringed. It must be noted that the Constitutional bench of this court in the landmark judgment
of Andhra Industrial Works v. Chief Controller of Exports5 has clearly held, “No action lies in
the Supreme Court under Article 32 unless there is an infringement of a Fundamental Right.”
It is further submitted that since in every writ petition filed under Article 32 the court has to
strictly restrict itself to the question of infringement of fundamental rights6, if the violation of
fundamental rights cannot be shown the writ petition under Article 32 should not be
entertained.7

1
INDIA CONST. art. 32.
2
Hindi Hitrakshak Samiti v. Union of India, AIR 1990 SC 851.
3
R.S.I.D.I. Corp. v. S.S. Co-operative Housing Society Jaipur, AIR 2013 SC 1226.
4
CODE CIV. PROC. § 13; CODE CIV. PROC. § 44A.
5
Andhra Industrial Works v. Chief Controller of Exports, AIR 1974 SC 1539.
6
Khyerbari Tea Company v. State of Assam, AIR 1964 SC 925.
7
Bhushan Power & Steel Ltd. v. Rajesh Verma, (2014) 5 SCC 551.

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS 1

 -ANALYSIS OF ISSUES-

THERE HAS BEEN NO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE

It cannot be denied that principles of natural justice are so sacrosanct that no legislation of a
civilized legal system can enact a law which goes contrary to these basic principles.8 It is a well
settled law that unless a statutory provision either specifically or by necessary implication
excludes the tenets of natural justice, the principles should be read into the provisions of the
statute.9 But the question whether these principles have to applied or not is to be considered
with respect to the express language and basic scheme of the provision conferring the power,
the nature of power conferred and the purpose for which the power is conferred and the final
effect of exercise of this power.10

In the case at hand, if we closely peruse §1011, the legislative intent of the provisions indicates
that there has been no violation of natural justice. Moreover, the opportunity of being heard
could be afforded only to financial and operational creditors. IPL fails to qualify as any of the
two and its right against the alleged claims is a mere inchoate one. Since, moratorium has
already been imposed after the admission of CIRP application, IPL’s right to institute a suit
against the debtor and his right to be heard has been suspended and the same has been done in
due accordance with the law. Thus, the question of violation of principles of natural justice
does not arise. The petitioner’s contention is that NCLT ought to have heard his case before
admitting the application of CIRP and the omission of NCLT to do that has led to an
infringement of principles of natural justice. It is contended that this cannot be a violation of
principles of natural justice because NCLT acted within its jurisdiction and as per the
provisions stipulated under §10 of the code. This court in the case of Ujjam Bai v. State of Uttar
Pradesh12 has clearly held that a quasi-judicial authority acting within its jurisdiction and
under an intra-vires law, could not be challenged under Article 32 on the ground that it has
misconstrued the law, because no breach of any fundamental right was involved in such a
situation. Hence, it is humbly contended that in absence of any infringement to the fundamental
rights of the petitioner or the principles of natural justice, the said petition be disposed-off
effective immediately.

8
M.H. Hoskot v. State of Maharashtra, AIR 1978 SC 1548.
9
Cooper v. Wandsworth Board of Works, (1863) 143 ER 414.
10
Automotive Tyre Manufacturers Assn. v. Designated Authority, (2011) 2 SCC 258.
11
Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 10.
12
Ujjam Bai v. State of Uttar Pradesh, AIR 1962 SC 1621.

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS 2

 -ANALYSIS OF ISSUES-

2. THE WRIT PETITION AND THE PETITION T O SET ASIDE THE

ORDER OF ADMISSION I S NOT MAINTAINABLE

THE PETITIONER HAS NO LOCUS STANDI TO APPROACH THE COURT

In order to satisfy the court on the maintainability of writ petition, it is compulsory for the
petitioner to prove his legal standing before presenting its arguments.13 In the landmark
judgment of Olga Tellis v. Bombay Municipal Corporation14 , it was held that whenever a
petitioner seeks to enforce his fundamental right, he is obliged to apprise the court of the direct
infringement that he/she is subjected to, failing which his cause of action would be rendered
inadmissible. Moreover, the right to be enforced under Article 32 must ordinarily be the right
of the petitioner himself. As rights are different and inhere in different legal entities, it is not
competent to a person to seek to enforce the rights of another.15

In the case at hand, IPL neither qualifies to be an operational creditor nor a financial creditor.
Petitioner’s right in the instant case is inchoate and can only be enforced to claim damages
because of the patent infringement decree that it holds. Under the current scheme of the code,
Financial Creditor is the one to whom a financial debt is owed and Operational Creditor is the
one to whom an operational debt is owed. § 5(8)16 of IBC defines financial debt as, “A debt
along with interest, if any, which is disbursed against the consideration for the time value of
money and includes:(a) money borrowed against the payment of interest; (b) any amount
raised by acceptance under any acceptance credit facility or its de-materialised equivalent; (c)
any amount raised pursuant to any note purchase facility or the issue of bonds, notes,
debentures, loan stock or any similar instrument;(d) the amount of any liability in respect of
any lease or hire purchase contract which is deemed as a finance or capital lease under the
Indian Accounting Standards or such other accounting standards as may be prescribed;(e)
receivables sold or discounted other than any receivables sold on non-recourse basis; (f) any
amount raised under any other transaction, including any forward sale or purchase agreement,
having the commercial effect of a borrowing”

On a close perusal of the requirements aforementioned, it can be easily concluded that IPL
meets none of them. Since the petitioner’s claim arise only out of a default judgment for

13
Veena Sethi v. State of Bihar, AIR 1983 SC 339.
14
Olga Tellis v. Bombay Municipal Corporation, AIR 1986 SC 180.
15
G.C. College Silchar v. Gauhati University, AIR 1973 SC 761.
16
Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 5(8).

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS 3

 -ANALYSIS OF ISSUES-

damages, the same cannot be given the colour of a financial debt. Similarly, §5(21) 17 of IBC
which defines Operational Debt, stipulates that the debt should be in relation to the provision
of goods and services or should come under the garb of statutory dues payable to the legislature.
The said claim of the petitioner arises out of a patent infringement suit passed in its favour by
a default judgment of a foreign court.18 Though the definition of both of these debts is to be
interpreted inclusively, the intent of the legislature cannot be said to be so wide that it
incorporates any ‘claim’ payable by the debtor under its definition. 19 In order to succeed with
the said writ petition, it is sine qua non to prove that the creditor falls within the ambit and
scope of the definition of either 'Financial Creditor’ under Section 5(7)20 or
'Operational Creditor' u/s 5(20)21 of the IBC. It must also be noted that time and again the
Tribunals are stringent in construing definition of 'Operational Creditor' under the IBC and are
refraining from entertaining applications wherein the applicants are not strictly falling within
the scope of the IBC and have alternate effective remedies available.22 This approach adopted
by NCLT in Col. Vinod Awashty’s23 case has been a settled law for cases where similar question
arises and has been duly followed in the subsequent cases before NCLT.24

CIRP PROCEEDINGS OF THE RESPONDENT HAVE NOT BEEN CONDUCTED

ARBITRARILY

It is submitted that the entire proceeding of initiation of CIRP of the respondent was done in
absolute accordance with §10 of IBC. The petitioner however, contends that the way the entire
proceedings were conducted establishes that the respondent is using IBC to re-set the
obligations against law and does not satisfy the letter and spirit of IBC. 25 There are various
tests to determine the insolvency of corporate debtors, which are: the test of inability to pay
debts26, the cash flow test27 and the balance sheet test.28 After a careful perusal of the factual

17
Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 5(21).
18
Moot Proposition Para. 9.
19
Col. Vinod Awasthy v. A.M.R. Infra. Ltd., (2017) SCC OnLine (NCLT) 16278.
20
Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 5(7).
21
Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 5(20).
22
Mukesh Kumar v. A.M.R. Infra. Ltd., (2017) SCC OnLine (NCLT) 468.
23
Col. Vinod Awasthy v. A.M.R. Infra. Ltd., (2017) SCC OnLine (NCLT) 16278.
24
Pawan Dubey v. J.B.K. Developers Pvt. Ltd., (2017) SCC OnLine (NCLT) 520.
25
Moot Proposition Para. 16.
26
A. KEAY & P. WALTON, INSOLVENCY LAW: CORPORATE AND PERSONAL, 17 (2nd ed., Jordan
Publishing House London, 2008).
27
RODRIGO OLIVARES-CAMINAL, et al., DEBT RESTRUCTURING, (1st ed. Oxford University Press,
2011).
28
RM GOODE, PRINCIPLES OF CORPORATE INSOLVENCY 88 (3rd ed., Sweet and Maxwell, London,
2005).

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS 4

 -ANALYSIS OF ISSUES-

matrix of the case, it can be observed that IPL had obtained a default judgment dated November
1, 2018 from the Court in Armorica in a suit of patent infringement.29 CIRP proceedings of Le
Tranquille had begun on 17th November and as of this date, Le Tranquille had already obtained
the moratorium which made it legally immune towards the institution of any suits. 30 It is only
on November 22 that IPL came to execute the default judgement dated November 1, and hence
the execution was estopped by the NCLT due to the imposition of moratorium.31

As far as the contention of the petitioner about being denied the opportunity of being heard
before admission of CIRP is concerned, it is submitted that neither NCLT nor the corporate
debtor was under any sort of obligation to inform the petitioner. Moreover, since the petitioner
fails to qualify as a creditor of Le Tranquille, there was no plausible reason as to why it should
be given an opportunity to present the case before admission of application of CIRP. Also, if
the contention of the petitioner were to be held true, the same would hinder the expeditious
resolution of the company and that would be a clear violation of the very purpose and spirit of
the Code.

Hence, since the petitioner does not have any locus standi to present itself before the court and
since the entire resolution proceedings were conducted in accordance with the provisions of
law, the writ petition challenging the order of admission and vires of the code, should be
immediately disposed of.

THERE IS AN ALTERNATIVE REMEDY AVAILABLE FOR THE PETITIONER

It is submitted before the Hon’ble Court that since there was no infringement of fundamental
rights of the petitioner, he ought to have proceeded to this court in due regard of the chain of
judicial structure. This doctrine is called ‘Doctrine of Exhaustion of Alternative Remedies.’
This court has time and again reiterated this doctrine and has observed that when the
enforcement and execution of a provision passed under a statute is contemplated by the statute
itself, an aggrieved litigant normally has to take the recourse in accordance with the hierarchy
of judicial structure and as per the remedy provided under the statute.32 The said doctrine has
been meticulously explained by this court in the landmark judgment of State of Uttar Pradesh
v Mohammed Nooh.33 The Court observed, “this doctrine directs that a litigant must approach

29
Moot Proposition Para. 9.
30
Moot Proposition Para. 9(1).
31
Moot Proposition Para. 9(1).
32
Bhaskar Lal Sharma v. Monika, (2014) 3 SCC 383.
33
State of Uttar Pradesh v. Mohammed Nooh, AIR 1958 SC 86.

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS 5

 -ANALYSIS OF ISSUES-

the forum that is nearest him/her in the chain of the judicial structure, and that precious judicial
resources, both at the higher level, and at the lower, perhaps specialized level, should not be
wasted in the wake of a forum shopping exercise.” In the case at hand, IPL’s contention is to
challenge the decision of NCLT to admit the CIRP application by a writ petition filed under
Article 32. This recourse, if allowed by the honourable court, would defeat the very idea of the
said doctrine as Article 32 is to be utilized strictly in cases of violation of fundamental rights
as well as principle of natural justice. It must be noted that a petitioner has a right to move to
Supreme Court under Article 32 to challenge a quasi-judicial decision only where the action is
taken without proper jurisdiction.34 Hence, it is humbly contended that the said writ petition
should not be maintained and be disposed-off effective immediately.

3. THAT THE ORDER OF AD MISSION PASSED BY TH E NCLT AND

THE CONSEQUENTIAL PROCEEDINGS THERETO SH OULD
NOT BE SET ASIDE

THE ADJUDICATING AUTHORITY IS NOT EMPOWERED TO CONSIDER EXTRANEOUS FACTORS

AND REJECT THE APPLICATION FILED U/S 10 GOING BEYOND THE PROVISIONS OF LAW

It is humbly submitted that it is a settled legal position as far as IBC is concerned that the
Adjudicating Authority is only required to examine if the application filed u/s 10 complies with
all the requisites enumerated in § 1035 and Form 6 under Rule 736, further the mandate of the
law does not enable the Adjudicating Authority to go beyond such pre-conditions.37

Under §10 of the Code it is necessary for the adjudicating authority to determine the “default”
in accordance with all the documents submitted u/s 10(3)(a)38. At this juncture it is important
to peruse a few interconnected definitions given under the code, the first definition is of
“default” as given u/s 3(12)39, which means “non-payment of debt when whole or any part or
any instalment of the amount of debt has become due and payable and is not paid by the debtor
or the corporate debtor as the case may be”, the next definition which is of utmost importance
is of “debt” as given u/s 3(11)40, which means “a liability or obligation in respect of a claim
which is due from any person and includes a financial debt and operational debt” and the last

34
Coffee Board v. Jt. Commercial Tax Officer, AIR 1970 SC 870.
35
Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 10.
36
The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, R. 7.
37
V.R. Hemantraj v. Stanbic Bank Ghana Ltd., (2018) SCC OnLine (NCLAT) 451.
38
Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 10(3)(a).
39
Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 3(12).
40
Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 3(11).

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS 6

 -ANALYSIS OF ISSUES-

definition in this chain is of “claim” as given u/s (3)(6)(a)41, “which means a right to payment,
whether or not such right is reduced to judgement, fixed, disputed, undisputed, legal, equitable,
secured or unsecured. On a keen perusal of the facts it can be seen that Mr. Shifu, as Managing
Director, duly authorised by the three board of directors, filed the application u/s 10, the
respondents declared that there were three financial creditors who were issued notice, while
two banks did not appear, the largest creditor (Union Bank of Narnia against whom the default
in payment as determined by the Adjudicating Authority persisted for 4 years) appeared and
submitted that it did not have any objections. It was also declared with relevant documents such
as Books of Accounts that the respondent company was never making continuous and sustained
profits.42 Thus, it is quite evident that the respondent company defaulted in discharge of debts
of the financial creditors and thus was empowered under law to file an application for initiation
of CIRP.

In a recent landmark judgement, the Apex Court has held that u/s 7 & 10 of the Code two
factors are common i.e. the debt is due and there is a default. It has further been held that the
moment the adjudicating authority is satisfied that a default has occurred, the application has
to be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify
the defect within 7 days from the receipt of the notice from the adjudicating authority. 43 It must
be observed that the present application and the subsequent order of admission by the NCLT
has been propounded in compliance with the aforementioned legal position.

In another important judgement on this point, the NCLAT while dismissing the order of
rejection of NCLT in the case of Unigreen Global Private Limited v. Punjab National Bank44,
held that §10 of the Code does not empower the Adjudicating Authority to go beyond the
records as prescribed under § 10 and the information as required to be submitted by a corporate
debtor in Form 6 of the Rules subject to ineligibility, if any, as prescribed u/s 11 of the Code.
§ 11 of the Code prescribes conditions which make an applicant ineligible/disqualified to make
an application under the Code to initiate corporate insolvency resolution process. As per the
judgment of NCLAT an applicant does not require to disclose or plead any fact which is
unrelated or beyond the requirements of the Code or forms prescribed under the Rules and thus
non-disclosure of such facts cannot be termed as suppression of facts by a corporate debtor.

41
Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 3(6)(a).
42
Moot Proposition Para. 13.
43
M/s Innoventive Industries Ltd. v. I.C.I.C.I. Bank & Anr., (2018) 1 SCC 407.
44
Unigreen Global Private Limited v. Punjab National Bank, (2017) SCC OnLine (NCLAT) 566.

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS 7

 -ANALYSIS OF ISSUES-

Relying on the afore-mentioned judgement the NCLAT in another case directed the NCLT to
accept the application if it was complete.45

In a few other judgements, where NCLAT relied on the judgement in Gemini Innovations Pvt
ltd v. State Bank of India46 it held that the Code, Rules and Regulations do not stipulate that the
debtor company has to provide details47 other than what are required.48

The clear position which emanates from the two judgements discussed above suggests that the
respondent company did not act in contravention of any law when it did not disclose the details
of the default judgement of 1st November, since the Code does not require it to divulge the
same.

Arguendo, if the application suffered from any defects the Adjudicating Authority ought to
give seven days of time in order to cure the defect, in terms of § 10(4)49, thus the contention of
the petitioner if any to set aside the proceedings does not stand on firm ground.

THERE CANNOT BE AN OPPORTUNITY GIVEN TO THE PETITIONERS OF BEING HEARD

It is humbly submitted before this Hon’ble Court that the Adjudicating Authority was acting
within law when it did not afford an opportunity to the petitioners of being heard. It is further
contended that the petitioners being in possession of a default judgement passed by the courts
in Armorica cannot be considered as operational or financial creditors of the corporate
applicant and their right, if any, against the corporate debtor is still inchoate.

It is for the consideration of this Hon’ble Court that the Karnataka High Court in a case whose
facts are quite similar to the ones at hand, held that a person who is neither a financial creditor
or operational creditor and whose right to recover the debt is still inchoate, cannot claim the
right of being heard since the statute does not confer upon him such a right and he can only
claim such a right when the right is crystallised and the moratorium u/s 14 has come to an end
which occurs when a resolution plan is approved.50

It is also worthy of this court’s attention that a person cannot be given a right to be heard before
admission u/s 10 merely because it has a judgement or a money decree against the corporate

45
Krishna Kraftex Pvt. Ltd. v. H.D.F.C. Bank & Ors., (2018) SCC OnLine (NCLAT) 357.
46
Gemini Innovations Pvt. Ltd. v. State Bank of India, (2018) SCC OnLine (NCLAT) 920.
47
B.C.L. Homes Ltd. v. Canara Banks & Ors., (2018) SCC OnLine (NCLAT) 134.
48
Antrix Diamond Exports Pvt. Ltd. v. Bank of India & Ors., (2018) SCC OnLine (NCLAT) 33.
49
Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 10(4).
50
M/s Sabinsa v. Olive Life Sciences Pvt. Ltd., W.P. No. 52587 (Kar.) 2017.

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS 8

 -ANALYSIS OF ISSUES-

applicant from a foreign court, in such a case the person holding such a decree or judgement
would have a right which is yet to be crystallised, it is only when such a right is crystallised
can he be given the status of a creditor depending on the nature of his claim.

At this juncture it is pertinent to deliberate upon the procedure enshrined in CPC for recognition
of a foreign decree which is defined in Explanation II of § 44A51 which reads as, “Decree”
with reference to a superior court means any decree or judgement of such court under which
a sum of money is payable. For enforcement of a foreign decree it must be conclusive, the test
of conclusiveness is given u/s 1352. If a conclusive foreign decree is obtained from a
reciprocating territory, the decree shall be executed as a decree of any civil court in the country
of Narnia, but if the conclusive foreign decree is obtained from a non-reciprocating territory, a
suit has to be filed in a court of competent jurisdiction in Narnia on the foreign judgement or
on the original cause of action or both. It is further submitted till the time the civil court in the
home country decrees the suit, the right to recover still remains largely inchoate. It is only after
the decree is obtained that the right crystallises and gives a right to the creditor to recover the
dues by initiating CIRP.

On further ponderance over the set of facts at hand it can be observed that the default judgement
passed by the Courts in Armorica on 1st November 2018 suffers from a variety of defects
including one of the major infirmity being that the court passed an ex-parte decree not on the
merits of the case, without prejudice to such a grave defect, it can be further observed that the
petitioners took no active steps to enforce the said default judgement in Narnia and have
approached this Hon’ble Court merely with a view to enforce the said default judgement which
would render them the status of a creditor.

It is also presented for this Hon’ble Court’s kind consideration that, the Bombay High Court in
the case of Marine Geotechnics LLC v. Coastal Marine Construction & Engineering Ltd.53,
reaffirmed the position and observed that in case of a decree from a non-reciprocating foreign
territory, the decree holder should file, in a domestic Indian court of competent jurisdiction, a
suit on that foreign decree or on the original, underlying cause of action, or both. It is also
noteworthy that in the case of Peter Johnson John v. KEC International Limited54, the Hon’ble

51
CODE CIV. PROC. § 44A.
52
CODE CIV. PROC. § 13.
53
Marine Geotechnics L.L.C. v. Coastal Marine Const. & Eng. Ltd., 2014 CR 2 (Bom.) 769.
54
Peter Johnson John v. K.E.C. International Ltd., (2019) SCC OnLine 375.

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS 9

 -ANALYSIS OF ISSUES-

NCLAT also established that the regime in IBC is no different than CPC with respect to
execution of a foreign decree.

In one of the recent judgements the NCLT taking recourse to the object of the IBC observed
that the IBC proceedings are not enforcement proceedings and hence the creditors should
restrain from using IBC as a tool to enforce their decree. 55 A similar position was adopted by
the NCLT in another case of M/s Deem Roll Tech Limited v. M/s R.L. Steel & Energy Ltd. 56

Arguendo, if the petitioners do not have the right to claim the decretal amount because of
operation of moratorium u/s 14 of the code, this is done in order to protect the other creditors
of the firm and thus such suspension for enforcement is only temporary and the petitioners can
institute a suit for enforcement in a civil court after the moratorium has ceased to exist i.e. post
the approval of resolution plan in accordance with § 31 of the Code.

Thus, comprehending the clear legal position, it can be said that the NCLT did not act ultra
vires the Code when it did not issue a notice to the petitioner, since it is neither operational nor
financial creditor, and its right still remains inchoate.

THERE EXISTS NO MALICIOUS INTENT ON PART OF THE CORPORATE DEBTOR

It is humbly submitted before this Hon’ble Court that there arose a genuine instance of
insolvency and there was no malicious intent on the part of the respondent company when it
approached the NCLT on 17th November 2018 with an application u/s 10.

It is further emphasised that the application setting in motion the CIRP came into existence due
to the pending debts of the respondent company to its various creditors which amounted to
more than Narnian Rs. 60 Crores and the company stood in default with respect to these claims
for more than 4 years, which is substantially a long period of time where all the efforts of the
directors, aimed at reviving the company and bringing in profits, failed to materialise and thus
it pushed the company into insolvency since it was never making continuous and sustained
profits.57

The petitioners allege that there exists a malicious intent on the part of the respondents because
the respondent company did not reveal that there was a decree lying against it from a foreign
court. It must be taken into account the reason for not disclosing the above mentioned decree

55
TATA Chemicals Limited v. Raj Process Equipments and Systems Pvt. Ltd., C.P. No. 21 (NCLT) 2018.
56
M/s Deem Roll Tech Ltd. v. M/s R.L. Steel & Energy Ltd., C.A. No. 24 (NCLAT) 2017.
57
Moot Proposition Para. 13.

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS 10

 -ANALYSIS OF ISSUES-

was that the petitioners even though in possession of such a decree are neither operational
creditors nor financial creditors and the Code does not require or empower the corporate
applicant to reveal any creditor other than financial creditor or operational creditor u/s 10 or
Form 6.

4. THAT THE NCLT WAS RI GHT IN ORDERING THE STAY OF

ARMORICA EP BY WAY OF AN I NTERIM ORDER

THE NCLT HAD THE JURISDICTION TO ENTERTAIN THE APPLICATION

It is pertinent to note here that the application made by Le Tranquille to the NCLT for interim
orders praying to set aside Armorica EP was filed u/s 60(5)58 of the Code. § 60(5) reads as,
“Notwithstanding anything to the contrary contained in any other law for the time being in
force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of—
(a) any application or proceeding by or against the corporate debtor or corporate person; (b)
any claim made by or against the corporate debtor or corporate person, including claims by
or against any of its subsidiaries situated in India; and (c) any question of priorities or any
question of law or facts, arising out of or in relation to the insolvency resolution or liquidation
proceedings of the corporate debtor or corporate person under this Code.” It can be seen from
the provision of the Code that NCLT indeed has the jurisdiction to entertain such an application
u/s 60(5)(a).

THE NCLT IS EMPOWERED TO PASS AN INTERIM ORDER

It is the most respectful submission of the respondents that the NCLT has the power to pass an
interim order that may be necessary in the interest of justice and for effective dispensation of
justice.

It is further submitted that the aforementioned power has been given under Rule 11 of the
National Company Law Tribunal Rules, 2016. Rule 1159 which talks about Inherent powers of
the Adjudicating Authority, it reads, “Nothing in these rules shall be deemed to limit or
otherwise affect the inherent powers of the Tribunal to make such orders as may be necessary
for meeting the ends of justice or to prevent abuse of the process of the Tribunal.”

58
Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 3(6)(a).
59
The National Company Law Tribunal Rules, 2016, R. 11.

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 -ANALYSIS OF ISSUES-

It is for the consideration of this court that the National Company Law Tribunal in the case of
Nissus Finance & Investment Managers LLP v. Lokhandwala Kataria Construction Pvt. Ltd.60
using its inherent powers under Rule 11 granted the permission to the party to withdraw the
petition filed for initiating the CIRP even after its admission since the parties had reached an
out of court settlement and the said petition if precipitated would render the entire procedure
infructuous.

In the factual matrix of the present case, the Hon’ble Court would be obliged to notice that
there were representations made by the respondents before the courts in Armorica, acquainting
it about the subsistence of period of moratorium, when they passed the enforcement decree
namely, “Armorica EP”61 and it is only when the court held that IBC was not applicable to the
courts of Armorica, did the respondents filed an application to the NCLT praying for interim
orders to set aside the said execution order62. The chain of events makes is amply clear that the
respondents did not file the application with a malicious intent.

It is for the kind consideration of this Hon’ble Court in the case of Swiss Ribbons Pvt. Ltd. &
Anr. v. Union of India & Ors63., this Hon’ble Court was pleased to reaffirm the power of the
Adjudicating Authority to grant interim relief under Rule 11. It had the occasion to discuss the
same while deliberating on the constitutional validity of § 12A, where it stated, “We make it
clear that at any stage where the committee of creditors is not yet constituted, a party can
approach the NCLT directly, which Tribunal may, in exercise of its inherent powers under Rule
11 of the NCLT Rules, 2016, allow or disallow an application for withdrawal or settlement.
This will be decided after hearing all the concerned parties and considering all relevant factors
on the facts of each case.”

In one of the most important judgements on this point the NCLT in the case of M/s. Roxcel
Trading GMBH v. NUI Pulp & Paper Private Limited64 invoking Rule 11 ruled that, “However,
the apprehension of the Applicant can be taken note of till the time either the Application is
admitted or rejected, the assets and the accounts of the Company need to be maintained on date
except withdrawal of the legitimate expenses required for carrying on the day-to-day expenses.
Therefore, this Authority restrains the corporate debtor in alienating the assets.

60
Nissus Finance & Investment Managers L.L.P. v. Lokhandwala Kataria Construction Pvt. Ltd., (2017) SCC
OnLine (NCLAT) 2300.
61
Moot Proposition Para. 12.
62
Moot Proposition Para. 17.
63
Swiss Ribbons Pvt. Ltd. v. Union of India & Anr., AIR 2019 SC 739.
64
N.U.I. Pulp and Paper Industries Pvt. Ltd. v. M/s Roxcel Trading G.M.B.H., C.A. No. 664 (NCLAT) 2019.

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS 12

 -ANALYSIS OF ISSUES-

The NCLAT while reaffirming the stance taken by NCLT in the appeal flowing from NUI Pulp
and Paper Industries Pvt. Ltd. v. M/s. Roxcel Trading GMBH held that, “From the aforesaid
Rule 11, it is clear that the Tribunal (Adjudicating Authority herein) can make any such order
as may be necessary for meeting the ends of justice or to prevent abuse of the process of the
Tribunal."

Thus, it can be cogently be proved that NCLT under Rule 11 had the requisite powers to pass
an interim-order to stay the Armorica EP which was passed without any jurisdiction by the
courts in Armorica.

THAT THE NCLT WAS CORRECT IN LAW TO STAY THE ARMORICA EP

It is humbly submitted before this Hon’ble Court that that the NCLT was right in ordering the
stay of Armorica EP in order to uphold the provisions of the Code and subsequently facilitate
the letter and spirit of the Code.

It is the mandate of the Code that once an application u/s 10 has come to be accepted, the
Adjudicating Authority shall order a moratorium in terms of §13 of the Code. For better
understanding of the delicate formulation of law involved §13 and §14 have to be read together,
§13(1)(a)65 read with §14(1)(a)66 bars the institution of suits or continuation of pending suits
or proceedings against the corporate debtor including execution of any judgement, decree or
order in any court of law, tribunal, arbitration panel or other authority. Hence it could be
comprehended without much difficulty that the Code bars any kind of suit against the corporate
debtor post the admission of application which is compliant with §10 requisites.

At this juncture it must be noted that the petitioners filed for the execution of the default
judgement in Armorica on 22nd November 201867, while it can be observed from the present
factual matrix that the order of admission by the Adjudicating Authority precedes the
application filed by the petitioners i.e. the order of admission was passed on 17th November
201868. This is clearly in violation of the mandate laid down by the Code which expressly bars
even admission of an execution petition. Moreover, it must be noted that the respondents
informed the court in Armorica and 69, submitted an evidence in the form of a public

65
Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 13(1)(a).
66
Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 14(1)(a).
67
Moot Proposition Para. 11.
68
Moot Proposition Para. 13.
69
Moot Proposition Para. 12.

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS 13

 -ANALYSIS OF ISSUES-

announcement dated 17th November issued by the IRP inviting claims70. In clear disregard to
the law laid down by the Hon’ble Legislature of Narnia passed an order of attachment, which
clearly suffers from multiple infirmities and shortcomings, one of them being the court which
passed it did not have the jurisdiction to pass the same.

It is for this Hon’ble Court to note that the scope of Moratorium as given u/s 14 is purposefully
kept wide. The statutory objective behind Moratorium is that it creates a calm period71, it
affords opportunity to creditors and debtors alike so that they can apply their minds without
any other burden in order to come up with the best way to restructure the company. As this
Hon’ble Court observed in Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India72, “It enables the
corporate entity the opportunity to continue its operations without fear of judicial nemesis
during the continuation of IRP. Thus, moratorium seeks to reinforce its legislative wisdom—
that is, providing 'value maximisation' to the corporate debtor's assets.”

The interim order passed can further be justified in light of the fact that if the execution of
Armorica EP would have taken place, the Creditors of Le Tranquille would have been duped
of a substantial amount of money to the extent of Narnian Rs. 30 Crores73 and the purpose of
imposition of Moratorium would stand frustrated. The Object of the Code would stand defeated
if such an occasion arose because it clearly stipulates that the value of assets of the corporate
debtor should be maximised and each creditor should be able to recover the maximum amount
of the debt in default.74

In a landmark case on the implication of Moratorium issued under §14 of the Code, the NCLT
held that adjudicating authority under PMLA Tribunal cannot attach property of a corporate
debtor undergoing CIRP. It concluded that if such an attachment order is passed, it would be a
nullity and non-est in law, and thereby would have no binding effect.75

The Delhi High Court in one of its landmark judgements, SSMP Industries Ltd. v. Perkan Food
Processors Pvt. Ltd. 76placing reliance on Hon’ble High Court’s judgement Power Grid
Corporation of India v. Jyoti Structures Ltd.77 and Hon’ble Appellate Tribunal’s judgement in

70
Moot Proposition Para. 11.
71
BANKRUPTCY LAW REFORMS COMMITTEE, THE REPORT OF THE BANKRUPTCY LAW REFORMS COMMITTEE:
VOLUME I: RATIONALE AND DESIGN, at 71, (2015).
72
Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India, AIR 2019 SC 739.
73
Moot Proposition Para. 12.
74
INSOLVENCY LAW COMMITTEE, THE REPORT OF THE INSOLVENCY LAW COMMITTEE, at 5.3, (2018).
75
S.R.E.I. Infra. Finance Ltd. v. Sterling S.E.Z. and Infra. Ltd., C.P. 405 (NCLT) 2018.
76
S.S.M.P. Industries Ltd. v. Perkan Food Processors Pvt. Ltd., C.C. Comm. 73 (NCLT) 2017.
77
Power Grid Corp. of India v. Jyoti Structures Ltd., (2018) 246 DLT 485.

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 -ANALYSIS OF ISSUES-

the case of Jharkhand Bijli Vitran Nigam Ltd. v IVRCL Limited & Anr.78, concluded that if the
pending proceeding would have the effect of endangering, diminishing, dissipating or
adversely impacting the assets of the corporate debtor, it would be prohibited under § 14(1)(a)
of the Code. In light of the various judicial dictums it can be observed that the attachment order
if not set aside would have resulted in dissipation of the assets of the corporate debtor, hence
the Armorica EP would be hit by § 14(1)(a) of the Code.

It is further argued that it cannot be the case of the petitioners that the IBC would not extend to
the assets of the corporate debtor located outside the territory of Narnia. The said proposition
would stand in direct contrast to the provisions such as § 18(1)(f)(i)79 which clearly stipulates
the duty of the Interim resolution professional to control and custody of the assets over which
the corporate debtor has ownership rights which may be located in a foreign country.

In light of the clear legal position explained above it is will be right to conclude that the Court
in Armorica passed the Order of Attachment, namely “Armorica EP” without Jurisdiction and
in clear violation of the law. Thus, the NCLT was right in ordering the stay of Armorica EP by
way of an interim order.

5. THAT THE § 10, § 30( 2)(B), §31(1) AND § 65 ARE

CONSTITUTIONALLY VAL ID AND DO NOT VIOLAT E ARTICLE
14

§10 OF IBC IS CONSTITUTIONALLY VALID AND DOES NOT VIOLATE ARTICLE

14

DENIAL OF OPPORTUNITY TO BE HEARD DOES NOT AMOUNT TO

VIOLATION OF FUNDAMENTAL RIGHT

It is submitted that denial to grant the petitioner a right to be heard does not amount to violation
of fundamental rights and principles of natural justice. The petitioner contends that he ought to
have been given an opportunity to present its case before the admission of CIRP order.
However, such a contention is merely discretionary and not stipulated under the provisions of
§10. NCLAT in its landmark decision of M/s Unigreen Global Private Limited v Punjab
National Bank80 held that the only necessary ingredient to determine before admission of an
application under § 10 is the determination of default. The moment default is determined, the

78
Jharkhand Bijli Vitran Nigam Ltd. v I.V.R.C.L. Ltd. & Anr., C.A. No. 285 (NCLAT) 2018.
79
Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 3(18)(1)(f)(i).
80
Unigreen Global Private Limited v. Punjab National Bank, (2017) SCC OnLine (NCLAT) 566.

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 -ANALYSIS OF ISSUES-

adjudicating authority is bound to admit the application. Hence, the petitioner’s contention that
he ought to have been given an opportunity to be heard falls flat and contrary to the contention
of Adjudicating Authorities. Moreover, none of the postulates of §10 provide for such a
consultation. The same view was adopted by the Supreme Court in the case of Innnoventive
Industries81, where it clearly mandated that after the determination of default, there should be
no delay in accepting the application.

THE RAISON D'ETRE FOR EXISTENCE OF IBC IS EXPEDITIOUS

RESOLUTION

Assuming Arguendo that the petitioner should have been given an opportunity to be heard, the
same would make the entire resolution process very tedious. This would go against the very
spirit of IBC that talks about expedient resolution of insolvents. It must also be noted that the
Supreme Court in the landmark judgment of Pioneer Urban Land and Infrastructure Ltd. v
Union of India82, clearly observed in para 32 that the speed within which the adjudicating
authority is to ascertain the existence of default and consequently initiate the CIRP is of
extreme importance. Moreover, the speed with which the existence of default is to be
determined from the public records and information utilities must also be as quick as possible.
This necessarily has to be done within 14 days of receipt of notice.83 Applying the said ruling
in the case at hand, it can be concluded that the petitioner’s contention that NCLT’s
determination of default is arbitrary, collapses by the virtue of the aforementioned Supreme
Court judgment and the fact that this would render the entire Chapter II ineffective and further
complicate the insolvency resolution process.

§10 PASSES THE TEST OF REASONABLE CLASSIFICATION AND NON-

ARBITRARINESS

The standard formulation for review of legislative action under Article 14 84 is that one must
test for reasonable classification.85 The form of the test is well known with its components of
“intelligible differentia” and a “rational nexus”. At the core of the test, what it checks is whether
the law makes an arbitrary classification by evaluating the reasons based on which persons are
treated differently.86 Whenever Article 14 is said to be infracted by an economic legislation,

81
M/s Innoventive Industries Ltd. v. I.C.I.C.I. Bank & Anr., (2018) 1 SCC 407.
82
Pioneer Urban Land & Infrastructure Ltd. v. Union of India, (2019) SCC OnLine (SC) 1005.
83
Pioneer Urban Land & Infrastructure Ltd. v. Union of India, (2019) SCC OnLine (SC) 1005.
84
INDIA CONST. art. 14.
85
E. P. Royappa v. State of Tamil Nadu, (1974) 4 SCC 3.
86
Charanjit Lal Chowdhury v. Union of India, AIR 1951 SC 41.

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 -ANALYSIS OF ISSUES-

the following oft quoted principles should be followed87: a). That the said legislation does not
confer arbitrary powers towards any authority- No such observation can be made in the case at
hand since the respondent acted strictly according to the provisions of §10. The fact that he
furnished all the information like information utilities, public accounts, etc. substantiate this
claim; b). That it must be presumed that the legislature understands the needs of its own people
and any misconception pertaining to an economic legislation should not render the legislation
invalid; c). That there is always a presumption in favour of the constitutionality of an enactment
and the burden is upon him who attacks it to show that there has been a clear transgression of
constitutional principles88- Applying the same to the case at hand, it can be concluded that the
petitioner does not have any prominent ground to assail the validity of the said statute and the
evidences furnished by him do not exhibit any transgression of the constitutional principles.

Hence in the light of the authorities cited above, it is humbly contended before the Hon’ble
Court that the said writ petition be disposed-off.

§30(2)(B) OF IBC IS CONSTIUTIONALLY VALID

It is submitted that §30(2)(b) which talks about the payment of operational creditors is
constitutionally valid and does not violate Article 14. The said provision is also not arbitrary
as the legislative intent specifically indicates towards the differential treatment of operational
creditors and financial creditors. Since, there exists a legitimate ‘intelligible differentia’
between financial and operational creditors and the classification is also reasonable, the said
provision should be held as constitutionally valid.

JUDICIARY SHOULD ADOPT A HANDS-OFF APPROACH WHEN

INTERPRETING ECONOMIC LEGISLATIONS

There may be crudities and inequities in complicated experimental economic legislation but
on that account alone it cannot be struck down as invalid. The Court must therefore adjudge
the constitutionality of such legislation by the generality of its provisions and not by its
crudities or inequities or by the possibilities of abuse of any of its provisions.89

In the case at hand, the petitioner contends that since Operational Creditors get a lower share
of the pie than financial creditors, §30(2)(b) should be struck down. It must also be noted that

87
Ram Krishna Dalmia v. Justice S.R. Tendulkar, AIR 1958 SC 538.
88
O’Gorman & Young v. Hartford Fire Insurance, 282 U.S. 251 (1931).
89
Swiss Ribbons Pvt. Ltd. v. Union of India & Anr., AIR 2019 SC 739.

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 -ANALYSIS OF ISSUES-

this is the only major contention on the basis of which the petitioner contends the invalidity of
the statute. Imbibing the aforementioned hands-off approach of interpretation of economic
legislation, it can be concluded that the constitutionality of the said section cannot be
challenged on mere irregularities that can be duly rectified by the legislature. Moreover, this
contention has been duly rectified by the Fourth Amendment Regulations on Operational
Creditors.90

FOURTH AMENDMENT REGULATIONS NOW PRIORTISES OPERATIONAL

CREDITORS OVER FINANCIAL CREDITORS

The issue of subordinate treatment of Operational Creditors in terms of payments has under
§30(2)(b) has now been solved by the said regulation which clearly says that, “the amount due
to the operational creditors shall be prioritised over payment to financial creditors under a
resolution plan.” Hence, now all payments due to operational creditors and not just the
minimum prescribed amount, have to be made in priority to the financial creditors. Hence, the
contention of the petitioners that §30(2)(b)91 discriminates against operational creditors stands
falsified.

§31(1) OF IBC IS CONSTITUTIONALLY VALID AND IS NOT ARBITRARY TO

EQUALITY PRINCIPLES

It is submitted that §31(1)92 of IBC that provides for the approval of resolution plans is neither
discriminatory nor arbitrary in nature. It provides for various mandatory conditions to be
fulfilled before the resolution plan can pass. It is further contended that since such conditions
duly require for the payment of operational creditors and now have also been prioritised after
the Fourth Amendment Regulations93, the question of discrimination does not arise. There are
proper conditions attached to passage of resolution plan which keeps a proper check and
balance on the arbitrary exercise of CoC.

90
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Fourth
Amendment Regulations, 2018.
91
Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 30(2)(b).
92
Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 31(1).
93
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Fourth
Amendment Regulations, 2018.

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§31(1) DOES NOT DISCRIMINATE AGAINST OPERATIONAL CREDITORS

It is submitted that the Hon’ble Supreme Court Swiss Ribbons94, held, “The NCLAT has, while
looking into viability and feasibility of resolution plans that are approved by the committee of
creditors, always gone into whether operational creditors are given roughly the same treatment
as financial creditors, and if they are not, such plans are either rejected or modified so that the
operational creditor’s rights are safeguarded. It may be seen that a resolution plan cannot
pass muster under§ 30(2)(b) read with §31 unless a minimum payment is made to operational
creditors, being not less than liquidation value.”

On applying the above observation to the case at hand, it can be concluded that the petitioner’s
contention regarding the resolution plan under §31(1) being discriminatory to operational
creditors falls flat of any theoretical basis since the prioritising payment of operational
creditors is now sine qua non for the resolution plan to be accepted. Moreover, the binding
effect of CoC approval has also been diluted to a considerable extent by the check and balances
stipulated by the Supreme Court in the above landmark judgment.

SUB-REGULATION 38(1) OF (INSOLVENCY RESOLUTION PROCESS FOR

CORPORATE PERSONS) REGULATIONS FURTHER STRENGTHENS THE
POSITION OF OPERATIONAL CREDITORS IN RESOLUTION PLANS

It is submitted that sub regulation 38(1)95 further strengthens the status of operational creditors
in so far as it asserts a new sub-regulation 1-A which states that a resolution plan shall include
a statement as to how it has dealt with the interests of all stakeholders, including financial
creditors and operational creditors, of the corporate debtor. Hence, for all the aforesaid
reasons, it cannot be concluded that operational creditors are discriminated against or that
Article 14 has been infracted either on the ground of equals being treated unequally or on the
ground of manifest arbitrariness.”

94
Swiss Ribbons Pvt. Ltd. v. Union of India & Anr., AIR 2019 SC 739.
95
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Fourth
Amendment Regulations, 2018

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§65 OF IBC IS CONSTITUTIONALLY VALID AND NOT ARBITRARY

It is submitted that §6596 of IBC which talks about imposing penalties on malicious initiation
of CIRP is constitutionally valid and does not violate any constitutional principles. The
preference of imposition of penalties over non-rejection of plans is not at all arbitrary as it
upholds the letter and spirit of the code.

IMPOSING PENALTIES INSTEAD OF REJECTING PLANS UPHOLDS THE

SPIRIT OF THE CODE

It is submitted that in so far as §65 talks about imposing penalties in case of fraudulent initiation
of CIRP and not rejecting the application altogether, the adjudicating authority under the said
exercise upholds the spirit of IBC which clearly stipulate the necessity of restructuring of
insolvent corporates. Imposition of penalty with a prescribed maximum limit of one crore poses
enough caution on the person initiating CIRP that he has to be just and fair in a court of law.
The rejection of the plan on the other hand would have severe consequences on the insolvent
corporate and would frustrate the thriving business environment of the country. Since the most
cardinal objective of the entire code is the adequate restructuring of corporate insolvents,
rejection in cases where even a minor fraud has been committed would be a disproportionate
punishment. Hence, it is contended that the provisions of §65 of IBC are constitutionally valid
and non-arbitrary.

96
Insolvency and Bankruptcy Code, No. 31 of 2016, INDIA CODE (1993), § 65.

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 -PRAYER-

PRAYER

In the light of arguments advanced and authorities cited, the respondents humbly submit
that the Hon’ble Court may be pleased to adjudge and declare that:

1. The Honorable Supreme Court does not have the Jurisdiction to entertain the writ
petition and the same is not maintainable.
2. Order of admission dated 17 th November, 2018 initiating the CIRP and any
subsequent proceedings thereto, should not be set aside.
3. NCLT’s order granting stay of Armorica EP should not be set aside
4. Sections 10, 30 (2) (b), 31 (1) and 65 of the IBC are constitutionally valid.

Or any other order as it deems fit in the interest of equity, justice and good conscience.

Sd/-

(Counsel for the Respondent)

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENTS