MEMORIAL ON BEHALF OF RESPONDENT

TEAM CODE-T 27

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 TRANQUILLE 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 RESPONDENT

Memorial on Behalf of Respondent

TABLE OF CONTENTS
List of Abbreviation .................................................................................................................. iv

Index of Authories ..................................................................................................................... v

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

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

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

Summary of Arguments ...........................................................................................................xii

ISSUE 1- That the Hon’ble court has no jurisdiction to entertain the petition and the the
petition filed by Inner Peace Private Limited is not maintainable .......................................xii

ISSUE 2- That the petition submitted by Le Tranquille under Section 10 and consequential
proceedings should not be set aside. ....................................................................................xii

ISSUE 3- That the NCLT was right in ordering the stay of the Armorica EP by way of an
interim order....................................................................................................................... xiii

ISSUE 4-Whether Section 10, 30 (2) (b), 31(1) AND 65 OF IBC Are Constitutional? ... xiii

argument 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 There is no locus standi.................................................................................................... 1

1.2 Alternate remedy has not been exhausted ........................................................................ 2

1.3 the writ petition has been filed prematurely. ................................................................... 4

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 That default has occurred. ................................................................................................ 5

2.2 The Application has followed due process of law. .......................................................... 6

2.2.1 The application has followed all requirements under section 10. ............................. 6

2.2.2 The applicant is not ineligible under section 11 of the code..................................... 8

2.2.3 IPL does not have any Locus Standi. ........................................................................ 9

2.3 The application under section 10 has not been filed with malicious intent ................... 10

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Issue 3:Whether the NCLT was right in ordering the stay of Armorica EP by way of an interim
order? ....................................................................................................................................... 12

3.1It has not been pronounced by a Court of competent jurisdiction. ................................. 12

3.2 The judgement has not been given on the merits of the case......................................... 13

3.3 It is submitted that NCLT has inherent powers vested in it. .......................................... 14

3.4 The order is only evidentiary in nature, and cannot be enforced. .................................. 15

Issue 4: WHETHER SECTIONS 10, 30 (2) (b), 31(1) AND 65 OF IBC ARE
CONSTITTUTIONAL? ........................................................................................................... 16

4.1 There is always a presumption of constitutionality. ...................................................... 16

4.2 section 10 is not violative of the constitution ................................................................ 17

4.3 THAT SECTION 30 (2) (b) OF IBC IS CONSTITUTIONALLY VALID .................. 18

4.4 THAT SECTION 31(1) OF IBC IS CONSTITUTIONALLY VALID......................... 19

4.5 THAT SECTION 65 OF IBC IS CONSTITUTIONALLY VALID. ............................ 20

PRAYER ................................................................................................................................. xiv

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LIST OF ABBREVIATION

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

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INDEX OF AUTHORIES

Cases

A.G. v. Momodou Jobe, (1984) 1 AC 689. ............................................................................. 20

A.V. Venkateshwaran v. R.S. Wadhwani, AIR 1961 SC 1906. ................................................ 2
Algemene Bank Nederland NV v Satish DayalalChoksi AIR 1990 Bom 170 ........................ 14
Andhra Industrial Works v. Chief Controller of Imports, AIR 1974 SC 1539. ......................... 1
Arcelor Mittal India pvt. Ltd. v. Satish Kumar Gupta & Ors., (2019) 2 SCC 1. ....................... 4
Asstt. Collector of Central Excise v. Jainson, AIR 1979 SC 1889. ........................................... 2
Binani Industries Limited v. Bank of Baroda and Anr., 2018 SCC OnLine NCLAT 565. ....... 7
Calcutta Gas Co. Ltd. v. State of West Bengal, AIR 1962 SC 1044. ........................................ 2
Central Bank of India v. Resolution Professional of the Sirpur Paper Mills Ltd. &Ors.,
(NCLAT) Company Appeal (AT) (Insolvency) No. 526 of 2018-12.09.2018. ................... 18
Charanjit Lal v. Union of India, AIR 1951 SC 41. .................................................................. 17
Commissioner of Income Tax and Ors. v. Chhabil Dass Agarwal, (2014) 1 SCC 603 (India). 2
Innoventive Industries Ltd. v. ICICI Bank & Anr., (2018) 1 SCC 407 ..................................... 7
Innoventive Industries Ltd. v. ICICI Bank & Anr., (2018) 1 SCC 407. ...................... 5, 7, 9, 18
K.K. Velusamy v. N. Palaanisamy, (2011) 11 SCC 275. ........................................................ 15
Kukadap Krishna Murthy v. GodmatlaVenkata Rao, AIR 1962 AP 400. ............................... 14
Leo Duct Engineers & Consultants Ltd. v. Canara Bank, 2017 SCC OnLine NCLAT 547.6, 8,
17
M/s. Deem Roll Tech Limited v. M/s. R.L. Steel & Energy Ltd., 2017 SCC OnLine NCLT 465.
................................................................................................................................................ 9
Maloji Nar Singh Rao Shitole v. Shankar Saran, AIR 1962 All 1737............................... 13, 15
Marine Geotechnics LLC v. Coastal Marine Construction & Engineering Ltd., (2014) 2 Bom
CR 769. ................................................................................................................................ 16
Mohammed Ishaq v. S. Kazam Pasha, (2009) 12 SCC 748. ..................................................... 3
Morey v. Doud, (1957) 354 U.S. 457. ..................................................................................... 19
Narasimha Rao v Venkata Lakshmi (1991) 3 SCC 451 .......................................................... 13
NUI Pulp and Paper Industries Pvt. Ltd. Vs. M/s. Roxcel Trading GMBH, (NCLAT) Company
Appeal (AT) (Insolvency) No. 664 of 2019-17.07.2019. .................................................... 15
R. K. Singh v. Union of India, AIR 1993 SC 1769. .................................................................. 2
R. Vishvanathan v. Rukn-ul-mulk Syed Abdul Wajid, (1963) 1 SCR 22. .............................. 12

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R.E. Mahomed Kassim & Co. v. Seeni Pakir-bin Ahmed, AIR 1927 Mad 265. ..................... 14
R.K. Garg v. Union of India, (1981) 4 SCC 675. .................................................................... 11
SEBI v. Kishore R. Ajmera, (2016) 6 SCC 368. ..................................................................... 10
Sirdar Gurdyal Singh v. Rajah of Faridkote, 1894 SCC OnLine 15. ................................ 12, 13
Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17. ............................................ 18, 19
Unigreen Global Pvt. Ltd. v. Punjab National Bank, 2017 SCC OnLine NCLAT 610. . 5, 7, 18
Union of India v. Paul Manickam, AIR 2003 SC 4622. ............................................................ 3
United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110. ............................................... 3

Statutes

Code of Civil Procedure, 1908, § 13, Act No.5, Acts of Parliament (India). .......................... 12
Code of Civil Procedure, 1908, § 44A, Act No.5, Acts of Parliament (India). ....................... 15
INDIA CONST. art. 14. ............................................................................................................... 16
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016, § 9 (India). ............................................................................. 10
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016, § 12(2) (India). ....................................................................... 10
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016, Rule 7 (India). .......................................................................... 6
The Insolvency and Bankruptcy Code, 2016, § 10(1), No. 31, Acts of Parliament, 2016 (India).
................................................................................................................................................ 5
The Insolvency and Bankruptcy Code, 2016, § 10(3), No. 31, Acts of Parliament, 2016 (India).
................................................................................................................................................ 6
The Insolvency and Bankruptcy Code, 2016, § 12(3), No. 31, Acts of Parliament, 2016 (India).
.............................................................................................................................................. 11
The Insolvency and Bankruptcy Code, 2016, § 12, No. 31, Acts of Parliament, 2016 (India).
.............................................................................................................................................. 11
The Insolvency and Bankruptcy Code, 2016, § 21, No. 31, Acts of Parliament, 2016 (India). 4
The Insolvency and Bankruptcy Code, 2016, § 3(10), No. 31, Acts of Parliament, 2016 (India).
................................................................................................................................................ 9
The Insolvency and Bankruptcy Code, 2016, § 3(12), No. 31, Acts of Parliament, 2016 (India).
................................................................................................................................................ 5
The Insolvency and Bankruptcy Code, 2016, § 4, No. 31, Acts of Parliament, 2016 (India). .. 5

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The Insolvency and Bankruptcy Code, 2016, § 5(20), No. 31, Acts of Parliament, 2016 (India).
................................................................................................................................................ 9
The Insolvency and Bankruptcy Code, 2016, § 5(7), No. 31, Acts of Parliament, 2016 (India).
................................................................................................................................................ 9
The Insolvency and Bankruptcy Code, 2016, § 61, No. 31, Acts of Parliament, 2016 (India). 4
The Insolvency and Bankruptcy Code, 2016, § 62, No. 31, Acts of Parliament, 2016 (India). 4
The Patents Act, 1970, No. 39, Acts of Parliament, 1970 (India). .......................................... 13

Foreign Case

International Woolen Mills v. Standard Wool (UK) Ltd., (2001) 5 SCC 265. ........................ 14
Morey v. Doud, 351 U.S. 457 (1957). ..................................................................................... 11
O’Gorman & Young v. Hartford Fire Insurance, (1931) 282 U.S. 251. .................................. 17

Moot Proposition

Moot Proposition, ¶ 10............................................................................................................. 13

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STATEMENT OF JURISDICTION

THE COUNSEL FOR THE RESPONDENTS HUMBLY SUBMITS BEFORE THE

HON’BLE SUPREME COURT OF NARNIA, THE MEMORANDUM ON BEHALF OF
THE RESPONDENTS.

The counsel on behalf of the Respondent 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.

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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 hey 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 because of this patent infringement. Shifu came to
know about this judgement through informal sources as because of a technical glitch, he wasn’t
able to receive a 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.

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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. Also
Once the plan was approved, there could be no further claims against Le Tranquille

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

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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?

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SUMMARY OF ARGUMENTS

ISSUE 1- THAT THE HON’BLE COURT HAS NO JURISDICTION TO ENTERTAIN THE PETITION
AND THE THE PETITION FILED BY INNER PEACE PRIVATE LIMITED IS NOT MAINTAINABLE

(A) It is humbly submitted before the Hon’ble Court that the instant matter is not
maintainable before the Court of Law. Locus standi means the right to bring an action,
to be heard in court, or to address the Court on a matter before it. Locus standi is the
ability of a party to demonstrate to the court sufficient connection to and harm from the
law or action challenged to support that party’s participation in the case.
(B) Alternative remedy is a bar unless there was complete lack of jurisdiction in the officer
or authority to take action impugned. It was held by the Hon’ble SC that where there is
an alternative statutory remedy available, court should not interfere unless the
alternative remedy is too dilatory or cannot grant quick relief.
(C) This writ petition has been filed prematurely. If a resolution plan has been approved
by the Committee of Creditors, and has passed before the Adjudicating Authority, this
determination can be challenged before the Appellate Authority under Section 61, and
may further be challenged before the Supreme Court under Section 62, if there is a
question of law arising out of such order, within the time specified in Section 62.

ISSUE 2- THAT THE PETITION SUBMITTED BY LE TRANQUILLE UNDER SECTION 10 AND

CONSEQUENTIAL PROCEEDINGS SHOULD NOT BE SET ASIDE.

(A) According to section 10(1), committing of default is one of the most important reasons
for the filing of an insolvency petition under the IBC code. According to the code,
where a corporate debtor has committed a default, a corporate applicant thereof may
file an application for initiating corporate insolvency resolution process with the
Adjudicating Authority.
(B) Rule 7 of 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 and as specified in the Insolvency and Bankruptcy
Board of India (Insolvency Resolution Process for Corporate Persons) Regulations,
2016.

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(C) The applicant is not ineligible under section 11 of the code. If all information is
provided by an applicant as required under section 10 and Form VI and if the Corporate
Applicant is otherwise not ineligible under section 11, the Adjudicating Authority is
bound to admit the application and cannot reject the application on any other ground.

ISSUE 3- THAT THE NCLT WAS RIGHT IN ORDERING THE STAY OF THE ARMORICA EP BY
WAY OF AN INTERIM ORDER

(A) It is submitted that the Court of Armorica does not have competent jurisdiction to give
the ‘foreign judgement’ falling under the exception of clause (a) of Section13. 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.
(B) In order for a foreign judgment to operate as Res judicata, it must have been given on
merits of the case. Moreover, with relation to the fact that Le Tranquille did not
participate in any proceedings in Armorica, i.e. the defendant, in a case similar to the
one at hand, was not present during the proceedings to defend his claim in the foreign
court (Armorican Court).

ISSUE 4-WHETHER SECTION 10, 30 (2) (B), 31(1) AND 65 OF 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 not violative of Article 14 of the Constitution of India and hence are
constitutionally valid, 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”, 31(1) with respect to approving/rejecting a plan is not subjective and 65
of the IBC with respect to the provision limiting to levy of penalty as opposed to rejection of
the petitioner for reasons contained therein

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ARGUMENT ADVANCED

The council on behalf of the respondent 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 not maintainable
before the Court of Law. The petitioner lacks the essential ingredients to maintain the matter
before the apex Court like infringement of any FR or locus standi [1.1]. Also there are other
alternative remedies available which haven’t been exhausted yet [1.2]. The writ petition has
also been filed prematurely [1.3].

1.1 THERE IS NO LOCUS STANDI

No action lies in the Supreme Court under Art. 32 unless there is an infringement of a
Fundamental Right1. The Supreme Court has previously emphasized that the violation of
Fundamental Right is the sine qua non of the exercise of the right conferred by Art. 32.2

Article 32, which contains the fundamental right to judicial remedies, is often considered one
of the most important fundamental rights. The object of Article 32 is the enforcement of the
fundamental rights guaranteed by the Constitution. A person whose fundamental rights have
been violated has the remedy of approaching the Supreme Court by way of a writ petition filed
under Article 32. When faced with such a petition, the Supreme Court will first deal with the
issue of the petitioner’s locus standi; the petitioner will have to establish that they have the
necessary locus to approach the Court. In this regard, the traditional, well established rule
of locus standi is that a person has no right to complain under Article 32 where no fundamental
right has been infringed. Article 32 seeks to protect the fundamental rights of a person and

1
Andhra Industrial Works v. Chief Controller of Imports, AIR 1974 SC 1539.
2
Fertilizer Corp. Kamgar Union v. Union of India, AIR 1981 SC 344.

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therefore, a precondition for its applicability is that there has been a violation of fundamental
rights.

In law, locus standi means the right to bring an action, to be heard in court, or to address the
Court on a matter before it. Locus standi is the ability of a party to demonstrate to the court
sufficient connection to and harm from the law or action challenged to support that party’s
participation in the case. In addition to this, a person acquires a locus standi, when he has to
have a personal or individual right which has been violated or threatened to be violated.3Third
party has no locus standi to canvass the legality or correctness of the action.4

In the present case in hand, the petitioner, being a stranger to the proceedings should not be
allowed to take part in the proceedings as he is neither a financial creditor nor an operational
creditor of Le Tranquille and therefore does not have any interest or right or any sort of legal
standpoint to challenge the proceedings. Also no FR of IPL has been violated as all the
proceedings were done in accordance with the law prevailing at that time.

1.2 ALTERNATE REMEDY HAS NOT BEEN EXHAUSTED

Alternative remedy is a bar unless there was complete lack of jurisdiction in the officer or
authority to take action impugned5. It was held by the Hon’ble SCthat where there is an
alternative statutory remedy available, court should not interfere unless the alternative remedy
is too dilatory or cannot grant quick relief. Thus, the respondents humbly submit that the
present writ petition is not maintainable on the ground that alternative remedy has not been
exhausted.6According to section 423 of the Companies Act 2013, an appeal can be made in the
Supreme Court when any person is aggrieved by the order of the NCLAT. In the present case,
the petitioner didn’t go to NCLAT but instead went straight to SC which clearly shows that
there are alternative remedies available which haven’t been exhausted by the petitioner.

In the case of Commissioner of Income Tax and Ors. v. Chhabil Dass Agarwal7, the Apex Court
discussed that the High Court should not entertain writ petitions when a statutory remedy has

3
Calcutta Gas Co. Ltd. v. State of West Bengal, AIR 1962 SC 1044.
4
R. K. Singh v. Union of India, AIR 1993 SC 1769.
5
A.V. Venkateshwaran v. R.S. Wadhwani, AIR 1961 SC 1906.
6
Asstt. Collector of Central Excise v. Jainson, AIR 1979 SC 1889.
7
Commissioner of Income Tax and Ors. v. Chhabil Dass Agarwal, (2014) 1 SCC 603 (India).

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been provided. This shows that it is pertinent to first exhaust all the alternative remedies
available and then move to HC first before moving to SC.

Moreover, in order to invoke the jurisdiction under Art. 32 of the Constitution to approach this
Court directly, it has to be shown by the petitioner as to why the High Court has not been
approached, could not be approached or it is futile to approach the High Court. Unless
satisfactory reasons are indicated in this regard, filing of petition in such matters directly under
Art. 32 of the Constitution is to be discouraged8.

This Hon’ble Court has itself imposed a self-restraint in its own wisdom on the exercise of
jurisdiction under Art. 32 where the party invoking the jurisdiction has an effective adequate
alternative remedy in the form of Art. 226 of the Constitution, although this Rule is a Rule of
convenience and discretion rather than a Rule of law9.

In the case of United Bank of India v. Satyawati Tondon10, the Supreme Court came down
heavily on the High Courts for entertaining writ petitions where statutory remedy is provided
and stated that,

“It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one
of compulsion, but it is difficult to fathom any reason why the High Court should entertain a
petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that
the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc.
and the particular legislation contains a detailed mechanism for redressal of his grievance. It is
a matter of serious concern that despite repeated pronouncement of this Court, the High Court’s
continue to ignore the availability of statutory remedies under the DRT Act and SARFAESI
Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse
impact on the right of the Banks and other financial institutions to recover their dues. We hope
and trust in future the High Courts will exercise their discretion in such matters with great
caution, care and circumspection.”

8
Union of India v. Paul Manickam, AIR 2003 SC 4622.
9
Mohammed Ishaq v. S. Kazam Pasha, (2009) 12 SCC 748.
10
United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110.

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1.3 THE WRIT PETITION HAS BEEN FILED PREMATURELY.

In the course of its order on Essar Steel11,the SC forbade litigations from any stakeholder over
a resolution plan before it is approved by the Committee of Creditors12 and the National
Company Law Tribunal (NCLT). Moreover, appeals over an approved resolution plan will go
directly to the National Company Appellate Law Tribunal (NCLAT) and may eventually land
up in the Supreme Court only after NCLAT has decided on the case.

“Once approved by the Committee of Creditors, the resolution plan is to be submitted to the
Adjudicating Authority under Section 31 of the Code. It is at this stage that a judicial mind is
applied by the Adjudicating Authority to the resolution plan so submitted, who then, after being
satisfied that the plan meets (or does not meet) the requirements mentioned in Section 30, may
either approve or reject such plan,” the Supreme Court’s order on the Essar Steel case stated.

If a resolution plan has been approved by the Committee of Creditors, and has passed before
the Adjudicating Authority, this determination can be challenged before the Appellate
Authority13 under Section 61, and may further be challenged before the Supreme Court14 under
Section 62, if there is a question of law arising out of such order, within the time specified in
Section 62, it further stated. Section 61 of the IBC gives rights to stakeholders to appeal to
NCLAT if the person feels aggrieved by the decision of the NCLT while Section 62 empowers
a stakeholder to file a petition in the Supreme Court if the person is not satisfied with the
outcome in the Appellate Tribunal.

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?

It is humbly submitted before the Hon’ble Supreme Court that the petition submitted by Le
Tranquille under Section 10 and consequential proceedings should not be set aside because
there has been an occurrence of a default[2.1]. Also the petition filed under section 10 is
complete as per the due process of law [2.2] and he is not ineligible to file a petition under

11
Arcelor Mittal India pvt. Ltd. v. Satish Kumar Gupta & Ors., (2019) 2 SCC 1.
12
The Insolvency and Bankruptcy Code, 2016, § 21, No. 31, Acts of Parliament, 2016 (India).
13
The Insolvency and Bankruptcy Code, 2016, § 61, No. 31, Acts of Parliament, 2016 (India).
14
The Insolvency and Bankruptcy Code, 2016, § 62, No. 31, Acts of Parliament, 2016 (India).

4
Memorial on Behalf of Respondent

NCLAT under the section 10 of the code and IPL does not have any locus standi to challenge
this petition. Also the petition has not been filed with malicious intent [2.3].

2.1 THAT DEFAULT HAS OCCURRED.

According to section 10(1), committing of default is one of the most important reasons for the
filing of an insolvency petition under the IBC code. According to the code, where a corporate
debtor has committed a default, a corporate applicant thereof may file an application for
initiating corporate insolvency resolution process with the Adjudicating Authority15. 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 authority16.

Default means non- payment of debt when whole or any part or instalment of the amount of
debt has become due and payable and is not repaid by the debtor or the corporate debtor, as the
case may be.17 An application may be filed by the Corporate applicant under the Insolvency
and Bankruptcy Code, 2016 once the default crosses the threshold limit which is one lakh
rupees.18

Also in Unigreen Global (P.) Ltd. v. Punjab National Bank19 the NCLAT has observed that
'so long as there is a debt and default has occurred and the application is complete and the
applicant is not barred by the provisions of section 11, the Adjudicating Authority must admit
the application'.

In an application under section 10, the Financial Creditor or the Operational Creditor may
dispute that there is no default or that the debt is not due and is not payable by law or fact. They
may also oppose admission on the ground that Corporate Applicant is not eligible to make
application given ineligibility under section 11 of the I.B. Code. The Adjudicating Authority
on hearing the parties and on perusal of record, if satisfied that there is a debt and default has
occurred, and the Corporate Applicant is not ineligible under section 11, the Adjudicating

15
The Insolvency and Bankruptcy Code, 2016, § 10(1), No. 31, Acts of Parliament, 2016 (India).
16
Innoventive Industries Ltd. v. ICICI Bank & Anr., (2018) 1 SCC 407.
17
The Insolvency and Bankruptcy Code, 2016, § 3(12), No. 31, Acts of Parliament, 2016 (India).
18
The Insolvency and Bankruptcy Code, 2016, § 4, No. 31, Acts of Parliament, 2016 (India).
19
Unigreen Global Pvt. Ltd. v. Punjab National Bank, 2017 SCC OnLine NCLAT 610.

5
Memorial on Behalf of Respondent

Authority has no option but to admit the application, unless it is incomplete, in which case the
Corporate Applicant is to be granted time to rectify the defects.20

The Corporate Debtor defaulted an amount of Narnian Rs. 60 Crores which has been revealed
by the respondent to the NCLT as well as to the interim resolution professional.

2.2 THE APPLICATION HAS FOLLOWED DUE PROCESS OF LAW.

The respondent respectfully submits before this Hon’ble Court that the application for initiation
of CIRP under Section 10 by Le Tranquille

2.2.1 The application has followed all requirements under section 10.

Rule 7 of 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 and as specified in the Insolvency and Bankruptcy Board of India (Insolvency
Resolution Process for Corporate Persons) Regulations, 201621. If all the above mentioned
documents have been presented before the tribunal that establishes the default by the corporate
debtor with the authorized signature, the application by the Corporate applicant is maintainable
before NCLT. The corporate applicant has to furnish the following documents along with the
application:22

1. Its books of account and such other documents relating to such period as may be
specified; and
2. The resolution professional proposed to be appointed as an interim resolution
professional.
3. The special resolution passed by shareholders of the corporate debtor or the resolution
passed by at least three-fourth of the total number of partners of the corporate debtor,
as the case may be, approving the filling of the application.

20
Leo Duct Engineers & Consultants Ltd. v. Canara Bank, 2017 SCC OnLine NCLAT 547.
21
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations,
2016, Rule 7 (India).
22
The Insolvency and Bankruptcy Code, 2016, § 10(3), No. 31, Acts of Parliament, 2016 (India).

6
Memorial on Behalf of Respondent

The similar issue fell for consideration before in Unigreen Global (P.) Ltd. v. PNB23, 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.24 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".

Any fact unrelated or beyond the requirement under I&B Code or Forms prescribed under
Adjudicating Authority Rules (Form 6 in the present case) are not required to be stated or
pleaded. Non-disclosure of any fact, unrelated to Section 10 and Form 6 cannot be termed to
be suppression of facts or to hold that the Corporate Applicant has not come with clean hands.25

The case of Binani Cements26 clarified one thing that the approval of the Adjudicating
Authority is not a mere requirement/ formality, although the Adjudicating Authority is not
permitted to alter the terms of the plan, the ultimate authority to approve or reject a plan vests
with the Adjudicating Authority, and for that it should consider the following aspects:

(i) whether the plan complies with the requirements of Section 30(2)?
(ii) whether the plan is fair and equitable or there is any unjust discrimination not
envisaged in law?
(iii) whether the plan adheres to the object of the Code i.e. maximises the value of assets
and balances the interests of all the stakeholders?

In the present case in hand, all of the above 3 requirements have been fulfilled. The plan ic not
violative of Section 30(2) od the code. There is no unjust treatment to any of the creditors in
the plan. And lastly the plan very well adheres to the object of the code.

23
Unigreen Global Pvt. Ltd. v. Punjab National Bank, 2017 SCC OnLine NCLAT 610.
24
Innoventive Industries Ltd. v. ICICI Bank & Anr., (2018) 1 SCC 407.
25
Innoventive Industries Ltd. v. ICICI Bank & Anr., (2018) 1 SCC 407.
26
Binani Industries Limited v. Bank of Baroda and Anr., 2018 SCC OnLine NCLAT 565.

7
Memorial on Behalf of Respondent

In Leo Duct Engineering 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.

Therefore, if the CIRP application is complete and is at par with the due process of law, the
adjudicating authority is bound to accept it base on its merits and then decide further.

2.2.2 The applicant is not ineligible under section 11 of the code.

Section 10 does not empower the Adjudicating Authority to go beyond the records as
prescribed under section 10 and the information as required to be submitted in Form VI of the
Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules 2016 subject to
ineligibility prescribed under section 11. If all information is provided by an applicant as
required under section 10 and Form VI and if the Corporate Applicant is otherwise not
ineligible under section 11, the Adjudicating Authority is bound to admit the application and
cannot reject the application on any other ground.27

Section 11 of the code says that-

The following persons shall not be entitled to make an application to initiate corporate
insolvency resolution process under this Chapter, namely: -

(a) a corporate debtor undergoing a corporate insolvency resolution process; or

(b) a corporate debtor having completed corporate insolvency resolution process twelve months
preceding the date of making of the application; or

(c) a corporate debtor or a financial creditor who has violated any of the terms of resolution
plan which was approved twelve months before the date of making of an application under this
Chapter; or

(d) a corporate debtor in respect of whom a liquidation order has been made.

Explanation. - For the purposes of this section, a corporate debtor includes a corporate
applicant in respect of such corporate debtor.

27
Leo Duct Engineers & Consultants Ltd. v. Canara Bank, 2017 SCC OnLine NCLAT 547.

8
Memorial on Behalf of Respondent

Non-disclosure of facts, such as that the 'Corporate Debtor' is undergoing a corporate

insolvency resolution process; or that the 'Corporate Debtor' has completed corporate
insolvency resolution process twelve months preceding the date of making of the application;
or that the corporate debtor has violated any of the terms of resolution plan which was approved
twelve months before the date of making of an application under the said Chapter; or that the
corporate debtor is one in respect of whom a liquidation order has already been made can be a
ground to reject the application under Section 10 on the ground of suppression of fact/not come
with clean hand.28

2.2.3 IPL does not have any Locus Standi.

It is humbly submitted before this Hon’ble SC that the petitioner, who challenged the
admittance of the CIRP petition by the NCLT has no locus standi to do so. According to the
code, to be a part of CIRP proceedings you have to be either a FC or an OC. The term
Creditor29has been defined under the Insolvency and Bankruptcy Code (IBC), 2016 to provide
for an exhaustive definition of the classification of creditors. This has in turn made it sine qua
non to prove that the creditor falls within the ambit and scope of the definition of either
Financial Creditor30 under of IBC or Operational Creditor31 under of the IBC to initiate
insolvency proceedings before the Tribunal. According to the definitions. In the present case
IPL neither falls under the ambit of Financial Creditor as it fulfils no requirement of Financial
Debt as specified by the code in Section 5(8). Also it can’t be an OC as the requirements of
operational debt have also not been fulfilled under Section 5(21).

One can argue that IPL is a creditor and has rights as under the definition of creditor in Section
3(10), a term ‘Decree holder” is used. But the Hon’ble NCLT in the judgement of M/s. Deem
Roll Tech Limited v. M/s. R.L. Steel & Energy Ltd32 held that the Code cannot be used to
execute decree of civil court and the remedy for the petitioner is to initiate execution proceeding
before appropriate civil court. NCLT, while dismissing the application on the ground of
limitation, didn’t entertain the civil court degree passed in favour of the petitioner. As regard
to the decree, the NCLT was of the view that, the remedy for the petitioner is to approach

28
Innoventive Industries Ltd. v. ICICI Bank & Anr., (2018) 1 SCC 407.
29
The Insolvency and Bankruptcy Code, 2016, § 3(10), No. 31, Acts of Parliament, 2016 (India).
30
The Insolvency and Bankruptcy Code, 2016, § 5(7), No. 31, Acts of Parliament, 2016 (India).
31
The Insolvency and Bankruptcy Code, 2016, § 5(20), No. 31, Acts of Parliament, 2016 (India).
32
M/s. Deem Roll Tech Limited v. M/s. R.L. Steel & Energy Ltd., 2017 SCC OnLine NCLT 465.

9
Memorial on Behalf of Respondent

appropriate civil court for execution of decree and NCLT cannot be converted into an executing
court.

Also as per the CIRP Regulations, a person claiming to be a creditor, other than those covered
under regulations 7, 8, or 9, shall submit proof of its claim to the interim resolution professional
or resolution professional in person, by post or by electronic means in Form F of the
Schedule.33Moreover a creditor, who failed to submit proof of claim within the time stipulated
in the public announcement, may submit such proof to the interim resolution professional or
the resolution professional, as the case may be, till the approval of a resolution plan by the
committee.34

Therefore, the petitioner, IPL does not have any rights or locus standi by which they can
approach the court regarding the decision of NCLT. Also, the petitioner was given certain
rights but they didn’t behave as prudent beings and ignored the law prevalent at that time.

2.3 THE APPLICATION UNDER SECTION 10 HAS NOT BEEN FILED WITH MALICIOUS INTENT

The respondents respectfully submit before this Hon’ble Court that the application for initiation
of CIRP under Section 10 by the corporate debtor i.e. Le Tranquille have not been filed with a
malicious intent as claimed by the petitioner. It is stated in the fact sheet that the company has
been in debt of more than Narnian Rs 60 crores. It is also stated that this debt has been due
since past 4 years. It is also mentioned that the company was never making continuous and
sustained profits. In the case of SEBI v. Kishore R. Ajmera35, it has been held by the Hon’ble
SC 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

33
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations,
2016, § 9 (India).
34
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations,
2016, § 12(2) (India).
35
SEBI v. Kishore R. Ajmera, (2016) 6 SCC 368.

10
Memorial on Behalf of Respondent

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"

Hon’ble SC in the case of R.K. Garg v. Union of India36, 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.
Nowhere has this admonition been more felicitously expressed than in Morey v. Doud37 where
Frankfurter, J., said in his inimitable style:-

In the utilities, tax and economic regulation cases, there are good reasons for judicial self-
restraint if not judicial deference to legislative judgment. The legislature after all has the
affirmative responsibility. When these are added to the complexity of economic regulation, the
uncertainty, the liability to error, the bewildering conflict of the experts, and the number of
times the judges have been overruled by events, self-limitation can be seen to be the path to
judicial wisdom and institutional prestige and stability.

In the present case all the facts and circumstances surrounding the event lead to only one
conclusion that the proceedings under section 10 of the code have not been filed maliciously.
Even if, as stated by the petitioner, that LT wanted to take benefit of the moratorium period, it
is only applicable till the time CIRP is complete which shall not be more than 6 months38 with
a possible extension of 90 days.39 Also in the event of failure of the approval of resolution plan
under section 30(6) or exhaustion of the maximum time limit under section 12, the process of
liquidation shall begin. It seems a little far-fetched that the creditors would initiate CIRP
proceedings and risk losing the company just to enjoy the benefits of the moratorium period.

Therefore, the reasonable conclusion here should be that the LT didn’t file CIRP proceedings
just to gain benefits of the moratorium period as claimed by the petitioner.

36
R.K. Garg v. Union of India, (1981) 4 SCC 675.
37
Morey v. Doud, 351 U.S. 457 (1957).
38
The Insolvency and Bankruptcy Code, 2016, § 12, No. 31, Acts of Parliament, 2016 (India).
39
The Insolvency and Bankruptcy Code, 2016, § 12(3), No. 31, Acts of Parliament, 2016 (India).

11
Memorial on Behalf of Respondent

ISSUE 3:WHETHER THE NCLT WAS RIGHT IN ORDERING THE STAY

OF ARMORICA EP BY WAY OF AN INTERIM ORDER?

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…”40

This is based on the principle of sanctity of judgements competently rendered. If a foreign

judgment is conclusive for any matter adjudicated between the parties, such judgment creates
Res judicata between same parties.41

The Armorica EP order, pursuant to the exceptions under Section 13 of CPC is not entitled to
recognition in India.

The relevant defences (exceptions) so attracted by the present foreign judgement i.e. the
Armorica EP order, are clauses (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.

3.1IT HAS NOT BEEN PRONOUNCED BY A COURT OF COMPETENT JURISDICTION.

It is submitted that the Court of Armorica does not have competent jurisdiction to give the
‘foreign judgement’ falling under the exception of clause (a) of Section13. This is becausethe
defendant Le Tranquille has not voluntarily submitted to the jurisdiction 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; that it may have jurisdiction under its own law is
irrelevant.42 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

40
Code of Civil Procedure, 1908, § 13, Act No.5, Acts of Parliament (India).
41
R. Vishvanathan v. Rukn-ul-mulk Syed Abdul Wajid, (1963) 1 SCR 22.
42
Sirdar Gurdyal Singh v. Rajah of Faridkote, 1894 SCC OnLine 15.

12
Memorial on Behalf of Respondent

submitted to the jurisdiction of that court or had adopted the proceedings as a plaintiff and
himself selected the forum.43

Therefore, what may be concluded is that when the defendant is not a citizen nor a resident of
said country and has not submitted to its jurisdiction, the foreign court is not a competent
court.44In Sirdar Gurdyal Singh v Rajah of Faridkote, it was held that in the case of an
agreement or consent to the jurisdiction of a foreign court being implied or inferred, ‘such
obligation, unless expressed, could not be implied’45. In the current case, Le Tranquille is a
private company incorporated in Narnia, and is the defendant in the suit filed by Inner Peace
Private Limited. The defendant by no means had agreed to submit to the jurisdiction of the
court of Armorica. Thus, there is required to be an express submission to the jurisdiction of
Armorican Courts by Le Tranquille, which is absent in the present situation.

It is also submitted that the court of Armorica had no jurisdiction to entertain the initial patent
infringement suit as patent protection is a territorial right and therefore it is effective only
within the territory of Narnia, and does not extend to Armorica ( the laws of Narnia being pari
materia to the laws of Republic of India)46. In Section 2.109, WIPO Intellectual Property
Handbook, as a general rule, patents do not extend beyond the boundaries of the country which
granted the patent.

Hence the Armorica EP must not be enforced for it is based on the said order.

3.2 THE JUDGEMENT HAS NOT 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.47 Moreover, with relation to the fact that Le Tranquille did not participate in any
proceedings in Armorica,48 i.e. the defendant, in a case similar to the one at hand, was not
present during the proceedings to defend his claim in the foreign court (Armorican Court).

“The decision of the foreign court was not given on examination of the points at controversy
between the parties. It was given ex parte on the basis of the plaintiff's pleadings and documents

43
Maloji Nar Singh Rao Shitole v. Shankar Saran, AIR 1962 All 1737.
44
Maloji Nar Singh Rao Shitole v. Shankar Saran, AIR 1962 All 1737.
45
Sirdar Gurdyal Singh v. Rajah of Faridkote, 1894 SCC OnLine 15.
46
The Patents Act, 1970, No. 39, Acts of Parliament, 1970 (India).
47
Narasimha Rao v. Venkata Lakshm, (1991) 3 SCC 451.
48
Moot Proposition, ¶ 10.

13
Memorial on Behalf of Respondent

tendered by the plaintiff without going into the controversy between the parties since the
defendant did not appear at the time of the hearing of the suit to defend the claim.”49

In case defendants are properly served but do not appear and contest and the judgment is given
for the plaint claim without any trial, judgment was entered up in favour of the plaintiff as a
matter of course. That a decree obtained on default of appearance of the defendant without any
trial on evidence is a case where the judgment must be held not to have been on the merits of
the case.50 A decree passed in absentem was a total nullity as a foreign judgment, in other
words, it is not a valid foreign judgment51. The default judgement was passed after the
respondent failed to appear for the court proceedings even on being provided with more than
five opportunities to do so. Hence the judgement cannot be said to have been passed on the
merits of the case. In the case of International Woolen Mill v. Standard Wool (UK) Ltd.52, it
was held that a judgment and decree granted by a Foreign Court can be said to be on merit only
if such Court has considered the case on merit by looking into evidence led by plaintiff and
documents proved before it. In the present case the order was not to be regarded as the one on
merit, for it was for the execution of a non-conclusive judgement.

3.3 IT IS SUBMITTED THAT NCLT HAS INHERENT POWERS VESTED IN IT.

It is humbly submitted that NCLT has some inherent powers vested in it under the NCLT Rules,
2016. It states that Nothing in these rules shall be deemed to limit or otherwise affect the
inherent powers of the Tribunal to make such orders as may be necessary for meeting the ends
of justice or to prevent abuse of the process of the Tribunal.

To ensure that one or other party may not abuse the process of the Tribunal or for meeting the
ends of justice, it is always open to the Tribunal to pass appropriate interim order.

Till the time either the Application is admitted or rejected, the assets and the accounts of the
Company need to be maintained on date except withdrawal of the legitimate expenses required
for carrying on the day-to-day expenses. Therefore, this Authority in exercise of the powers
conferred under Rule 11 of the NCLT Rules, 2016, restrains the Corporate Debtor and its

49
Algemene Bank Nederland NV v. Satish Dayalal Choksi, AIR 1990 Bom 170.
50
R.E. Mahomed Kassim & Co. v. Seeni Pakir-bin Ahmed, AIR 1927 Mad 265.
51
Kukadap Krishna Murthy v. GodmatlaVenkata Rao, AIR 1962 AP 400.
52
International Woolen Mills v. Standard Wool (UK) Ltd., (2001) 5 SCC 265.

14
Memorial on Behalf of Respondent

Directors from alienating, encumbering or creating any third party interest on the assets of the
1st Respondent Company till further orders53.

In the verdict of K.K. Velusamy v. N. Palaanisamy,54 the Hon’ble Supreme Court upheld that
Section 151 of the Code of Civil procedure (now rule 11 of NCLT Rules 2016) recognizes the
discretionary power inherited by the every Court as a necessary corollary for rendering justice
in accordance with law, to do what is ‘right’ and undo what is ‘wrong’

On similar lines, with the power vested in it by Rule 11 of National Company Law Tribunal
Rules, 2016, NCLT can appropriately pass an interim order to stay the Armorica EP, until
further orders or until the insolvency resolution process is completed.Therefore, to protect the
interest of the Company and the shareholders, the NCLT can order interim stay on the
Armorica EP.

3.4 THE ORDER IS ONLY EVIDENTIARY IN NATURE, AND CANNOT BE ENFORCED.

A foreign Judgment may be enforced by proceedings in execution in certain specified cases

mentioned in Section 44-A of the CPC. Section 44A talks about “Execution of decrees passed
by Courts in reciprocating territory- (1) Where a certified copy of a decree of any of the superior
courts of any reciprocating territory has been filed in a District Court, the decree may be
executed in India as if it had been passed by the District Court….”55

Section 44A of the CPC is an enabling provision which enables a decree holder to put a decree
of a court in a reciprocating territory into execution.

In a case, the Supreme Court that a foreign judgment which does not arise from the order of a
superior court of a reciprocating territory cannot be executed in India. It ruled that a fresh suit
will have to be filed in India on the basis of the foreign judgment56.

Therefore, under Section 44A of the CPC, a decree or judgment of any of the Superior Courts
of any reciprocating territory are executable as a decree or judgment passed by the domestic
Court.

53
NUI Pulp and Paper Industries Pvt. Ltd. Vs. M/s. Roxcel Trading GMBH, (NCLAT) Company Appeal (AT)
(Insolvency) No. 664 of 2019-17.07.2019.
54
K.K. Velusamy v. N. Palaanisamy, (2011) 11 SCC 275.
55
Code of Civil Procedure, 1908, § 44A, Act No.5, Acts of Parliament (India).
56
Maloji Nar Singh Rao Shitole v. Shankar Saran, AIR 1962 All 1737.

15
Memorial on Behalf of Respondent

The court of Armorica that gave the order of Armorica EP was a trial court of that country and
not a superior court, while being a non-reciprocating country.

However, if a decree is of a court in a non-reciprocating foreign territory, a party has to file a

fresh civil action (suit) on that foreign decree, or on the original underlying cause of action, or
both in a domestic court of competent jurisdiction, where the foreign judgement is treated as
only evidentiary in nature.

However, in both the cases, the decree has to pass the test of Section 13 CPC which specifies
certain exceptions under which the foreign judgment becomes inconclusive and is therefore
not executable or enforceable in India.57

In the present case, the Armorica EP fails to avoid the exceptions stated in Section 13 of the
CPC, making it non conclusive in Narnia, and hence unenforceable.

ISSUE 4: WHETHER SECTIONS 10, 30 (2) (B), 31(1) AND 65 OF IBC ARE
CONSTITTUTIONAL?

It is humbly submitted before the Hon’ble Supreme Court that Section 10, 30 (2) (b), 31(1) and
65 of IBC are not violative of Article 1458 of the Constitution of India and hence are
constitutionally valid, 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”, 31(1) with respect to approving/rejecting a plan is not subjective and 65
of the IBC with respect to the provision limiting to levy of penalty as opposed to rejection of
the petitioner for reasons contained therein.

4.1 THERE IS ALWAYS A PRESUMPTION OF CONSTITUTIONALITY.

Presumption of Constitutionality is a legal theory that was developed by Common Law Courts
to deal with the cases challenging the constitutionality of statutes. The presumption of
Constitutionality was first employed in the case of O’Gorman & Young v. Hartford Fire

57
Marine Geotechnics LLC v. Coastal Marine Construction & Engineering Ltd., (2014) 2 Bom CR 769.
58
INDIA CONST. art. 14.

16
Memorial on Behalf of Respondent

Insurance59 in 1931 in which Justice Brandeis wrote, “The presumption of constitutionality

must prevail in the absence of some factual foundation of record for overthrowing the statute.”

Presumption of Constitutionality of a statute or provision is followed when two possible

interpretations of a statute occur –one in violation of the Constitution and one in favour of the
Constitution. In such a case, the interpretation that favours the Constitution is considered valid
until the petitioner proves otherwise, in a manner that convinces the Court beyond reasonable
doubt, laying the burden of proof on the petitioner.

In Charanjit Lal v. Union of India60 , the Supreme Court stated-

“…the presumption is always in favour of the constitutionality of an enactment, and the burden
is upon him who attacks it to show that there has been a clear transgression of the constitutional
principles.”

Therefore, all the sections which are questioned by the petitioner in the writ petition are
constitutional till the time they themselves prove beyond doubt that they violate any provision
of constitution as according to the doctrine of presumption of constitutionality, it is always, by
default assumed by the judiciary that the provision of law is constitutional till proven otherwise.

4.2 SECTION 10 IS NOT VIOLATIVE OF THE CONSTITUTION

It is humbly submitted before the Hon’ble court that no provision under section 10 violated any
provision of the constitution. In an application under section 10, the Financial Creditor or the
Operational Creditor may dispute that there is no default or that the debt is not due and is not
payable by law or fact. They may also oppose admission on the ground that Corporate
Applicant is not eligible to make application given ineligibility under section 11 of the I.B.
Code. The Adjudicating Authority on hearing the parties and on perusal of record, if satisfied
that there is a debt and default has occurred, and the Corporate Applicant is not ineligible under
section 11, the Adjudicating Authority has no option but to admit the application, unless it is
incomplete, in which case the Corporate Applicant is to be granted time to rectify the defects.61

59
O’Gorman & Young v. Hartford Fire Insurance, (1931) 282 U.S. 251.
60
Charanjit Lal v. Union of India, AIR 1951 SC 41.
61
Leo Duct Engineers & Consultants Ltd. v. Canara Bank, 2017 SCC OnLine NCLAT 547.

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Memorial on Behalf of Respondent

The similar issue fell for consideration before in Unigreen Global (P.) Ltd. v. PNB62, 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:

Therefore, we, hold that the law laid down by the Hon'ble Supreme Court in Innoventive
Industries Ltd.63 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".

Upon reading the provisions of section 10, it is very well clear that it does give an opportunity
of being heard by the help of IRP or RP as appointed by the CoC. It is his job to hear all the
claims and then act upon the as it is prescribed under law. Also the provisions of section 10
must be read with the provisions of Section 65 and 66. It is up to NCLT to accept or reject a
petition if in a case there has been any sort of misuse of the provisions of CIRP under section
10, therefore rejecting the argument of the petitioner that NCLT has no obligation to determine
the default.

4.3 THAT SECTION 30 (2) (B) OF IBC IS CONSTITUTIONALLY VALID

It is humbly submitted before the Hon’ble Supreme Court that Section 30(2) (b) of the Code
does not violate Article 14 of the Constitution as this section takes care of the rights of OC in
a way which is best suited for the interest of all. It neither violates the rights of FC and nor of
OC.

Hon’ble NCLAT in Central Bank of India Vs Resolution Professional of the Sirpur Paper Mills
Ltd. &Ors.64, wherein it was held that the legislators did not intend any discrimination among
the same set of group such as “Operational Creditors” or “Financial Creditors”.

It was held by Supreme Court in the case of Swiss Ribbons Pvt. Ltd. &Anr v. Union of India65
that -

62
Unigreen Global Pvt. Ltd. v. Punjab National Bank, 2017 SCC OnLine NCLAT 610.
63
Innoventive Industries Ltd. v. ICICI Bank & Anr., (2018) 1 SCC 407.
64
Central Bank of India v. Resolution Professional of the Sirpur Paper Mills Ltd. &Ors., (NCLAT) Company
Appeal (AT) (Insolvency) No. 526 of 2018-12.09.2018.
65
Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17.

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Memorial on Behalf of Respondent

“It may be seen that a resolution plan cannot pass muster under Section 30(2)(b) read with
Section 31 unless a minimum payment is made to operational creditors, being not less than
liquidation value. Section 30(2)(b) does exactly the same. It says that the amount of money that
should be paid to OC should not be less than the amount of money paid to them in the event of
liquidation under section 53 of the code. Therefore the interest of OC remains protected and is
not violative of article 14 of the constitution and is therefore constitutional.

4.4 THAT SECTION 31(1) OF IBC IS CONSTITUTIONALLY VALID.

It is humbly submitted before the Hon’ble Court that Section 31 (1) of the IBC is constitutional
as it serves the interests of all stakeholders in a reasonable manner.

The Insolvency Code is a legislation which deals with economic matters and, in the larger
sense, deals with the economy of the country as a whole. The experiment contained in the Code,
judged by the generality of its provisions and not by so called crudities and inequities that have
been pointed out by the petitioners, passes constitutional muster.66

Where there is challenge to the constitutional validity of a law enacted by the legislature, the
Court must keep in view that there is always a presumption of constitutionality of an enactment,
and a clear transgression of constitutional principles must be shown. The Court also needs to
be mindful that a legislation does not become unconstitutional merely because there is another
view or because another method may be considered to be as good or even more effective, like
any issue of social, or even economic policy. It is well settled that the courts do not substitute
their views on what the policy is.67

In the utilities, tax and economic regulation cases, there are good reasons for judicial self-
restraint if not judicial deference to legislative judgment. The legislature after all has the
affirmative responsibility. The courts have only the power to destroy, not to reconstruct. 68 A
proviso has been added in 31(1) stipulating that, before approving a resolution plan, the NCLT
will satisfy itself that the resolution plans can be effectively implemented. This is meant to
formalise the discretion exercised by the Adjudicating Authority in reviewing the merits of the
resolution plan and not act as pure rubber stamping authority.

66
Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17.
67
Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17.
68
Morey v. Doud, (1957) 354 U.S. 457.

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Memorial on Behalf of Respondent

Under Section 31(1) the Adjudicating Authority, if satisfied with the resolution plan, accepts
or rejects a plan leaving no scope for arbitrariness and therefore the Section does not violate
Article 14 of the Constitution.

4.5 THAT SECTION 65 OF IBC IS CONSTITUTIONALLY VALID.

It is humbly submitted before the Hon’ble Supreme Court that Section 65 is included in the
code so that if any person who initiates insolvency resolution process or liquidation process
fraudulently or with malicious intent, and for any purpose other than for the resolution of
insolvency or liquidation, as the case may be, the adjudicating authority may impose a fine on
that person. “It is but a decent respect to the wisdom, integrity, and patriotism of the legislative
body, by which any law is passed, to presume in favour of its validity, until its violation of the
Constitution is proved beyond a reasonable doubt.”69 This summarises the principle of
Presumption of Constitutionality. Presumption of Constitutionality of a statute or provision
comes into play when contradicting interpretations of a statute can be made–one in violation
of the Constitution and one in favour of the Constitution. When such a situation arises, the
interpretation which favours the constitutionality of the provision and the burden of proof lies
with the petitioner to prove its unconstitutionality unequivocally and beyond any reasonable
doubt.

Section 65 guarantees that fraudulent misrepresentations made by a party are not let off without
justice being served. The purpose of this section is to make a person accountable for all his
malicious intentions and consequent acts. Therefore, declaring unconstitutional a provision
which deals with fraudulent acts of a person would be gross violation of article 14 which
promises equal protection and hence equal accountability before law. Furthermore, if the
petition for CIRP itself is dismissed, it would cause gross loss to the creditors and the debtor
involved. However, it is a well-founded principle of law that fraud vitiates all underlying
transactions. Therefore, after the application under Section 7, 9, or 10 has been accepted, an
action under this Section 65 will render the entire insolvency resolution process void, hence
not letting the malafide intent get its way. Therefore, on no grounds can Section 65 be declared
unconstitutional. Instead it enforces Article 14 as it prevents any party from gaining unfair
advantage though a fraudulently filed CIRP, ensuring equality guaranteed in the Constitution
of Indi

69
A.G. v. Momodou Jobe, (1984) 1 AC 689.

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Memorial on Behalf of Respondent

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 not 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 not
be set aside.
3. That the order of NCLT in ordering the stay of the Armorica EP by way of an interim
order should be upheld.
4. That Sections 10, 30(2)(b), 31(1) and 65 of the Insolvency and Bankruptcy Code,
2016 should not 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 Respondent)

xiv