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rusykohli · 4 years ago

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From The Bubonic Plague To COVID-19: Impact On The Legal Profession In India

https://www.barandbench.com/author/rusy-kohli

The COVID-19 Pandemic has fundamentally disrupted our social and economic order. It has affected the functioning of most institutions and the Indian Judiciary is no exception. The Guardian of Law now finds itself compelled to guard against this deadly virus, its fraternity and litigants alike. The declaration of lockdown in India was accompanied with Courts across the country restricting functioning to limited matters in order to curb the number of lawyers / litigants entering court complexes. Soon, all hearings were being conducted through videoconferencing only, in order to avoid any human contact whatsoever. However, just like previous health emergencies in India like the Bubonic Plague of the late 19th century and the Spanish Flu of 1918, Corona Virus has made many its victims including the Judiciary, and the legal profession. In order to fully appreciate the impact of the virus, the author attempts to provide an account of the effect of Covid-19 with reference to historical health emergencies and their impact on the judicial apparatus.

Pendency in Indian Courts:

The Indian Judiciary has been over-burdened for several years and COVID-19 is only adding to this menace. As of May 27, 2020, there are approximately 3.24 crore pending cases in India’s subordinate courts[i] and about 48.2 lakh pending cases in the High Courts[ii].

The Supreme Court via its Notification dated March 13, 2020 restricted functioning of the Court to “ urgent matters ” only ( w.e.f. March 16, 2020 )[iii], thereby only entertaining bail matters, suspension of sentence matters and the like.

High Courts too have restricted their functioning to urgent matters. In normal course, a High Court hears north of 400 matters a day. However, since late March, High Courts across the country are hearing anywhere between 10-100 matters a day.[iv]

Subordinate courts account for over 80 % of the pendency of cases. On April 30, 2020 the Karnataka High Court extended the closure of all District Courts, Family Courts, Labour Courts and Industrial Tribunals in the State until May 16, 2020[v]. On April 29, 2020 the Punjab & Haryana High Court ordered that all the district and sub-divisional Courts in Punjab, Haryana and Chandigarh will function “restrictively” from May 1 “till the lockdown / curfew is in force in the respective area”[vi]. These restrictive measures have led to a glut of pending cases, thereby increasing the burden on courts.

Justice Delayed Is Justice Denied:

Pendency in India’s courts has always been a hindrance in securing timely justice for people, if not denying justice altogether. As the usual functioning of courts has been disrupted, many under-trials and even many of those whose appeals are pending are left with no recourse. It can hardly be denied that the subject adage has particular force in the criminal sphere.

In pursuance of the Apex Court’s directions dated March 23, 2020, States and Union Territories have been asked to constitute High Powered Committees “ to determine which class of prisoners can be released on parole or an interim bail for such period as may be thought appropriate. ” Therefore, each State is free to determine its own criteria for granting bail. Further the Supreme Court has clarified vide its order dated April 13, 2020 that it has not directed the States / Union Territories “ to compulsorily release the prisoners from their respective prisons.”[vii] This clarification has allowed High Courts to further restrict the nature of cases in which they are prepared to grant bail.

On March 29, 2020, the Insolvency And Bankruptcy Board Of India announced the insertion of regulation “ 40 C ”, which laid down that the period of lockdown imposed in the wake of COVID19 shall not be counted for the purposes of the time-line for any activity that could not be completed due to such lockdown, in relation to the corporate insolvency resolution process ( CIRP )[viii]. While this move has come as a relief for companies undergoing the CIRP, it has left creditors waiting for repayment of dues for longer than the mandated 330-day period. NCLT benches across the country are hearing only urgent matters until the lockdown is lifted. This has left many other matters, which do not qualify as urgent, pending. [ix]

Plight Of Advocates:

A PIL was filed in the Supreme Court urging that non-payment of rent for professional premises belonging to advocates should not be made a ground for eviction, during lockdown. However, on April 30, 2020 the Apex Court refused to entertain the plea remarking that it was "not going to enter into this issue," and dismissed the petition as withdrawn. [x] Further on May 8, 2020 a three- Judge bench of the Supreme Court dismissed a plea urging the court to direct the government to formulate a uniform welfare scheme for lawyers affected across the country.[xi]

Daily appearances in court are the main source of income for most advocates, and cash flow has come to a drip, if not completely dried up. In the month of April, 82,725 cases were filed in India’s courts as compared to 8,80,000 cases in March [xii]. This steep decline in cases filed has consequently resulted in a significant dip in court fee, besides Lawyers’ income.

Younger lawyers are left with little or no work. Today, a senior lawyer has the time, and the need to address minor matters, if any, personally, rather than refer them to a junior, which may have been done prior to the lockdown.

A petition was filed in the Madras High Court, seeking a direction to the State and the Bar Council to release Rs. 50,000/- to advocates, in order to compensate for the loss of work[xiii]. However, the Bar Council Of Tamil Nadu & Puducherry has resolved to disburse only Rs. 4000/- each to needy lawyers. The Bar Council was not in a position to release any more money because of limited resources.[xiv]

Law Firms:

Law Firms have also been severely affected. Many partners have either chosen to renounce salaries this financial year or agreed to take significant pay cuts. Firms which charged clients anywhere between Rs. 20,000 and Rs 75, 000 per hour, our now renegotiating their fee, since cash-strapped clients are no longer willing to pay exorbitant sums. Moreover, clients are questioning the actual amount of time that firms are spending on their matters, thereby making firms consider implementing technology that would track the number of hours spent by an executive on a client’s job, in order to provide proof to clients[xv]. This is great innovation; however, it comes with a significant cost in a day and age when law firms are suffering unprecedented lows in business.

Prisoners:

Corona Virus cases have already sprung up in various jails across India. Amongst other jails, there are over 180 cases in Mumbai’s Arthur Road Jail[xvi]. Authorities have been compelled to take drastic measures such as - release a large number of inmates, shift inmates to different prisons and designate temporary places as jails for keeping new undertrials.

By end February, nearly the cases (233 of 565) of COVID-19 reported in Wuhan, China, were from the city’s prison system.[xvii] This fact is reflective of just how dangerous prisons are today.

Indian prisons have historically been overcrowded and may potentially become breeding grounds when threatened by a contagion like Covid19. Considering the difficult living conditions and lack of hygiene, which is an unfortunate reality of our prisons, containing the spread would become nearly impossible.

Coping With This Challenge:

We are now in the age of what has come to be known as “Virtual Courts ” which function through videoconferencing, e-filing, telephonic mentioning of urgent matters and online payment of court fees. These are not bereft of teething problems. Perhaps, the biggest drawback of this new system is the inability to provide public access to courtroom proceedings. Virtual proceedings are being held in camera, and are therefore not open to public which is discordant with what has been held in Naresh Shridhar Mirajkar v State of Maharashtra[xviii], where the Apex Court observed that the public has a right to be present in court and to watch proceedings.

Lawyers are facing problems with basics such as uploading petitions on the Supreme Court website, since the data restrictions put in place are just 5 MB for a petition and 2 MB for additional documents, thereby compelling lawyers to break up the file into multiple volumes.[xix]

Déjà Vu

Historically, the Bubonic Plague of the late 19th century and Spanish Flu of 1918 are two points of reference when the entire framework of judiciary was disrupted on account of a health emergency.

The arrival of the Bubonic Plague in Bombay ( now Mumbai ) in 1896, brought courts to a grinding halt. A J C Mistry, a managing clerk at the Bombay law firm, Wadia Ghandy & Co. has given a grim account of the situation in early 1897. Mistry noted that the judges of the Bombay High Court “had no work to do.” The staff of the firm returned to work after four months, however over the next decade three members fell victim to the plague and died.

Mahatma Gandhi on page 72 in his book - The Law and The Lawyers[xx], while discussing an appeal which was to be heard in Veraval in Gujarat, writes that there were as many as fifty cases heard daily ( a lot of cases for that day and age ) in the Court at Veraval which had a population of about 5,500 people, however at the time of writing the “plague was raging ” and it was “ practically deserted ”. This anecdote bears a striking semblance to the scenario today.

Property which was seized in discharge of debts those days included pots, pans, utensils, bedding etc. These items were regularly hauled in and out of court. Legal historian Mitra Sharafi on page 48 in her book - Law and Identity in Colonial South Asia: Parsi Legal Culture, 1772–1947, writes that this practice of bringing property inside court rooms had become a “ particularly unsavoury phenomenon when the bubonic plague swept through the city. ”

When the Spanish Flu arrived in 1918, the judiciary was hit once again. Jurors, lawyers and assistants of the Calcutta High Court were severely affected. The Court was functioning on somewhat similar lines of how the courts are functioning today, thereby causing consequent pendency issues. [xxi]

Even in Bombay, law offices were bought to a standstill. In late June 1918 the Times Of India reported,

“ Nearly every house in Bombay has some of its inmates down with [influenza] fever and every office is bewailing the absence of clerks. ”

The flu soon found its way into jails and a need was felt to decongest prisons as inmates began to fall sick and the jails were short-staffed. The District Magistrate of Bijapur particularly wanted to release sick prisoners from jail, but the then Government was not ready to cooperate.[xxii]

It may be relevant to mention here that an eminent lawyer by the name of, Mohandas Karamchand Gandhi was himself laid down with the Spanish flu with a faltering heartbeat. However, destiny had charted out a different path for him, and India.

Conclusion:

This piece has only covered some of the ramifications of COVID-19 on the legal profession and there are other areas such as legal education which also need to be addressed on a priority. The existing delays in the legal system will only be exacerbated by the impediments COVID-19 will inevitably present to the progress of investigations, charging decisions, pre-trial processes etc. It appears that Corona Virus is here to stay, and the Judiciary needs to cope with it. We have been through a pandemic before and have come out of it as well. Normal functioning or rather “ New Normal ” functioning of courts is going to take its own time. Hopefully, it shouldn’t take too long, lest Lady Justice will soon have to, along with a blindfold, sword and scales, be adorned with — a mask.

Rusy Kohli

The author is a Post Graduate from Punjab University and a keen student of current affairs with context to lessons from history.

[i] “ Pending Dashboard ”: National Judicial Data Grid (District and Taluka Courts of India).

[ii] National Judicial Data Grid For High Courts.

[iii] Supreme Court Notification, March 13, 2020.

[iv] Data collected from Daily Cause Lists of various High Courts.

[v] Vide Notification No. DJA.I/550/1993, dated April 30, 2020.

[vi] Vide Order No. 13/Spl./RG/Misc. , dated April 29, 2020.

[vii] Suo Motu Writ Petition (Civil) No.1 Of 2020 ( In Re : Contagion Of Covid 19 Virus In Prisons ): Order dated April 13, 2020.

[viii] Vide Notification No. IBBI/2019-20/GN/REG059 Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2020. , dated March 29, 2020

[ix] NCLT Notice dated April 20, 2020.

[x] Writ Petition (Civil) Diary No.11055/2020 ( ALJO K. JOSEPH Vs. UNION OF INDIA & ANR.): Order dated April 30, 2020.

[xi] Writ Petition (Civil) Diary No(S). 11049/2020 ( Abhinav Ramkrishna Vs. Union Of India & Ors. ): Order Dated May 8, 2020

[xii] “ How lockdown has hit judiciary, in numbers — April cases fall to 82k from 14 lakh avg in 2019 ”: The Print, May 4, 2020.

[xiii] W.P.No.7419 of 2020: ( Dr.A.E. Chelliah vs. The Chairman and Members of the Bar Council of Tamil Nadu and Puducherry and an. )

[xiv] Bar Council Of Tamil Nadu & Puducherry: Press Release Dated 08-05-2020

[xv] Covid-19 Fallout: Pressure on hourly fee of top consultants, lawyers: The Economic Times, May 1, 2020

[xvi] “ After 180 cases from Arthur Road Jail, Maharashtra to release half the state’s prisoners ”: The Indian Express, May 12, 2020.

[xvii] Mainland China adds 573 coronavirus infections, eyes risks abroad: Reuters.com, March 1, 2020

[xviii] (1966) 3 SCR 744

[xix] “ ‘ Public hearing fundamental to democracy’: Lawyers on SC hearings via video conference ”, The Print, April 20, 2020.

[xx] The Law and The Lawyers By: M. K. Gandhi

[xxi] Pandemic or poison? How epidemics shaped Southasia's legal history by Mitra Sharafi: Himal Southasian, April 20, 2020.

[xxii] GD 353, 1918 GOB to District Magistrate, Bijapur, 13 November, 1918.

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charlesjening · 5 years ago

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Friday Footnotes: Cocaine and Hookers; Facebook Slapped By the SEC; PwC on AI | 7.26.19

Geeky accountant who stole £150,000 and blew it on cocaine and hookers told to pay back just £1 [The Sun] Carvill, 38, was jailed for 2½ years after admitting fraud. His sentencing hearing was told he’d been bullied for most of his life and suffers very low self-esteem.

Accountants ordered to disclose information on personal misconduct [FT] The UK’s accounting watchdog has ordered the industry’s largest firms to disclose all complaints of bullying and harassment made against their senior staff after a string of scandals. In letters sent this week, the Financial Reporting Council has demanded information on complaints about bullying, sexual harassment and alcohol or drug abuse, including the seniority of the employees implicated and their area of business.

EY warns of audit fee hikes as compliance costs bite [Sky News] EY, the big four accountancy firm, has warned some of Britain’s biggest companies that they will be charged more to audit their books as the profession contends with intense scrutiny from politicians and regulators. Sky News has obtained a letter sent by Hywel Ball, EY’s head of UK audit, to the firm’s clients to inform them that “unprecedented market forces” will entail higher fees.

Art of Accounting: Female staff are smarter, redux [Accounting Today] Ed Mendlowitz on why chicks are cool (in the office).

IRS Sending Warning Letters to More Than 10,000 Cryptocurrency Holders [WSJ] “Taxpayers should take these letters very seriously. The IRS is expanding efforts involving virtual currency, including increased use of data analytics,” said IRS Commissioner Chuck Rettig.

Don’t be afraid to take chances on AI says PwC partner Darren O’Neill [Silicon Republic] “There’s an element of taking some risks and not being afraid to take some chances, to spend a little bit of money on this stuff in a controlled way,” he said. “It won’t always work out. Be open to the fact that some of it is going to fail. But just get your sleeves rolled up and get stuck in.”

Deloitte India granted four-week pause in legal battle [economia] Deloitte and BSR Associates, a KPMG affiliate, have been granted a stay on a legal order by India’s National Company Law Tribunal (NCLT). The firms have been involved a protracted legal battle over alleged misconduct in their audit work on infrastructure firm IL&FS. India’s Ministry of Corporate Affairs has argued for Deloitte to be banned from the country for five years over the IL&FS case.

Facebook agrees to $100 million SEC settlement after privacy probe [CNET] “Public companies must accurately describe the material risks to their business,” said Stephanie Avakian, co-director of the SEC’s enforcement division. “As alleged in our complaint, Facebook presented the risk of misuse of user data as hypothetical when they knew user data had in fact been misused. Public companies must have procedures in place to make accurate disclosures about material business risks.”

The post Friday Footnotes: Cocaine and Hookers; Facebook Slapped By the SEC; PwC on AI | 7.26.19 appeared first on Going Concern.

republished from Going Concern

#Technology #Finance

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legalseat · 6 years ago

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Resolving IL&FS: Desperate Times Call for Desperate Measures

[Manaswi Agarwal and Aayush Mitruka graduated from ILS Law College, Pune and are currently working with law firms in Mumbai and Delhi respectively. They can be reached at [email protected] and [email protected]]

In a previous post we had analysed the efficacy of the Insolvency and Bankruptcy Code, 2016 (IBC) as compared with the scheme of arrangements mechanism under the Companies Act, 2013 (Companies Act) as a tool for restructuring of a financial institution like Infrastructure Leasing and Financial Services Limited (IL&FS). The post was written after IL&FS along with several of its subsidiaries had filed a petition before the National Company Law Tribunal, Mumbai (NCLT) for “certain reliefs in connection with filing of a scheme of arrangement under section 230 of the Companies Act”. Thereafter, the Union of India swung into action and invoked section 241(2) of the Companies Act pursuant to which the NCLT directed suspension of the then existing board of directors of IL&FS and appointed a new board of directors. As briefly discussed in the previous post, while schemes route under the Companies Act seemed more attractive for IL&FS than the IBC, the lack of any moratorium (as envisaged in section 14 of the IBC) in the Companies Act would pose a major concern for IL&FS with several creditors seeking to recover their debts.

In these circumstances, the Union of India approached the NCLT seeking virtually a blanket ban on all the creditors of IL&FS from taking any action against IL&FS and its 348 group companies to recover their dues. Interestingly, the relief was sought under section 242 of the Companies Act. The NCLT found itself constrained by provisions of Companies Act and concluded that only if IL&FS could proceed under IBC could it have availed of the moratorium envisaged in section 14 of the IBC. Accordingly, by an order dated 12 October 2018 (NCLT Order), the NCLT rejected the request for immunity in respect of IL&FS and its group companies.

The NCLT Order was challenged before the National Company Law Appellate Tribunal (NCLAT) and the NCLAT, in an unprecedented move, by an order dated 15 October 2018 (NCLAT Order), granted interim relief effectively restraining the creditors of the IL&FS group from taking any action to recover their dues from IL&FS and its 348 group companies. The NCLAT Order, curiously enough, does not discuss the legal provisions under which such an order was passed. In this post, we critically analyse the legality of the NCLAT Order.

Powers of the NCLT and NCLAT under section 242 of the Companies Act:

The NCLAT Order does not discuss the provisions of the Companies Act, and the interpretation thereof which confer, if at all, the power upon the NCLT to pass an order which is as overarching as the NCLAT Order. The only reason assigned by the NCLAT to support the moratorium is “larger public interest” and “the economy of the nation”. Notably, a plain reading of the provisions under Chapter XVI of the Companies Act suggests that while the NCLT has plenary powers to pass any order in respect of the company before it, such orders ought not adversely affect parties other than such company and its shareholders and management. This is significant since the entire chapter deals with the internal management of a company and disputes inter se between the members and management of such company. Section 242(2), which provides an illustrative list of orders that can be passed by the NCLT, indicates that no order can be passed which affects any party other than the company itself without hearing such a party. In fact, section 242(2)(f) which provides for termination, modification, setting aside of any agreement entered into between the company and any other party requires the NCLT to give a hearing to such a third party.

However, section 242(2)(m) confers upon NCLT the power to make provisions where it is just and equitable to make such provisions. In addition, rule 11 of the NCLT Rules, 2016 confers inherent powers upon the NCLT to pass any orders to meet ends of justice and prevent abuse of the process of the tribunal. A combined reading of these two provisions indicates that the NCLT has powers to pass all orders which are found to be just and equitable or are required to meet ends of justice. One needs to bear in mind that “inherent powers” of a court or tribunal are those powers necessary for the ordinary and efficient exercise of jurisdiction already conferred upon it (see Arjun Singh v. Mohindra Kumar, AIR 1964 SC 993). Thus, section 242(2)(m) as well as rule 11 cannot be construed to enlarge and expand the powers of the NCLT which it otherwise does not enjoy. Assuming an order like the NCLAT Order can be passed by resorting to the said provisions, caution has to be exercised that phrases like ‘just and equity’ and ‘ends of justice’ are construed not only with reference to IL&FS but also with reference to creditors and other stakeholders of IL&FS. The Union of India ought to demonstrate that an order restraining the creditors of IL&FS to take any actions against IL&FS for recovery of their dues for a limited period of time will benefit the creditors at large in the long run. Further, given various investigations pending and suspected wrongdoings in the management of IL&FS, it would be an uphill task to prove equities in favour of IL&FS as against the creditors who seek immediate recovery of their dues.

The comparison with moratorium under the IBC

The order sought by the Union of India in respect of IL&FS is being mistaken to be similar to the moratorium envisaged under section 14 of the IBC. The moratorium under the IBC is not only to the benefit of the corporate debtor (by barring creditors from recovering dues from the corporate debtor) but also to the benefit of the creditors by barring the corporate debtor itself from alienating or transferring any of its assets. Thus, all assets as well as liabilities of the corporate debtor are frozen and the creditors are allowed to restructure the debt. However, the NCLAT Order seems to protect only IL&FS and its group companies without any corresponding protection to the creditors. Therefore, even by the standards of the IBC, the NCLAT Order is extraordinary and such a moratorium could not have been availed by IL&FS or any of its group companies under the IBC.

Protection to group companies of IL&FS

One striking feature of the NCLAT Order is that the moratorium granted therein applies to 348 group companies of IL&FS. There are multiple objections to this aspect of the NCLAT Order viz.: (1) the group companies were not before the NCLAT and thus no orders could have been passed in respect of such companies; (2) IL&FS is a separate legal entity from its group companies and cannot be treated to be acting for and on behalf of all the group companies; and (3) several group companies of IL&FS are incorporated under foreign laws and applicability of the NCLAT Order in respect of such group companies is unclear and fraught with several legal hurdles.

Moreover, since IL&FS and all its group companies are now under the scanner and are being governed by the government appointed board, it is unlikely that any illegalities would be committed in functioning thereof. However, if any of the 348 group companies to which the NCLAT Order applies is a company in which IL&FS has a minority stake, one cannot rule out the possibility of misuse of the protection from legal proceedings granted by the NCLAT Order.

Another aspect to be considered as regards the group companies of IL&FS is that the premise of Union of India to approach the NCLT and NCLAT to seek moratorium under section 242 of the Companies Act was that IL&FS being a financial service provider was excluded from application of the IBC and therefore, IL&FS could not avail of moratorium under section 14 of the IBC. Besides the fact that Union of India can pass necessary notification under section 227 of the IBC to put IL&FS through the IBC procedure, it is unsettling that several group companies of IL&FS are not financial service providers and can avail of provisions of the IBC. Therefore, the fundamental premise of the Union of India that IL&FS cannot avail of the IBC process and therefore an order ought to be passed under the Companies Act, does not apply to several group companies.

In these circumstances, the case of IL&FS has demonstrated an urgent requirement of not only a comprehensive bankruptcy law for financial service providers (like the Financial Resolution and Deposit Insurance Bill) but also a framework for resolving group insolvencies in India.

An Order without hearing the creditors

It is of concern that the NCLAT Order appears to have been passed without any notice to the creditors of IL&FS or its group companies. The NCLAT Order does not even delve into the reasons for granting such an ex-parte relief without giving hearing to the creditors of IL&FS and its group companies.

However, the NCLAT appears to be cognizant of the absence of the creditors and has directed that the five largest creditors be impleaded as respondents to the appeals in the representative capacity of all the creditors. It is uncertain whether five largest creditors of IL&FS will represent all the creditors of IL&FS and its group companies. In any event, if certain creditors are not satisfied with the five largest creditors leading their case, it is unclear if such individual creditors will be granted an opportunity to be heard. Moreover, the NCLAT has entirely overlooked that each class of creditors ought to be represented before the NCLAT and not merely five largest creditors.

Effect of NCLAT Order on proceedings under the IBC

Although the NCLAT has directed a moratorium in respect of IL&FS and its 348 group companies, it is irresistible to test its tenability as against the proceedings under the IBC. The question is whether any proceeding pending under the IBC or to be filed under the IBC is affected by the NCLAT Order. In this regard it is necessary to refer to sections 64(2) and 231 of the IBC. Section 64(2) reads as under:

“(2) No injunction shall be granted by any court, tribunal or authority in respect of any action taken, or to be taken, in pursuance of any power conferred on the National Company Law Tribunal or the National Company Law Appellate Tribunal under this Code.”

Section 231 of the IBC reads as under:

“231. Bar of jurisdiction.- No civil court shall have jurisdiction in respect of any matter in which the Adjudicating Authority or the Board is empowered by, or under, this Code to pass any order and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any order passed by such Adjudicating Authority or the Board under this Code.”

From the above-quoted provisions, it is clear that no court or authority can grant an injunction to restrict: (a) the powers of the NCLT or NCLAT under the IBC; or (b) any actions taken or to be taken pursuant to any order passed by the NCLT under the IBC. The question of injuncting the IBC proceedings fell for consideration before the Bombay High Court in the case of Jotun India Private Limited v. PSL Limited (26 July 2018), wherein the Division Bench recognized the primacy of the IBC over the Companies Act and in unequivocal terms held that the proceedings under the IBC cannot be stalled by an order of the High Court. One may argue that while no other court or authority can restrict the powers of the NCLT or NCLAT, the order of NCLAT itself would not be barred by sections 64(2) and 231 of the IBC. However, that argument deserves to be rejected because the NCLAT has passed the NCLAT Order as the tribunal constituted under the Companies Act which is to be distinguished from the adjudicating authority and appellate authority under the IBC. The non-obstante clause under section 238 of the IBC further fortifies the argument and establishes the supremacy of the IBC over any provision of or order passed under the Companies Act.

In these circumstances, in our considered view, the NCLAT Order would not affect the proceedings (whether pending or filed after the NCLAT Order) under the IBC and this may defeat the very purpose of the NCLAT Order.

Conclusion

Needless to say, the NCLAT Order is problematic on various counts and sets a dangerous precedent. The interim order passed by the NCLAT appears to have been handed out merely upon the asking. Undeniably, IL&FS needs immunity to work out a viable plan for the resolution of the group insolvency. However, the statutory source of such immunity is unlikely to be section 242 of the Companies Act. IL&FS perhaps needs to look elsewhere and consider approaching the constitutional courts for such an order under its extraordinary jurisdiction in view of grave public interest. While the NCLAT Order is an interim order, it is hoped that the NCLAT will answer all these legal issues before finally disposing of the appeal. At this point it cannot be ruled out that some of the creditors of the IL&FS group would approach the Supreme Court against the NCLAT Order. It would be interesting to see how these legalities would finally get resolved.

– Manaswi Agarwal & Aayush Mitruka

The post Resolving IL&FS: Desperate Times Call for Desperate Measures appeared first on IndiaCorpLaw.

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