MEMORIAL ON BEHALF OF PETITIONER

TEAM CODE-T27

DR. RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY, LUCKNOW

UNIVERSITY MOOT COURT SELECTIONS (SUMMER GRAND INTRA) 2019

BEFORE,

THE HON’BLE SUPREME COURT OF NARNIA

TRANSFER PETITION UNDER THE CONSTITUTITON OF NARNIA

INNER PEACE PRIVATE LIMITED............................................................APPELLANT

LE TRANQILLE PRIVATE LIMITED......................................................RESPONDENT

Clubbed With

Writ Petition No. 123 UMSC/2019 UNDER Article 32 OF THE CONSTITUTION OF

NARNIA

INNER PEACE PRIVATE LIMITED............................................................APPELLANT

UNION OF NARNIA......................................................................................RESPONDENT

WRITTEN SUBMISSION ON BEHALF OF PETITIONER

 TABLE OF CONTENTS

List of Abbreviations ............................................................................................................... iii

Index of Authorities .................................................................................................................. iv

Statement of Jurisdiction........................................................................................................ viii

Statement of Facts ..................................................................................................................... ix

Statement of Issues ................................................................................................................... xi

Summary of arguments ............................................................................................................xii

Issue 1- Whether this Hon’ble court has jurisdiction to entertain the petition and whether the
petition filed by Inner Peace Private Limited is maintainable .............................................xii

Issue 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? ..............................................................................................................xii

Issue 3- Whether the NCLT Order Dated 17TH November 2018 Admitting the Petition Under
Section 10 Filed by Le Tranquille Pvt Ltd and Consequential Proceedings Thereto should be
set Aside? ........................................................................................................................... xiii

Issue 4-Whether Sections 10, 30(2)(b), 31(1) and 65 of the IBC are Constitutional? ....... xiii

Arguemet Advanced .................................................................................................................. 1

Issue 1- Whether this Hon’ble court has jurisdiction to entertain the petition and whether the
petition filed by Inner Peace Private Limited is maintainable ................................................... 1

1.1 Principles of natural justice have been violated ............................................................... 1

1.2- Mere availability of appeal under the IBC 2016 cannot ouster the writ jurisdiction....... 2

1.3- Powers of supreme court under article 136 of Indian Constitution ................................ 3

i
Issue 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? ............................................................................................................................... 4

2.1 The application under section 10 is in abuse of the law. ................................................. 5

2.2.1 The application has been filed with malafide intent in order to gain benefit of the
moratorium period. ............................................................................................................ 5

2.2 LT has concealed facts which are para material to the case. ....................................... 6

2.2 courts should apply both subjective as well as objective mind-set while admitting a
petition ................................................................................................................................... 8

Issue 3- 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?................................................................................................................. 9

3.1- It has been pronounced by a Court of competent jurisdiction. ..................................... 10

3.2- The judgement has been given on the merits of the case ............................................. 11

3.3- NCLT does not have the jurisdiction to pass such an order. ........................................ 12

Issue 4-Whether Sections 10, 30(2)(b), 31(1) and 65 of the IBC are Constitutional? ............. 13

4.1 That section 10 of IBC is unconstitutional. ................................................................... 13

4.2 That section 30 (2) (b) of IBC is unconstitutional. ........................................................ 14

4.3 That section 31(1) of IBC is unconstitutional ................................................................ 16

4.4 That section 65 of IBC is unconstitutional. ................................................................... 17

PRAYER ................................................................................................................................... xi

ii
 LIST OF ABBREVIATIONS

Abbreviations Full Forms

& And

AIR All India Reporter

All Allahabad

Anr. Another

Art. Article

AT Appellate Tribunal

BLRC Bankruptcy law Reform Committee

Bom Bombay

CLA. Company Law Appeal

Co. Company

CoC Committee of Creditors

CP Civil Petition

IB Insolvency and Bankruptcy

IBBI Insolvency and bankruptcy Board of

India

IBC Insolvency And Bankruptcy Code

ILR Indian Law Review

IRP Interim Resolution Professional

NCLAT National Company Law Appellate Tribunal

NCLT National Company Law Tribunal

iii
 INDEX OF AUTHORITIES

Cases

Amar Remedies Ltd. v. Gujarat Urja Vikas Nigam Ltd., 2017 SCC OnLine Guj 732. ............ 7

Binani Industries Ltd. v. Bank of Baroda &Anr., Company Appeal (AT) (Insolvency) No. 82
of 2018-14.11.2018. ............................................................................................................. 17

Cellular Operators Assn. of India v. TRAI, (2016) 7 SCC 703. .............................................. 18

Champalal Binani v. Commissioner of Income Tax, West Bengal, AIR 1970 SC 645. ........... 3

Chormal Balchand Firm v. Kasturi Chand, AIR 1938 Cal 511. .............................................. 11

Col. Narendra Kumar Yadav v. Union of India, 2010 SCC OnLine AFT 328. ...................... 19

Dan Bunkering Ltd. v. PFS Shipping India Ltd., 2018 SCC OnLine Bom 1313. ................... 13

Diamond Power Transformers Ltd. v. Indian Overseas Bank & Ors.,2017 SCC OnLine NCLT
14599.................................................................................................................................... 21

DK Basu v. State of West Bengal and others, (2015) 8 SCC 744. .......................................... 14

E.P. Royappa v. State of Tamil Nadu, (1974) 4 SCC 3. .......................................................... 19

Falcon Tyres v. Edelweiss Asset Reconstruction Company, Writ Petition No. 16486/2017. . 15

Gill v. Chief Election Commissioner, AIR 1978 SC 851. ......................................................... 2

Harbanslal Sahnia v. Indian Oil Corporation Ltd., (2003) 2 SCC 107. ..................................... 2

Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India, (1985) 1 SCC 641. .......... 19

Innoventive Industries Ltd. v. ICICI Bank & Anr., (2018) 1 SCC 407. .......................... 6, 7, 15

J.R. Agro Industries P Limited v. Swadisht Oils Pvt. Ltd., (2018) 146 CLA 260..................... 9

Leo Duct Engineers & Consultants Ltd. v. Canara Bank, 2017 SCC OnLine NCLAT 547. 7, 8

iv
Madan Sharma v. B.S.E Board, AIR 1971 Pat 371. .................................................................. 1

Maloji Nar Singh Rao Shitole v. Shankar Saran, AIR 1962 All 1737..................................... 11

Mobilox Innovations Private Ltd. v. Kirusa Software Private Ltd., (2018) 1 SCC 353. ........... 6

N. Suriyakala v. A. Mohan Doss, (2007) 9 SCC 196. ............................................................... 5

N.A.L. Layout Residents Association v. Bangalore Development Authority and Ors., (2017) 6
SCC 331. ................................................................................................................................ 4

Narasimha Rao v. Venkata Lakshmi, (1991) 3 SCC 451 ........................................................ 12

Neeta Chemicals (I) Pvt. Ltd. vs. State Bank of India, (NCLAT) Civil Appeal (IB) No. 128 of
2017-14.08.2017. ................................................................................................................... 8

Oomer Hajee Ayoob Sait v. Thirunavukkarasu Pandaram, AIR 1936 Mad 552. .................... 12

Pratik Ramesh Chirana v. Trinity Auto Components Ltd., (NCLT) Civil Appeal (IB) No. 1032
of 2017-22.01.2018. ......................................................................................................... 9, 18

Punjab National Bank v. M/s. James Hotels Ltd., 2017 SCC OnLine NCLT 4199 ................ 15

R. Vishvanathan v. Rukn-ul-mulk Syed Abdul Wajid, (1963) 1 SCR 22. .............................. 10

R.K. Garg v. Union of India, (1981) 4 SCC 675. ...................................................................... 9

Radha Mohan Singh and Lal Saheb v. State of Uttar Pradesh, AIR 2006 SC 951. ................... 4

Ramana Dayaram Shetty v. International Airport Authority, (1979) 3 SCC 489.................... 17

Sanjana M. Wig (Ms) v. Hindustan Petroleum Corporation Ltd., AIR 2005 SC 3454. ............ 3

SEBI v. Kishore R. Ajmera, (2016) 6 SCC 368. ....................................................................... 5

Sham Sunder v. Puran, AIR 1991 SC 8. .................................................................................... 4

Sirdar Gurdyal Singh v. Rajah of Faridkote, 1894 SCC OnLine 15. ...................................... 11

State of Punjab v. Rafiq Masih, AIR 2015 SC 696. .................................................................. 4

v
Swadeshi Cotton mills v. Union of India, AIR 1981 SC 818. ................................................... 1

The General Manager, Telephones, Ahmedabad v. V.G. Desai, AIR 1996 SC 2062. .............. 4

Usha Holdings LL.C. & Anr. V. Francorp Advisors Pvt. Ltd., 2017 SCC OnLine NCLT 12834.
.............................................................................................................................................. 13

Vithalbhai Shivabhai Patel v. Lalbhai Bhimbhai, AIR 1942 Bom 199. .................................. 13

Whirlpool Corporation v. Registrar of Trade Marks, (1998) 8 SCC 11. ................................... 3

STATUTES

Code of Civil Procedure, 1908, § 13, Act No.5, Acts of Parliament (India). ............................ 9

INDIA CONST. art. 14. ............................................................................................................... 13

Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016, Rule 7 (India). .......................................................................... 7

The Insolvency and Bankruptcy Code, 2016, § 10, No. 31, Acts of Parliament, 2016 (India). 6

The Insolvency and Bankruptcy Code, 2016, § 18(1)(e), No. 31, Acts of Parliament, 2016
(India). .................................................................................................................................... 2

The Insolvency and Bankruptcy Code, 2016, § 18, No. 31, Acts of Parliament, 2016 (India). 2

The Insolvency and Bankruptcy Code, 2016, § 31, No. 31, Acts of Parliament, 2016 (India). 2

FOREIGN CASE

Golden Endurance Shipping SA v. RMA Watanya SA [2016] EWHC (Comm) 2110, [28]. . 11

BOOKS

DICEY & MORRIS, THE CONFLICT OF LAWS (15th ed. 2012). ................................................... 11

DK Basu v. State of West Bengal and others, (2015) 8 SCC 744. .......................................... 13

MOOT PROPOSITION

vi
Moot Proposition ¶ 11................................................................................................................ 2

Moot Proposition, ¶ 12............................................................................................................. 11

Moot Proposition, ¶ 14............................................................................................................. 14

vii
 STATEMENT OF JURISDICTION

THE COUNSEL FOR THE PETITIONER HUMBLY SUBMITS BEFORE THE HON’BLE
SUPREME COURT OF NARNIA, THE MEMORANDUM ON BEHALF OF THE
PETITIONER.

The counsel on behalf of the Petitioner humbly submits this memorandum for a Writ Petition
numbered as W.P. No. 123 UMSC/2019, filed before this honorable court, which has been
listed for hearing.

The Hon’ble Supreme Court of Narnia has the inherent jurisdiction to try, entertain and dispose
off the suit under Article 32 of The Constitution of Narnia

The present Memorandum sets forth the facts, contentions and arguments in the
present case.

viii
 STATEMENT OF FACTS

BACKGROUND- Oogway started the company Inner peace pvt. Ltd in the year 1992. He
hired Shifu for his keen financial acumen. Both Oogway and Shifu worked hard and made IPL
one of the 100 most successful pharmaceutical companies in the world. After working for many
years, Shifu expected a promotion in the company. As there was no promotion in sight for shifu
even after working so hard for the company, he resigned on 07.05.2018. After quitting IPL,
shifu started working in Le Tranquille which was set up by Dr Vachir and later on acquired
60% of its shares. Due to employment issues in July 2018, IPL and Shifu resorted to arbitration
proceedings and IPL was held liable to pay Shifu Narnian Rs. 3 lakhs. The said award was
challenged by IPL and is pending disposal.

ISSUE 2

LT was selling GULLIP in Armorica which is very similar to the product sold by IPL i.e SIP.
Because of this, IPL bought patent infringement suit against LT. After the beginning of
proceedings in court of Armorica, LT submitted its defence but later on they didn’t attend the
proceedings. Court of Armorica awarded a default judgement on 1.1.2018 in favour of IPL. LT
was held liable to pay Narnian Rs 30 crore. Shifu came to know about this judgement through
informal sources as because of a technical glitch, he wasn’t able to receive the mail.

IPL filed for the execution of the default judgement in Armorica on 22nd November 2018 and
prayed for the attachment of a real estate property which was owned by LT in Armorica. When
notice was issued to LT, they made a representation that the corporate insolvency resolution
process of the Le Tranquille had commenced on 17th November 2018 pursuant to a petition
filed by LT, through Shifu under laws of Narnia as per Section 10 of the Insolvency and
Bankruptcy Code, 2016 (“IBC”). Consequently, the moratorium period was in effect and the
Courts of Armorica could not entertain any suit or proceedings against Le Tranquille.

Later on, LT made an application to the NCLT for interim orders praying that the Armorica EP
must not be enforced on the grounds that courts in Armorica did not have jurisdiction to pass
such an order. Consequently, NCLT passed an interim order staying the said Armorica EP.
Subsequently, IPL filed an appeal bearing Comp. Appl (AT) (Ins) 123/2019 before NCLAT
against the order of the NCLT.

ix
ISSUE 3

The Courts in Armorica passed an order of attachment of the said property but this attachment
would only satisfy 10% of the amount due under the default judgment. It was submitted by
Shifu to NCLT that there were debts of more than Narnian Rs. 60 crores, with the Company
being in default of more than 4 years. For the record, Le Tranquille was never making
continuous and sustained profits. LT gave notice to all of its creditors which were primarily
banks. Considering that the debts were due for more than 4 years as per the statement of Le
Tranquille, the NCLT admitted the petition filed under Section 10; ordered moratorium in
terms of Section 14 of the IBC and appointed Mr. Geriatrix as the Interim Insolvency
Resolution Professional.

Oogway, as soon as came to know about the resolution application, approached the RP to
submit his claims. He told him that LT approached the NLCT with unclean hands and is not at
all in a state of insolvency. According to Oogway, LT initiated the proceedings so that they can
claim the benefit of the moratorium period. He asked Mr Geriatrix to give him a copy of
documents so that he can take suitable actions against IPL. In reply to this Email, Mr Geriatrix
replied that “Please submit your claims and the same will be considered in accordance with the
law”. IPL didn’t submit the claims and said that if they didn’t receive any response, he will
initiate suitable proceedings in accordance with the law. Subsequently, IPL filed an appeal
bearing Comp. Appl (AT) (Ins) 123/2019 before the NCLAT against the order of the NCLT.

After the petition was listed in SC, both the parties filed objections to the petition. In the
objection the features of the Resolution Plan were revealed. The financial creditors were given
95% of their dues. There were 20 operational creditors who were given various amounts
ranging from 70% to 80%. IPL was given Narnian Rupees 3 Lakhs as full and final settlement
in respect of the alleged claims under the default judgment dated 1st November 2018.

IPL filed a Writ Petition bearing W.P. No. 123 UMSC/2019 challenging the order of admission
dated 17th November 2018 as well as constitutional validity of Sections 10, 30 (2) (b), 31 and
65 of the IBC. 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 Supreme
Court heard the transfer petition and has agreed for the tagging of the two proceedings and pass
a common order

x
 STATEMENT OF ISSUES

[ISSUE 1] WHETHER THIS HON’BLE COURT HAS JURISDICTION TO ENTERTAIN

THE PETITION AND WHETHER THE PETITION FILED BY INNER PEACE PRIVATE
LIMITED IS MAINTAINABLE?

[ISSUE 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?

[ISSUE 3] WHETHER THE NCLT WAS RIGHT IN ORDERING THE STAY OF

ARMORICA EP BY WAY OF AN INTERIM ORDER?

[ISSUE 4] WHETHER SS. 10, 30(2)(B), 31(1) AND 65 OF THE IBC ARE
CONSTITUTIONAL?

xi
 SUMMARY OF ARGUMENTS

ISSUE 1- WHETHER THIS HON’BLE COURT HAS JURISDICTION TO ENTERTAIN THE PETITION
AND WHETHER THE PETITION FILED BY INNER PEACE PRIVATE LIMITED IS MAINTAINABLE

It is humbly submitted before the Hon’ble Court that the instant matter is maintainable before
the Court of Law. The petitioner possesses all the essential reasons to maintain the matter
before the apex Court like infringement of any Fundamental Right or locus standi. In the
present case the Interim Resolution Professional was appointed by NCLT post the voluntary
initiation of CIRP by Le Tranquille. The Interim Resolution Professional failed to perform his
duties as numerated by the code in 18(1)(a) to (g). Mr. Geriatrix has the duty to collect all the
information relating to assets, financing and operations of the corporate debtor for determining
the financial position of the corporate debtor.

ISSUE 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?

(a) The petitioner respectfully submits before this Hon’ble Court that the application for
initiation of CIRP under Section 10 by the corporate debtor has been filed with mala
fide intent with the sole purpose to gain benefit of the moratorium period. The
Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016
specifies that an application filed under section 10 of the Insolvency and Bankruptcy
Code, 2016 should be filed in accordance with Form 6 of the Code with the documents,
records required.
(b) It is not sufficient just to meet the requirements under sec. 10 of the Code which would
automatically entitle the Corporate Debtor to initiate such proceedings. The
Adjudicating Authority has to consider the merits of each case and see beyond what
meets the eye, and only after due application of mind, consider the case on its merits.

xii
ISSUE 3- WHETHER THE NCLT ORDER DATED 17TH NOVEMBER 2018 ADMITTING THE

PETITION UNDER SECTION 10 FILED BY LE TRANQUILLE PVT LTD AND CONSEQUENTIAL

PROCEEDINGS THERETO SHOULD BE SET ASIDE?

(a) The NCLT was not right in ordering the stay of Armorica EP, as the said order is
conclusive in India, and can be enforced. The recognition of foreign judgments is
determined by Section 13 of the Code of Civil Procedure. In order for a foreign
judgment to operate as Res judicata, it must have been given on merits of the case. A
judgment can be considered as a judgment passed on merits when the Court deciding
the case gives opportunity to the parties to the case to put forth their case and after
considering the rival submissions.

ISSUE 4-WHETHER SECTIONS 10, 30(2)(B), 31(1) AND 65 OF THE IBC ARE CONSTITUTIONAL?

(a) It is humbly submitted to the Hon’ble Court that the Section 10 of IBC in regard to
article14 of the constitution infringes the right to equality. Section 10 of the IBC
violates the principle of ‘audi alteram partem’ as this section leaves no room to hear the
other what the other party has to say.
(b) Any ‘Resolution Plan’ if shown to be discriminatory against one or other ‘Financial
Creditor’ or the ‘Operational Creditor’, such plan can be held to be against the
provisions of the ‘I&B Code’.” The aforesaid decision presents the following problems.
(c) Section 31 (1) of the IBC is unconstitutional as it does not give a subjective process to
accept/reject a resolution plan and provides for unequal treatment and unequal
representation for the creditors and also the right to equality of IPL has been breached.
(d) that Section 65 was incorporated in the Code so that provisions of IBC cannot be
misused by any person, who has initiated the insolvency resolution process or
liquidation proceedings, with a fraudulent or malicious intent, and for any purpose other
than for the resolution of insolvency or liquidation, as the case may be.

xiii
 ARGUEMET ADVANCED

The council on behalf of the petitioner would like to present these arguments before the
Hon’ble SC of Narnia.

ISSUE 1- WHETHER THIS HON’BLE COURT HAS JURISDICTION TO

ENTERTAIN THE PETITION AND WHETHER THE PETITION FILED BY
INNER PEACE PRIVATE LIMITED IS MAINTAINABLE

It is humbly submitted before the Hon’ble Court that the instant matter is maintainable before
the Court of Law. The petitioner possesses all the essential reasons to maintain the matter
before the apex Court like infringement of any Fundamental Right or locus standi.

1.1 PRINCIPLES OF NATURAL JUSTICE HAVE BEEN VIOLATED

It is submitted that the principles of natural justice have been violated, as the petitioner IPL
was not given a fair hearing in the matter at hand. In India, the principles of natural justice are
firmly grounded in Article 14 & 21 of the Constitution. Audi alterem partem, one of the said
principles, means that all parties to a dispute have a right to be heard and to state their own
case, so as to maintain equality and uphold the sanctity of the Constitution of India. The soul
of Natural Justice is fair play in action. In every exercise of discretion, rules of Natural Justice
operate as checks on the freedom of administrative/ quasi judicial or judicial actions. Although
adherence to it may often prove to be time consuming yet that is the price one has to pay to
ensure fairness in administration.

Natural justice has been held as an inseparable ingredient of fairness and reasonableness. It is
necessary that the courts avoid drawing unnecessary technical and artificial distinctions just to
deny procedural safeguards to the people1.Non-observance of natural justice is itself prejudice
to any man and proof of denial of natural justice is unnecessary2. In addition to this, where
conclusions are controversial, howsoever slightly, and penalties discretionary, natural justice

1
Madan Sharma v. B.S.E Board, AIR 1971 Pat 371.
2
Swadeshi Cotton mills v. Union of India, AIR 1981 SC 818.
1
is a must3. In the present case the Interim Resolution Professional was appointed by NCLT4
post the voluntary initiation of CIRP by Le Tranquille5. The Interim Resolution Professional
failed to perform his duties6 as numerated by the code in 18(1)(a) to (g). Mr. Geriatrix has the
duty to collect all the information relating to assets, financing and operations of the corporate
debtor for determining the financial position of the corporate debtor. When after initiation of

CIRP on 17th November 2018, Mr. Oogway wrote an email and raised his concerns regarding
the CIRP proceeding, he was not properly heard by the Interim Resolution Professional, and
his issues raised were not addressed. Under the code it is the duty of IRP to file necessary
information collected with information utility7. Mr. Oogway and Shifu has were closely
associated with each other and Mr. Oogway has substantial information about the finances of
Le Tranquille which can have an impact on whole CIRP proceeding. There has been ‘material
irregularity’ in the exercise of the powers given to IRP/RP which violates the principle of natural
justice of the IPL, hence the petition is maintainable. The Hon’ble Supreme Court have time
and again emphasized upon the need to adherence to the principles of natural justice and
adherence to “due process of law”, failing which the impugned act of the Public authorities
would become arbitrary and is vulnerable to challenge before the appropriate Court.

1.2- MERE AVAILABILITY OF APPEAL UNDER THE IBC 2016 CANNOT OUSTER THE WRIT

JURISDICTION

Writ jurisdiction cannot be ousted, even if other remedy are present. Rule of Exclusion of writ
jurisdiction by availability of alternative remedy is a rule of discretion and not of compulsion. In
the case of Harbanslal Sahnia v. Indian Oil Corporation Ltd8 SC held that mere availability of
alterative forum cannot impinge upon the jurisdiction of courts to entertain writ petitions. At
the discretion of the court exemptions can be made on following grounds- Where the writ
petitioner seeks enforcement of any Fundamental Right; where there is a failure of principles
of natural justice; where proceedings are totally without jurisdiction; or where an act or its
provisions are challenged.

3
Gill v. Chief Election Commissioner, AIR 1978 SC 851.
4
The Insolvency and Bankruptcy Code, 2016, § 31, No. 31, Acts of Parliament, 2016 (India).
5
Moot Proposition ¶ 11.
6
The Insolvency and Bankruptcy Code, 2016, § 18, No. 31, Acts of Parliament, 2016 (India).
7
The Insolvency and Bankruptcy Code, 2016, § 18(1)(e), No. 31, Acts of Parliament, 2016 (India).
8
Harbanslal Sahnia v. Indian Oil Corporation Ltd., (2003) 2 SCC 107.
2
Similar position was also reiterated in the case of Whirlpool Corporation v. Registrar of Trade
Marks9. A new dimension was added to the above tests when in Sanjana M Wig (Ms) v
Hindustan Petroleum Corporation Ltd10 the Supreme Court laid down that notwithstanding an
arbitration clause in the agreement, access to justice by way of public law remedy would not
be denied when a case involves public law character and when the forum chosen by the parties
would not be in a position to grant appropriate relief. Further, it was held that a writ petition
will also be entertained when it involves a question arising out of public law functions on the
part of one of the parties. Hence, the writ petition filed by IPL can be entertained on similar
lines.

In the case of Champalal Binani v. Commissioner of Income Tax11 the Supreme Court held
that, ‘the Court must consider the pros and cons of the case and then may interfere if it comes
to the conclusion that the writ seeks enforcement of any of the fundamental rights; where there
is failure of principle of natural justice or where the orders or proceedings are wholly without
jurisdiction or the vires of an Act is challenged or the order is totally erroneous or of
infringement of fundamental rights of the petitioner’

1.3- POWERS OF SUPREME COURT UNDER ARTICLE 136 OF INDIAN CONSTITUTION

Article 136 of the Constitution of India provides that the Supreme Court may in its discretion,
grant the special leave to an appeal, from any judgment, decree, sentence or order in any cause
or matter passed or made by any court in the territory of India. Article 136 begins with a non-
obstante clause and thus has overriding effect.12 It confers residuary powers unfettered by any
statute or other provisions of Chapter IV of Part V of the constitution13. However the power
can be exercised to interfere in cases of manifest injustice or where grave miscarriage of justice
has resulted from illegality, misapprehension or mistake in reading evidence or from ignoring,

9
Whirlpool Corporation v. Registrar of Trade Marks, (1998) 8 SCC 11.
10
Sanjana M. Wig (Ms) v. Hindustan Petroleum Corporation Ltd., AIR 2005 SC 3454.
11
Champalal Binani v. Commissioner of Income Tax, West Bengal, AIR 1970 SC 645.
12
State of Punjab v. Rafiq Masih, AIR 2015 SC 696.
13
N.A.L. Layout Residents Association v. Bangalore Development Authority and Ors., (2017) 6 SCC 331.
3
excluding or illegally admitting material evidence14 to avoid grave injustice15 and conclusions
that are perverse16.

The Supreme Court explained the scope of Article 136 of the Constitution- ‘It is not possible to
define with any precision the limitations on the exercise of the discretionary jurisdiction vested
in this Court by the constitutional provision made in Article 136. The limitations, whatever
they are, are implicit in the nature and character of the power itself. It being an exceptional and
overriding power, naturally it has to be exercised sparingly and with caution and only in special
and extraordinary situations.

It is, however, plain that when the Court reaches the conclusion that a person has been dealt
with arbitrarily or that a court or tribunal within the territory of India has not given a fair deal
to a litigant, then no technical hurdles of any kind like the finality of finding of facts or otherwise
can stand in the way of the exercise of this power because the whole intent and purpose of this
Article is that it is the duty of the Court to see that injustice is not perpetuated or perpetrated by
decisions of courts and tribunals because certain laws have made the decisions of these courts
or tribunals final and conclusive.’

The word ‘Tribunal’ used in Article 136 assumes greater significance, in view of the fact that
the Supreme Court may grant special leave to appeal from the decisions of Court or Tribunal
in the territory of India. However, the word ‘Tribunal’ is used in contradistinction to ‘Courts’.
Article 136 is a residuary provision which enables the Supreme Court to interfere with the
judgment or order of any Court or Tribunal in India in its discretion17.

ISSUE 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?

14
The General Manager, Telephones, Ahmedabad v. V.G. Desai, AIR 1996 SC 2062.
15
Sham Sunder v. Puran, AIR 1991 SC 8.
16
Radha Mohan Singh and Lal Saheb v. State of Uttar Pradesh, AIR 2006 SC 951.
17
N. Suriyakala v. A. Mohan Doss, (2007) 9 SCC 196.
4
It is humbly submitted before the Hon’ble Supreme Court that the petition submitted by Le
Tranquille under Section 10 and consequential proceedings should be set aside because the
petition is in abuse of law [2.1]. Both subjective and objective mind-set should have been
applied by the court [2.2].

2.1 THE APPLICATION UNDER SECTION 10 IS IN ABUSE OF THE LAW.

The petitioner respectfully submits before this Hon’ble Court that the application for initiation
of CIRP under Section 10 by the corporate debtor has been filed with mala fide intent with the
sole purpose to gain benefit of the moratorium period. Also LT has concealed facts which are
para material to the case.

2.2.1 The application has been filed with malafide intent in order to gain benefit of the
moratorium period.

Section 65 was incorporated in the Code so that the provisions of IBC cannot be misused by
any person, who has initiated the insolvency resolution process or liquidation proceedings, with
a fraudulent or malicious intent, and for any purpose other than for the resolution of insolvency
or liquidation, as the case may be.

The Hon'ble Supreme Court held in the case of SEBI v. Kishore R. Ajmera18 held that,

"It is a fundamental principle of law that proof of an allegation levelled against a person may
be in the form of direct substantive evidence or, as in many cases, such proof may have to be
inferred by a logical process of reasoning from the totality of the attending facts and
circumstances surrounding the allegations/charges made and levelled. While direct evidence is
a more certain basis to come to a conclusion, yet, in the absence thereof the Courts cannot be
helpless. It is the judicial duty to take note of the immediate and proximate facts and
circumstances surrounding the events on which the charges/allegations are founded and to
reach what would appear to the Court to be a reasonable conclusion therefrom. The test would
always be that what inferential process that a reasonable/prudent man would adopt to arrive at
a conclusion"

18
SEBI v. Kishore R. Ajmera, (2016) 6 SCC 368.
5
Though the above said test laid down in the Securities and Exchange Board of India case is in
a different set of facts, however, the test laid down in the above said case is squarely applicable
in this case. Even in the absence of substantive evidence proving allegation of fraud, the said
allegations can be looked into considering the rival contentions of the parties in the case in
hand.

In the case of Innoventive Industries Ltd. v. ICICI Bank19, the National Company Law
Appellate Tribunal (NCLAT) held that the National Company Law Tribunal (NCLT) have
discretion to reject the debtor’s application under Section 1020 on the ground that where the
debtor has made an application for CIRP with malicious intention to take advantage of the
moratorium provisions of the IBC.

In Kirusa Software Pvt. Ltd. v. Mobilox Innovation Private Limited21 it was held by the NCLAT
that,- ‘It is necessary to determine the circumstances in which the dispute has been raised. The
dispute raised shall be genuine dispute and not one that was raised with malafides to stall the
insolvency resolution process.’

In the present case it should be noted that there was a close connection between Shifu and
Oogway. According to Oogway, the main purpose to initiate this voluntary CIRP was with an
ulterior motive of obtaining a moratorium to stop all proceedings against the company and at
the same time do a full and final settlement of the debt, without the participation of IPL in any
manner. It has been held by NCLAT that NCLT have discretion to reject the debtor’s
application under S10 on the ground where the debtor has made an application for CIRP with
malicious intention to take advantage of the moratorium provisions of IBC22.

2.2 LT has concealed facts which are para material to the case.

The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 specifies
that an application filed under section 10 of the Insolvency and Bankruptcy Code, 2016 should
be filed in accordance with Form 6 of the Code with the documents, records required therein

19
Innoventive Industries Ltd. v. ICICI Bank & Anr., (2018) 1 SCC 407.
20
The Insolvency and Bankruptcy Code, 2016, § 10, No. 31, Acts of Parliament, 2016 (India).
21
Mobilox Innovations Private Ltd. v. Kirusa Software Private Ltd., (2018) 1 SCC 353.
22
Innoventive Industries Ltd. v. ICICI Bank & Anr., (2018) 1 SCC 407.
6
and as specified in the Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 201623.

In the case of Amar Remedies Limited24, it was held that the corporate applicant suppressed
this material fact, knowing it to be material, and filed the petition under section 10 and in
contravention of rule 10 of Insolvency and Bankruptcy (Application to Adjudicating Authority)
Rules, 2016. The alleged act of the corporate applicant is punishable under the relevant section
of the code.

In Leo Duct Engineers & Consultants Ltd. v. Canara Bank25 also it was held by the Hon’ble
NCLAT that there were unrelated facts that were not disclosed in term of section 10 or Form
6. In the circumstances, the Adjudicating Authority was not correct in rejecting the application
on the ground of suppression of relevant facts. Previously the adjudicating authority rejected
the application because they felt that the facts which were supressed were relevant to the case.

In the case of Unigreen Global Private Ltd.26, NCLT, Principal Bench, New Delhi held that if
the corporate debtors does not disclose all the facts including facts in relation to the debts owed
by it to its creditors and were trying to misuse the provisions for CIRP under IBC for only
taking benefit of moratorium on actions against the corporate and its creditors, the application
for CIRP would be rejected.

Here in the present case, IPL is a creditor of LT by virtue of the judgement given by court of
Armorica in which it was established that LT has to give IPL Narnian Rupees 30 crores because
of patent infringement. Before this, IPL and LT have also undergone arbitration proceedings
which are still pending in the court of Chippingford. These facts are relevant to the present case
and LT has suppressed these facts so that it can avoid repayment of the penalty or debts to IPL.

23
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016, Rule 7 (India).
24
Amar Remedies Ltd. v. Gujarat Urja Vikas Nigam Ltd., 2017 SCC OnLine Guj 732.
25
Leo Duct Engineers & Consultants Ltd. v. Canara Bank, 2017 SCC OnLine NCLAT 547.
26
Unigreen Global Pvt. Ltd. v. Punjab National Bank, 2017 SCC OnLine NCLAT 610.
7
2.2 COURTS SHOULD APPLY BOTH SUBJECTIVE AS WELL AS OBJECTIVE MIND-SET WHILE

ADMITTING A PETITION

It is not sufficient just to meet the requirements under sec. 10 of the Code which would
automatically entitle the Corporate Debtor to initiate such proceedings. The Adjudicating
Authority has to consider the merits of each case and see beyond what meets the eye, and only
after due application of mind, consider the case on its merits.27

It was held in Neeta Chemicals (I) Pvt. Ltd. vs. State Bank of India28 that in order to adjudicate
any issue legally, it is necessary to read the concerned Act as a whole, and not a particular
provision in isolation, in order to arrive at a judicious decision. There are fundamental judicial
principle(s) for coming to such decision(s) viz. principle of natural justice; party has to come
to court/Tribunal with clean hands by disclosing all material issues in question, Courts/Tribunal
should not allow a party to misuse/abuse the judicial process.

In Pratik Ramesh Chirana v. Trinity Auto Components Ltd29 as well, NCLT, Mumbai Bench
interpreted the phrase “if the adjudicating authority is satisfied….” under Section 31, observed
that “satisfaction” must be objective, subjective or both, and to form an opinion, thorough study
of a resolution plan is required.

 Objective Satisfaction: The objective satisfaction revolves around the object of enactment
of the Code, enshrined in the Preamble.
 Subjective Satisfaction: This depends upon logical analysis of the financial data supplied,
where a methodical scrutiny of the financial statement is expected before concurring with
approval of the CoC

Again, in the case of J.R. Agro Industries P Limited v. Swadisht Oils Pvt Ltd.30, it was observed
that the pros and cons of the resolution plan must be studied and if the Tribunal approves the
plan, it should record in writing its satisfaction, in the judgement approving the resolution plan.

27
Leo Duct Engineers & Consultants Ltd. v. Canara Bank, 2017 SCC OnLine NCLAT 547.
28
Neeta Chemicals (I) Pvt. Ltd. vs. State Bank of India, (NCLAT) Civil Appeal (IB) No. 128 of 2017-14.08.2017.
29
Pratik Ramesh Chirana v. Trinity Auto Components Ltd., (NCLT) Civil Appeal (IB) No. 1032 of 2017-
22.01.2018.
30
J.R. Agro Industries P Limited v. Swadisht Oils Pvt. Ltd., (2018) 146 CLA 260.
8
Hon’ble SC in the case of R.K. Garg v. Union of India31, has held:

‘Another rule of equal importance is that laws relating to economic activities should be viewed
with greater latitude than laws touching civil rights such as freedom of speech, religion etc.
The court should feel more inclined to give judicial deference to legislative judgment in the
field of economic regulation than in other areas where fundamental human rights are involved.’

Therefore, even if the petitioner has provided all the information under Section 10 and from 6
and even though the debtor is not otherwise not ineligible under section 11, the adjudicating
authority has the power to reject the petition if it deems fit to do so. In this present case it is
well established that LT has come to the court with malice in their minds. In the present case,
Shifu resigned IPL on 7.05.2018 and acquired shares of Le Tranquille on 31.1.2018 i.e. before
he left IPL. This shows that his intentions were not right from the very beginning. Later on
when IPL had a decree in its favour, respondent company filed this petition which is aimed to
harm IPL and is hence liable to be rejected under Section 60(5) of the IBC.

ISSUE 3- 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?

The NCLT was not right in ordering the stay of Armorica EP, as the said order is conclusive in
India, and can be enforced.

The recognition of foreign judgments is determined by Section 13 of the Code of Civil

Procedure. It provides that a foreign judgement ‘shall be conclusive’ except in cases set out in
the section which requires that “A foreign judgment shall be conclusive as to any matter thereby
directly adjudicated upon between the same parties or between parties under whom they or
any of them claim litigating under the same title except…”32

31
R.K. Garg v. Union of India, (1981) 4 SCC 675.
32
Code of Civil Procedure, 1908, § 13, Act No.5, Acts of Parliament (India).
9
The judgement of a foreign court creates estoppels or res judicata between the same parties
provided such judgement is not subject to challenge under any of the clauses mentioned
under Section 14 of CPC.33

The Armorica EP order is entitled to recognition in India, for it does not attract any exceptional
clause under Section 13 of CPC, those relevant to the current case namely (a) where it has not
been pronounced by a Court of competent jurisdiction, and (b) where it has not been given on
the merits of the case.

3.1- IT HAS BEEN PRONOUNCED BY A COURT OF COMPETENT JURISDICTION.

It is submitted that the Court of Armorica does have competent jurisdiction to give the ‘foreign
judgement’ and avoids coming under the exception of clause (a) of Section13. This is because
the defendant Le Tranquille has voluntarily submitted to the jurisdiction of the court of
Armorica. Clause (a) of Section 13 requires that the court which has pronounced the judgement
must be a competent court, that is, it must have jurisdiction over the subject matter and the
defendant in context of international law sense.34 Hence, the foreign court would have
jurisdiction if the defendant was a citizen of the State whose Court pronounced the judgement,
or a resident of that State or had voluntarily submitted to the jurisdiction of that court or had
adopted the proceedings as a plaintiff and himself selected the forum.35

Therefore, what may be concluded is that when the defendant is a citizen or a resident of said
country or has submitted to its jurisdiction, the foreign court is a competent court.36

It is submitted that though the defendant is neither a citizen nor a resident of the Armorican
court, he still has voluntarily submitted to the jurisdiction of the court. In case a defendant
appears in the Court where the suit is instituted and questions the jurisdiction or proceeds to
challenge the action on merits, he is said to have submitted to the jurisdiction voluntarily.37 By
making representations before the court for want of relief other than dismissal of the case,
respondents manifested their voluntary submission to the courts jurisdiction. It is well-settled

33
R. Vishvanathan v. Rukn-ul-mulk Syed Abdul Wajid, (1963) 1 SCR 22.
34
Sirdar Gurdyal Singh v. Rajah of Faridkote, 1894 SCC OnLine 15.
35
Maloji Nar Singh Rao Shitole v. Shankar Saran, AIR 1962 All 1737.
36
Maloji Nar Singh Rao Shitole v. Shankar Saran, AIR 1962 All 1737.
37
Chormal Balchand Firm v. Kasturi Chand, AIR 1938 Cal 511.
10
that the active participation of a party in the proceedings is tantamount to an invocation of the
courts jurisdiction and a willingness to abide by the resolution of the case, and will bar said
party from later on impugning the court’s jurisdiction.

, In the Conflict of Laws, Dicey says that where such a litigant, though a defendant rather than
a claimant, appears and pleads to the merits without contesting the jurisdiction there is clearly
a voluntary submission. The same is the case where he does indeed contest the jurisdiction but
nevertheless proceeds further to plead to the merits, or agrees to a consent order dismissing the
claims and cross claims, or where he fails to appear in proceedings at first instance but appeals
on the merits”38

A party who voluntarily appears or participates in proceedings is considered by the common

law to have accepted an offer from the opposing party who commenced the proceedings to
accept the jurisdiction and be bound by its judgment39

The defendant Le Tranquille has made appearance in the suit proceedings with the intent of
proving that IBC is binding on the courts of Armorica, displaying active participation in the
proceedings, hence voluntarily submitting to the jurisdiction of the court of Armorica40.

In the case of Oomer Hajee Ayoob Sait v. Thirunavukkarasu Pandaram41, the Madras High
Court while dealing with the issue of submission to jurisdiction held that mere conduct or
circumstances indicative of intention to submit to the jurisdiction is enough to derive a
conclusion of submission to jurisdiction

3.2- THE JUDGEMENT HAS BEEN GIVEN ON THE MERITS OF THE CASE

In order for a foreign judgment to operate as Res judicata, it must have been given on merits
of the case.42

A judgment can be considered as a judgment passed on merits when the Court deciding the
case gives opportunity to the parties to the case to put forth their case and after considering the

38
DICEY & MORRIS, THE CONFLICT OF LAWS (15th ed. 2012).
39
Golden Endurance Shipping SA v. RMA Watanya SA [2016] EWHC (Comm) 2110, [28].
40
Moot Proposition, ¶ 12.
41
Oomer Hajee Ayoob Sait v. Thirunavukkarasu Pandaram, AIR 1936 Mad 552.
42
Narasimha Rao v. Venkata Lakshmi, (1991) 3 SCC 451
11
rival submissions, gives its decision in the form of an order or judgment, it is certainly an order
on merits of the case in the context of interpretation of Section 13(c) of the CPC.43

A judgment on merits means a judgment based on the ultimate facts or state of facts disclosed
by the pleadings and evidence upon which the right of recovery depends. It amounts to a
declaration as to the respective rights and duties of the parties.

Where the Court had taken evidence and examined witnesses and after taking all the oral
evidence and considering the same together with the documents had decreed the claim, the
decision must be treated as given on merits and the fact that the defendant did not appear cannot
make it otherwise.44

It is submitted that the present order has been given on the merits of the case as it had been
passed after the court had considered the representations made by both parties of the case. Each
party had been given equal opportunity of being heard, and the judgement had been given based
solely on the matter presented before the court. Hence the judgement is one based on merits.

Thus, relying on the above stated statements, it can be safely said that the order Armorica EP
was conclusive in Narnia, and hence enforceable.

3.3- NCLT DOES NOT HAVE THE JURISDICTION TO PASS SUCH AN ORDER.

It is humbly submitted that the Adjucating Authority, i.e. the NCLT did not have the
jurisdiction to pass the stay order against Armorica EP as it had no right to decide the legality
of the decision in the first place. In Usha Holdings LL.C. & Anr. Vs. Francorp Advisors Pvt.
Ltd45, it was held that the Adjudicating Authority not being a Court or ‘Tribunal’ and
‘Insolvency Resolution Process’ not being a litigation, it has no jurisdiction to decide whether
a foreign decree is legal or illegal. Whatever findings the Adjudicating Authority has given
with regard to legality and propriety of foreign decree in question being without jurisdiction is
nullity in the eye of law.

43
Dan Bunkering Ltd. v. PFS Shipping India Ltd., 2018 SCC OnLine Bom 1313.
44
Vithalbhai Shivabhai Patel v. Lalbhai Bhimbhai, AIR 1942 Bom 199.
45
Usha Holdings LL.C. & Anr. V. Francorp Advisors Pvt. Ltd., 2017 SCC OnLine NCLT 12834.
12
 ISSUE 4-WHETHER SECTIONS 10, 30(2)(B), 31(1) AND 65 OF THE IBC
ARE CONSTITUTIONAL?

It is humbly submitted before the Hon’ble Supreme Court that Section 10, 30 (2) (b), 31(1) and
65 of IBC are violative of Article 14 of the Constitution of Narnia and hence is constitutionally
not valid. These sections are not valid on the grounds that Section 10 with respect to granting
of opportunity of being heard and NCLT’s obligation to determine “default”; Section 30(2)(b)
with respect to prescription of a minimum threshold for payment of dues during the stage of
insolvency resolution process by comparing “CIRP” to “Liquidation process”; Section 31(1)
where the basis for approving/rejecting a plan is not subjective and Section 65 of the IBC, with
respect to the provision limiting to levy of penalty as opposed to rejection of the petition for
reasons contained therein.

4.1 THAT SECTION 10 OF IBC IS UNCONSTITUTIONAL.

It is humbly submitted to the Hon’ble Court that the Section 10 of IBC in regard to article1446of
the constitution infringes the right to equality. The section determines the rules for initiating
the CIRP process by the corporate debtor to the adjudicating authority where a default must be
committed by the corporate debtor. When the corporate debtor files for an insolvency process
and the default is proved a notice is sent to only the operation or financial creditors with a
notice of 7 days if they want to raise any contention against the application and other
shareholders and creditors.

The ground on which this section is being challenged that this section does not provide the
opportunity of being heard and hence violates the principle of natural justice. Section 10 of the
IBC violates the principle of ‘audi alteram partem’ as this section leaves no room to hear the
other what the other party has to say. It is further submitted that access to justice is a
fundamental right guaranteed under Article 14 of the Constitution.47Thus, violation of principle
of audi alteram partem is violative of Article 14 of the Constitution.It is also open to the parties
to point out that the NCLT and the NCLAT are bound to follow the principles of natural justice

46
INDIA CONST. art. 14.
47
DK Basu v. State of West Bengal and others, (2015) 8 SCC 744.
13
while disposing of proceedings before them. Therefore, anything contrary to it would be in
violation of rules of natural justice.48

In Unigreen Global (P.) Ltd. v. PNB49, wherein this Appellate Tribunal, taking into
consideration the provisions of Section 10 of the 'I&B Code' and other relevant provisions,
observed and held as follows:

"Under both Section 7 and Section 10, the two factors are common i.e. the debt is due and there
is a default. Sub-section (4) of Section 7 is similar to that of sub-section (4) of Section 10.
Therefore, we, hold that the law laid down by the Hon'ble Supreme Court in Innoventive
Industries Ltd.50 is applicable for Section 10 also, wherein the Hon'ble Supreme Court observed
as "The moment the adjudicating authority is satisfied that a default has occurred, the
application must be admitted unless it is incomplete, in which case it may give notice to the
applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating
authority". Here also it states that ‘the moment adjudicating authority…’. It leaves no ground
for the other party to say what they have to say. If the adjucating authority is convinced that a
default has been occurred, the application will be accepted irrespective of what the other party
has to say.

In Falcon Tyres v. Edelweiss Asset Reconstruction Company51, the Karnataka High Court held
that “the NCLT must hear both parties before admitting an application for initiation of the
insolvency resolution process under the Code.”.

In the case that we have in our hand, LT approached NCLT with an ulterior motive to gain
benefits of the moratorium period so as to stop all the proceedings against itself.52

4.2 THAT SECTION 30 (2) (B) OF IBC IS UNCONSTITUTIONAL.

It is humbly submitted before the Hon’ble Supreme Court that Section 30(2)(b) is
unconstitutional and violative of Article 14 of the Constitution as the prescription of minimum

48
Punjab National Bank v. M/s. James Hotels Ltd., 2017 SCC OnLine NCLT 4199
49
Unigreen Global Pvt. Ltd. v. Punjab National Bank, 2017 SCC OnLine NCLAT 610.
50
Innoventive Industries Ltd. v. ICICI Bank & Anr., (2018) 1 SCC 407.
51
Falcon Tyres v. Edelweiss Asset Reconstruction Company, Writ Petition No. 16486/2017.
52
Moot Proposition, ¶ 14.
14
threshold for payment of dues during the stage of insolvency resolution process by comparing
“CIRP” to “Liquidation” is inequitable and hence violative of Article 14 of the Constitution.

Financial Creditors are covered under sub-clause b(ii), (d) and e(ii) of sub-section (1) of Section
53 whereas Operational Creditors fall under sub-clause (f) of sub-section (1). Hence, Financial
Creditors rank higher than Operational Creditors and their dues are, therefore, required to be
paid in priority over the latter.

Thus, sub-clause (b) of section 30 specifically imports the waterfall provision in Chapter II of
the Code, with the only caveat that the resolution plan must allocate to the Operational
Creditors at least the amount which they would have received in the event of liquidation of the
Corporate Debtor. In other words, sub-clause (b) prescribes only a lower limit on the amount
that is to be paid to Operational Creditors in a resolution process carried out under Chapter II
of the Code. This minimum amount can be easily ascertained by calculating the Corporate
Debtor’s liquidation value and subtracting therefrom the total dues of Financial Creditors and
other persons ranking above the Operational Creditors in the waterfall provision.

The actual implication of these provisions is seen in cases where the Financial Debt of a
Corporate Debtor exceeds its Liquidation Value by a considerable margin and the Resolution
Plan offers a sum that is insufficient to repay the entire Financial Debt. In such cases, by virtue
of the waterfall provision, nothing remains to be paid to Operational Creditors as the resolution
amount gets exhausted in repaying the debts/sums ranking higher than the dues of Operational
Creditors under Section 53. Only when the resolution amount exceeds the dues of Financial
Creditors does the question of repaying the Operational Creditors arise. At least, this is what
the aforesaid provisions imply. This provision clearly brings arbitrariness which treats financial
creditors above operational creditor and discriminate against the operational creditors. This
provision is violative of article 14. in the case of R.D. Shetty v. International Airport Authority53
the supreme court held that The principle of reasonableness and rationality which is legally as
well as philosophically an essential element of equality or non-arbitrariness is protected by
Article 14 and it must characterise every State action, whether it be under authority of law or
in exercise of executive power without making of law.

53
Ramana Dayaram Shetty v. International Airport Authority, (1979) 3 SCC 489.
15
In the case of Binani Industries Ltd. v. Bank of Baroda &Anr.54, the Delhi bench of NCLAT
held that If the ‘Operational Creditors’ are ignored and provided with ‘liquidation value’ on
the basis of misplaced notion and misreading of Section 30(2)(b) of the ‘I&B Code’, then in
such case no creditor will supply the goods or render services on credit to any ‘Corporate
Debtor’. All those who will supply goods and provide services, will ask for advance payment
for such supply of goods or to render services which will be against the basic principle of the
‘I&B Code’ and will also affect the Indian economy. Therefore, it is necessary to balance the
‘Financial Creditors’ and the ‘Operational Creditors’ while emphasizing on maximization of
the assets of the ‘Corporate Debtor’. Any ‘Resolution Plan’ if shown to be discriminatory
against one or other ‘Financial Creditor’ or the ‘Operational Creditor’, such plan can be held
to be against the provisions of the ‘I&B Code’.” The aforesaid decision presents the following
problems. Firstly, it virtually rewrites the provisions of the Code by excluding the applicability
of Section 53 from resolution process carried out under Chapter II of the Code, contrary to the
plain and unambiguous language of Section 30(2)(b).

Because of this section, the interest of OC is not at par with that of FC. It is hence violative of
article 14 of the constitution.

4.3 THAT SECTION 31(1) OF IBC IS UNCONSTITUTIONAL

It is humbly submitted before the Hon’ble Court that Section 31 (1) of the IBC is
unconstitutional as it does not give a subjective process to accept/reject a resolution plan and
provides for unequal treatment and unequal representation for the creditors and also the right
to equality of IPL has been breached.

Section 31 of the code provides for the approval of resolution plan. For a resolution plan to be
admitted it firstly needs to be approved by the COC which mainly consists of financial creditors
and even if the other creditors are included in it, they are not given any say in voting which is
a clear example of breach of Right to Equality of the creditors.

Approval of the Adjudicating Authority under section 31(1) depends if the Resolution Plan as
approved by the Committee of Creditors under sub-section (4) of Section 30 meets the

54
Binani Industries Ltd. v. Bank of Baroda &Anr., Company Appeal (AT) (Insolvency) No. 82 of 2018-
14.11.2018.
16
requirement as referred to in sub-section (2) of section 30. Here NCLT does not apply its
subjective mind and see the resolution plan logically but instead only apply its objective mind-
set which means that the satisfaction of the adjudicating authority is paramount, in conformity
with the provisions of the code.

In Pratik Ramesh Chirana v. Trinity Auto Components Ltd55 as well, NCLT, Mumbai Bench
interpreted the phrase “if the adjudicating authority is satisfied….” under Section 31, observed
that “satisfaction” must be objective, subjective or both, and to form an opinion, thorough study
of a resolution plan is required.

 Objective Satisfaction: The objective satisfaction revolves around the object of enactment
of the Code, enshrined in the Preamble.
 Subjective Satisfaction: This depends upon logical analysis of the financial data supplied,
where a methodical scrutiny of the financial statement is expected before concurring with
approval of the CoC
It is important to note that subordinate legislation can be struck down on the ground that it is
arbitrary and, therefore, violative of Article 14 of the Constitution.56 One of the tests for
challenging the constitutionality of subordinate legislation is that subordinate legislation should
not be manifestly arbitrary. Also, it is settled law that subordinate legislation can be challenged
on any of the grounds available for challenge against plenary legislation. 57 Where an act is
arbitrary, it is implicit in it that it is unequal both according to political logic and constitutional
law and is therefore violative of Article 14, and if it affects any matter relating to public
employment.58

4.4 THAT SECTION 65 OF IBC IS UNCONSTITUTIONAL.

It is humbly submitted that Section 65 of the Insolvency and Bankruptcy Code, 2016 is un
constitutional.

55
Pratik Ramesh Chirana v. Trinity Auto Components Ltd., (NCLT) Civil Appeal (IB) No. 1032 of 2017-
22.01.2018.
56
Cellular Operators Assn. of India v. TRAI, (2016) 7 SCC 703.
57
Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India, (1985) 1 SCC 641.
58
E.P. Royappa v. State of Tamil Nadu, (1974) 4 SCC 3.
17
This was incorporated in the Code so that the provisions of IBC cannot be misused by any
person, who has initiated the insolvency resolution process or liquidation proceedings, with a
fraudulent or malicious intent, and for any purpose other than for the resolution of insolvency
or liquidation, as the case may be.

What may not be done directly cannot be allowed to be done indirectly; that would be an
evasion of the statute. It is a ‘well-known principle of law that the provisions of an Act of
Parliament shall not be evaded by shift or contrivance’59. ‘To carry out effectually the object
of a Statute, it must be construed as to defeat all attempts to do so, or avoid doing, in an indirect
or circuitous manner that which it has prohibited or enjoined’60

This must be followed to prevent parties in question from finding and exploiting loopholes in
the law with the intention to evade punishment or conviction. In the present case, the defendant
had filed for voluntary initiation of CIRP with the malafide intent of using the consequent
moratorium period as a bar on IPL from proceeding with the enforcement of Armorica EP,
where it would be made to pay 10% of the amount in the default judgement, i.e. Narnian rupees
3 crore, and subsequently 30 crores which it owes to IPL.61

However, since Le Tranquille, through Shifu, has filed for voluntary initiation of CIRP, even
with malafide intention, it would be pardoned after paying a fine which may be between 1 lakh
to 1 crore.62 The companies that come to the NCLT for insolvency resolution generally are
mammoth business houses, for whom 1 crore as a fine would not be a great loss.

Furthermore, the applicant’s malicious intent would find unhindered passage as the resolution
process will still take place. Instead of a fine to be paid, the petition for CIRP should be rejected
so as not to let applicant take unfair advantage of Section 65, facilitating appropriate
proceedings to take place and providing a level platform to the corporate debtors and creditors.
The aim of the Code is to provide for a better financial future for the stakeholders and that they
act honestly while disclosing their assets, liabilities and other obligations. The stakeholders
deserve more than just the crumbs of justice. It is important that these novel and well-intended
measures were interpreted and implemented in a constructive manner by the various

59
Col. Narendra Kumar Yadav v. Union of India, 2010 SCC OnLine AFT 328.
60
ROY WILSON, MAXWELL ON THE INTERPRETATION OF STATUTES (2nd ed. 1962).
61
Moot Proposition ¶ 12.
62
The Insolvency and Bankruptcy Code, 2016, Section 65, No. 31, Acts of Parliament, 2016 (India).
18
adjudicatory authorities. If in such situations the Adjucating authority decides to go with the
literal interpretation of Section 65, and proceed with the fraudulently initiated resolution
process after the imposition of a fine, it would violate the principles of natural justice, audi
alterem partem, ingrained in Article 14 of the Constitution of India, which guarantees a person
equality before law and equal treatment of the law, as the applicant would gain an unfair
advantage if the resolution process is allowed to proceed. Such subjectivity would undermine
the weight of IBC.

Moreover, the Code fails to provide for a proper guideline which encompasses the grounds to
be considered as being done with fraudulent or malicious intent. It is left to the subjective
interpretation of the tribunals and how the facts of the case evolve, leaving it completely to the
discretion of the adjudicating authority to decide the fate of the resolution petition. This steals
away the opportunity of the creditors and debtor having an objectively equal platform. In
Diamond Power Transformers Ltd. v. Indian Overseas Bank & Ors63 , the tribunal admitted the
application under Section 10 of the Code despite knowing the fact that the petitioners had given
contradictory facts when were before the Tribunal. Herein the tribunal held that the mere fact
of the existence of the said contradiction does not suffice the ‘intent’ required for it to fall under
the scope of Section 65. Rejecting the application on this basis would only defile the creditors.

Thus, Section 65 of the IBC is unconstitutional as it fails to give definite equality before the
law to the parties involved

63
Diamond Power Transformers Ltd. v. Indian Overseas Bank & Ors.,2017 SCC OnLine NCLT 14599.
19
 PRAYER

Wherefore in the light of the issues raised, arguments advanced and authorities cited, this
Hon’ble Supreme Court may be pleased to adjudge and declare that:

1. That the writ petition filed by Inner Peace Private Limited under article 32 of the
Constitution of Narnia is maintainable before the Supreme Court.
2. That NCLT’s Order dated 17th November 2018 admitting the Petition under Section
10 filed by Le Tranquille Private Limited and consequential proceedings should be
set aside and IPL should be paid his dues of Narnian Rupees 30 crores.
3. That the order of NCLT in ordering the stay of the Armorica EP by way of an interim
order should be quashed.
4. That Sections 10, 30(2)(b), 31(1) and 65 of the Insolvency and Bankruptcy Code,
2016 should be declared unconstitutional.

AND/OR
Pass any other order that this Hon’ble Court may deem fit in the interests of justice, equity and
good conscience.

And for this the Petitioner, as is duty bound shall forever humbly pray.
Sd/-
(Counsel on behalf of the Petitioner)

xi