The Supreme Court on September4 has stayed the insolvency proceedings against real estate firm, Jaypee Infratech, going on at the Allahabad National Company Law Tribunal (NCLT), initiated by the IDBI Bank for a default of a loan of Rs. 526 Cr. Thousands of homebuyers have not yet received possession of their flats booked with the company. The bench has also sought the replies of Reserve Bank of India and others on a PIL filed alleging that they have not received the flats, and the insolvency proceedings initiated against the company will render them without any remedy. The Court noted that the insolvency proceeding would severely disadvantage the homebuyers, since no decrees passed by the civil courts or consumer fora would be executed against Jaypee once the proceedings begin. The debt ridden realty firm has accumulated money from about 32,000 buyers who have put their hard earned money to the tune of Rs. 25,000 cr. in different projects, being developed by the Company. The homebuyers have also asked for a financial audit of Jaypee to evaluate the magnitude of the bankruptcy. IDBI, the financier for Jaypee had asked to lift the stay on the insolvency proceedings against Jaypee on the basis that it would not really benefit the buyers, and the Court is going to hear the plea soon.
The petition had also challenged a few provisions of the Insolvency &Bankruptcy Code, 2016, especially on the grounds that it did not protect customers, as they did not fall in the category of secured creditors of the defaulter and under the Code, the interests of the secured creditors will be safeguarded first. It further highlighted how the customers had been made to sign some contracts that prohibited them from approaching the Consumer Forum. The Court weighed the interest of the homebuyers against the debt amount, stating that the interest of the homebuyers could not be put at stake for a paltry sum of 500 Crs. For the homebuyers, all their life savings would have gone to waste with no prospects of recovering the same. Accordingly, the Government is considering to amend the I&B Code to protect the interests of the home buyers, either to treat them at par with banks and financial institutions, or to make them trustees so that their investments are mandatorily protected.
[Chitra Sharma v Union of India Writ Petition Civil No. 744 of 2017 order dated 04.09.2017]
i. Insolvency and Bankruptcy Code, 2016 upheld – The Supreme Court has recently passed a detailed judgment on the legality of the Insolvency and Bankruptcy Code, 2016. Earlier, ICICI had started an insolvency proceeding against the Innoventive Industries, which claimed that the petition could not be maintained as the Government of Maharashtra had given relief to the company under the Maharashtra Relief Undertaking (Special Provisions Act) 1958 (MRUA) and thus no amounts were due. But the NCLAT held that the provisions of the IBC override that of the MRUA and thus the petition was maintainable while deciding Section 7 applications. It held that by giving effect to the MRUA, the plan/ scheme which may be adopted under the IBC will directly be hindered and/or obstructed and that there would be direct clash between moratoriums under the two statutes.[M/s Innoventive Industries v ICICI Bank & Others Civil Appeal No. 8337 of 2017, judgment dated 31.08.2017]
ii. Cow Vigilantism ordered to be stopped – The Supreme Court came down heavily on those who take law in their own hands and mete out justice in the name of cow protection. Though the Centre tried to argue that this was a law and order situation to be dealt by the States, the bench sternly said that such incidents needed to be curbed. The Court asked the Centre and the States to file affidavits within four weeks. The Government also submitted that the States of Haryana, Gujarat, Maharashtra, and Rajasthan would nominate a senior police officer of the Police Department as the Nodal Officer in each district to ensure that vigilante activities do not take place. [Tehseen S. Poonawalla v Union of India, Writ Petition (Civil) 754/2016, order dated 06.09.2017]
iii. Petition filed for mandatory filing of documents on criminal offences before elections – The Supreme Court has issued notice on a PIL filed, which seeks to ensure greater transparency in the election process by making it mandatory for candidates to furnish documents supporting affidavits related to their criminal offences. The petition contends that without the requirement of filing affidavits, the voter cannot know as to whether the affidavit reflects the whole truth or not. [Khemchand Rajaram Khoshti v Union of India Special Leave Petition (Civil) 22373 of 2017, order dated 08.09.2017]
iv. Court to examine whether re-tweeting a defamatory tweet amounts to defamation–The Supreme Court has agreed to hear a petition filed by AAP Spokesperson, Raghav Chadha, asking whether re-tweeting a defamatory tweet itself also amounts to defamation. Earlier, the Delhi Chief Minister Arvind Kejriwal accused Arun Jaitley of corruption during his tenure as the President of the Delhi and District Cricket Association. Those accused in the case are Arvind Kejriwal, Raghav Chadha and other AAP leaders like Kumar Vishwas, Ashutosh Singh, and Deepak Bajpai. [Raghav Chadha v State of NCT of Delhi, Special Leave Petition (Criminal) No. 6526-6527 of 2017, order dated 07.09.2017]
v. Court asks for speedy disposal of consumer matters – The Supreme Court has asked for speedy disposal of Consumer disputes, especially through the use of alternate dispute resolution mechanisms. The Court has said that steps should be taken under Section 24B of the Consumer Protection Act to provide swifter remedy to the consumers. It has directed the NCDRC to come up with a plan to formulate an action plan to implement this directive. [Bijoy Sinha Roy v Biswanath Das & Ors. Civil Appeal No. 4756 of 2009 order dated 30.09.2017)
vi. Petition against deportation of Rohingya Muslims filed – The Supreme Court has sought response of the Central Governmnet on a petition was filed against the deportation of the Rohingya Muslims, refugees from Myanmar, from India. The Rohingyas are facing persecution in Buddhist majority Myanmar and their return would seriously imperil their bodily safety. [Mohammad Salimullah v Union of India Writ Petition (Civil) No. 793/2017, order dated 04.09.2017
vii. Peaceful protests against NEET permitted – The Supreme Court, while hearing a petition against the law and order situation in Tamil Nadu, has allowed peaceful protests against the NEET Examination and the Supreme Court’s earlier decision upholding it. The Court took note of the fact that such protests can disrupt normal life but it also admitted that it was the duty of the Government to maintain the law and order situation in the State. The Court thus held that “every citizen of this country has a fundamental right to peacefully protest and demonstrate, but not to cause a situation that results in violence and paralyses the law and order situation.” [G.S. Mani v Government of Tamil Nadu Writ Petition (Criminal) No. 133 of 2017, order dated 08.09.2017]
viii. Amicus Curiae directed to look into Ministry of Environment and Forests report – The Supreme Court has asked amicus curiae, Harish Salve, to examine the report filed by the Environment Ministry and suggest ways to protect and increase forest cover in India. The Court has also asked Mr. Salve to provide information about the funds collected under for the purposes. [T.N. Godavarman Thirumulpad v Union of India & Ors. Interlocuroty Application No. 3957 in Writ Petition (Civil) 202 of 1995, order dated 06.09.2017]
ix. Another petition seeking extension of depositing demonetised notes filed: The Supreme Court has given RBI and the Ministry of Finance four weeks’ time to reply on a plea seeking extension of time for exchanging demonetised notes of Rs 500 and Rs 1000. Similar petitions have been filed before also where the Court has asked the Government to consider whether people with genuine reasons could be given another chance to deposit the demonetised notes to RBI.
x. Secured creditor prohibited from invoking provisions of SARFESI after sale of secured asset – The Calcutta High Court has ruled that a secured creditor cannot maintain an application under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, after issuance of a sale certificate, in order to obtain actual physical possession of the property. The Court ruled that after the sale of the asset, the creditor cannot any longer claim a security interest in the property. [United Bank of India v State of West Bengal Writ Petition No. 21814(W) of 2017 dated 01.09.2017]
xi. Provisions of Insolvency and Bankruptcy Code challenged –Certain provisions of the Insolvency and Bankruptcy Code have been challenged in the Madras High Court. The main grounds of challenge are that the provisions deprive the petitioner of the right to be heard and are against the principles of fairness. Secondly, the provisions also deny the right to equality before law. The Court has issued notice in the matter.
xii. Sentences awarded in 1993 Mumbai blast case – A Special Terrorism and Disruptive Activities Court (‘TADA Court’), Mumbai has sentenced the accused Firoz Khan and Tahir Merchant to death and the mobster Abu Salem and Karimullah Khan to life imprisonment for their conspiring and causing the bomb blasts in Mumbai in 1993. Another accused, Riyaz Siddiqui got 10 years of imprisonment.
Other Legal Developments
xiii. Sunil Arora takes charge as new Election Commissioner – Mr. Sunil Arora has been appointed as the new Election Commissioner of India. Before taking on this role, Mr. Arora has served at important positions in the Government of Rajasthan and the Central Government. Prior to his appointment, he was serving as the Director General in the Ministry of Foreign Affairs.
xiv. Government freezes bank accounts of more than 2 lakh shell companies – The Central Government has frozen the bank accounts of more than 2 lakh suspected shell companies, as a part of its measures on curbing illegal transactions. This has followed the earlier directive by the Government to shut down such shell companies. The owners cannot operate these accounts, until these accounts are restored legally.