W.P.(C)/9674/2017 of ASHAPURA MINECHEM LTD. Vs UNION OF INDIA AND ORS.

*IN THE HIGH COURT OF DELHI AT NEW DELHI+W.P.(C) 9674/2017%Date of Decision: 1[st]November, 2017

ASHAPURA MINECHEM LTD.

..... Petitioner

Through :Mr. Rajashekhar Rao, Ms.MeghnaMishra, Mr. M.S. Bdhanwalla, Mr.Dheeraj P. Deo, Advocates.

versus

CORAM:HON'BLE MR. JUSTICE SANJIV KHANNAHON'BLE MS. JUSTICE PRATHIBA M. SINGH

SANJIV KHANNA, J.(ORAL)CM APPL. 39391/2017 (Exemption)

Allowed, subject to all just exceptions. The application accordinglystands disposed of.

W.P.(C) 9674/2017 & CM APPL. 39390/2017 (STAY)

Learned counsel for the petitioner/Ashapura Minichem Limited(hereafter ‘Ashapura’) has given up the prayer challenging constitutionalvalidity of the Sick Industrial Companies (Special Provisions) Repeal Act,2003 (Repeal Act, for short) and restricts his challenge to the amended

W.P.(C) 9674/2017

provisions of Section 4(b) and Section 5(1)(d) of the Repeal Act as beingviolative of Article 14 of the Constitution of India.

2.The petitioner also prays for quashing of Notification No. S.O. 3568(E) dated 25[th]November, 2016, Notification No. S.O. 3569 (E) dated 25[th]November, 2016 and Notification No. S.O. 1683 (E) dated 24[th]May, 2017.

3.The Petitioner is company engaged in mining, processing, sale, andexport of minerals.

4.On 2nd June, 2011, the petitioner company made reference beforethe Board of Industrial and Financial Reconstruction (BIFR or Board, forshort), which, vide order dated 12th March, 2012 declared it to be sickcompany under the provisions of the Sick Industrial Companies (SpecialProvisions) Act, 1985 (SIC Act for short).

5.The petitioner had submitted Draft Rehabilitation Scheme, whichwas pending when vide Notification No. S.O. 3568(E) dated 25thNovember, 2016 the Repeal Act was enforced with effect from 1stDecember, 2016. Consequently, the SIC Act was repealed and ceased to beoperative and proceedings under the SIC Act before the BIFR abated.

6.Repeal Act was enacted by the Parliament in 2004, but was notnotified under Section 1(2), till Notification No. S.O. 3568(E) dated 25thNovember, 2016.

7.Section 4(b) of the Repeal Act as originally enacted was as under:-

"4. Consequential provisions.—On the dissolution of theAppellate Authority and the Board,—Appellate Authority and the Board,—

(a) XXXX

(b) any appeal preferred to the Appellate Authority or anyreference made to the Board or any inquiry pending before theBoard or any other authority or any proceeding of whatevernature pending before the Appellate Authority or the Boardimmediately before the commencement of this Act shall standabated :

Provided that company:—

(i) in respect of which such appeal or reference or inquirystand abated under this clause may make reference underPart VI-A of the Companies Act, 1956 (1 of 1956) within onehundred and eighty days from the commencement of this Act inaccordance with the provisions of the Companies Act, 1956;

(ii) which had become sick industrial company as defined inclause (46-AA) of Section 2 of the Companies Act, 1956 (1 of1956), before the commencement of the Companies (SecondAmendment) Act, 2002 (11 of 2003) may make referenceunder Part VI-A of the Companies Act, 1956 within onehundred and eighty days from the commencement of theCompanies (Second Amendment) Act, 2002 or within sixty daysof final adoption of accounts after such commencement,whichever is earlier,

and reference so made shall be dealt with in accordance withthe provisions of the Companies Act, 1956 (1 of 1956) :

Provided further that no fee shall be payable for makingsuch reference under Part VI-A of the Companies Act, 1956 (1of 1956) by company whose appeal or reference or inquirystand abated under this clause :

Provided also that any scheme sanctioned under sub-section (4) or any scheme under implementation under sub-

section (12) of Section 18 of the repealed enactment shall bedeemed to be scheme sanctioned or under implementationunder Section 424-D of the Companies Act, 1956 (1 of 1956)and shall be dealt with in accordance with the provisionscontained in Part VI-A of that Act;"

However, the said sub-section was never enforced.

8.By another Notification No. S.O.3569(E) also dated 25[th]November,2016, Section 4(b) ofRepeal Act was amended/modified - w.e.f. 1[st]November 2016, to read as under:

“AFTER AMENDMENT OF SICA (REPEAL) ACT, 2003,W.E.F. 1[ST]NOVEMBER, 2016:

4. Consequential provisions - On the dissolution of theAppellate Authority and the Board –Appellate Authority and the Board –

(a)XXXX

(b) on such date as my be notified by the Central Governmentin this behalf, any appeal preferred to the Appellate Authorityor any reference made or inquiry pending to or before theBoard or any proceeding of whatever nature pending before theAppellate Authority or the Board under Sick IndustrialCompanies (special provisions) Act, 1985 (1 of 1986) shallstand abated:

Provided that company in respect of which such appeal orreference or inquiry stands abated under this clause may makereference to the National Company Law Tribunal under theInsolvency and Bankruptcy Code, 2016 within one hundred andeighty days from the commencement of the Insolvency andBankruptcy Code, 2016 in accordance with the provisions ofthe Insolvency and Bankruptcy Code, 2016.

Provided further that no fees shall be payable for making suchreference under Insolvency and Bankruptcy Code, 2016 by acompany whose appeal or reference or inquiry stands abatedunder this clause]”

The aforesaid amendment was made prior to 1[st]December, 2016 i.e. thedate on which the Repeal Act was enforced.

9.Thereafter, vide Notification No. S.O. 1683 (E) dated 24[th]May, 2017,two provisos were added to Section 4(b) of the Repeal Act. SaidNotification, also referred to as 'The Removal of Difficulty Order', 2017,reads as under:-

S.O. 1683(E).- Whereas, the Insolvency and Bankruptcy Code,2016 (31 of 2016 (hereinafter referred to as the said Code)received the assent of the President on 28[th]May, 2016 and waspublished in the official Gazette on the same date;

And, whereas, section 252 of the said Code amended theSick Industrial Companies (Special Provisions) Repeal Act,2003 (1of 2004) in the manner specified in the Eighth Scheduleto the said Code;

And, whereas, the un-amended second proviso to clause(b) of section 4 of the Sick Industrial Companies (SpecialProvisions) Repeal Act, 2003 provides that any schemesanctionedundersub-section(4)oranyschemeunderimplementation under sub-section (12) of section 18 of therepealed enactment i.e., the Sick Industrial Companies (SpecialProvisions) Act, 1985 (1 of 1986) shall be deemed to be ascheme under implementation under section 424D of theCompanies Act, 1956, (1 of 1956) and shall be dealt with inaccordance with the provisions contained in Part VIA of theCompanies Act, 1956;

And, whereas, section 424D of the Companies Act, 1956provided for review or monitoring of schemes that aresanctioned or are under implementation;

And, whereas the Companies Act, 1956 has beenrepealed are re-enacted as the Companies Act, 2013 (18 of2013) which, inter alia, provides for scheme of revival andrehabilitation, sanction of scheme, scheme to be binding andfor the implementation of scheme under section 261 to 264 ofthe Companies Act, 2013;

And, whereas, sections 253 to 269 of the Companies Act,2013 have been omitted by Eleventh Schedule to the Insolvencyand Bankruptcy Code, 2016;

And, whereas, clause (b) of section 4 of the SickIndustrial Companies (Special Provisions) Repeal Act, 2003has been substituted by the Eighth Schedule to the Code, whichprovides that any appeal preferred to the Appellate Authority orany reference made or inquiry pending to or before the Boardor any proceeding of whatever nature pending before theAppellate Authority or the Board under the Sick IndustrialCompanies (Special Provisions) Act, 1985 shall stand abated.Further, it was provided that company in respect of whichsuch appeal or reference or inquiry stands abated under thisclause may make reference to the NCLT under the Codewithin one hundred and eighty days from the date ofcommencement of the Code;

And, whereas, difficulties have arisen regarding reviewor monitoring of the schemes sanctioned under sub-section (4)or any scheme under implementation under sub-section (12) ofsection18oftheSickIndustrialCompanies(SpecialProvisions) Act, 1985 (1 of 1986) in view of the repeal of theSick Industrial Companies (Special Provisions) Repeal Act,

2003 and omission of sections 253 to 269 of the Companies Act,2013;

Now, therefore, in exercise of the powers conferred bythe sub-section (1) of the section 242 of the insolvency andBankruptcy Code, 2016 (31 of 2016), the Central Governmenthereby makes the following Order to remove the above saiddifficulties, namely:-

1.Short title and commencement. – (1) This Order may becalled the Insolvency and Bankruptcy Code (Removal ofDifficulties) Order, 2017.

2.In the Insolvency and Bankruptcy Code, 2016, in theEighth Schedule, relating to amendment to the Sick IndustrialCompanies (Special Provisions) Repeal Act, 2003, in section 4,in clause (b), after the second proviso, the following provisosshall be inserted, namely:-

“Provided also that any scheme sanctioned under sub-section(4) or any scheme under implementation under sub-section(12) of section 18 of the Sick Industrial Companies (SpecialProvisions) Act, 1985 shall be deemed to be an approvedresolution plan under sub-section (1) of section 31 of theInsolvency and Bankruptcy Code, 2016 and the same shall bedealt with, in accordance with the provisions of Part II of thesaid code:

Provided also that in case, the statutory period within whichan appeal was allowed under the Sick Industrial Companies(Special Provisions) Act, 1985 against an order of the Boardhad not expired as on the date of notification of this Act, anappeal against any such deemed approved resolution planmay be preferred by any person before National CompanyLaw Appellate Tribunal within ninety days from the date ofpublication of this order.”

10.We deem it appropriate to reproduce Section 5(1)(d) of the RepealAct, which reads as under:

“....Saving.-(1) The repeal by this Act of the repealed enactmentshall not-

...... (d) affect any order made by the Board for sanction ofschemes;....”

11.The primary contention of the petitioner is that the aforesaidprovisions, Section 4(b) and Section 5(1)(d) of the Repeal Act, areunconstitutional as they draw distinction between sick companies whereschemes have been sanctioned under Section 18 of the SIC Act and caseswhere draft schemes were pending consideration before the BIFR and hadnot been sanctioned. This classification, it is submitted, violates Article 14and is discriminatory. Our attention is drawn to the power of the BIFR undersub-Section (3) of Section 17 of the SIC Act. It is submitted that similar oranalogous provision with wide powers do not exist under the newly enactedInsolvency and Bankruptcy Code, 2016, (the Code, for short) and no suchpowers are being conferred on the National Company Law Tribunal (NCLT,for short) under the Code.

12.Counsel for the petitioner has referred to certain illustrative examplesto make the point that there are several contingencies which have not beenconsidered by the amendments brought about. It is stated that the Repeal Actand the Code do not deal with situation where orders were reserved by theBIFR on the question whether or not the Draft Scheme should be adopted,and were pending pronouncement on the date of enforcement of the RepealAct, w.e.f. 1[st]December, 2016.

13.It is further submitted that the Government had made commitmenton the question of revival and rehabilitation of sick companies and has nowresiled from the same. Reliance is placed on the judgment of theConstitution Bench of the Supreme Court dated 14[th]May, 2015 in MadrasBar Association v. Union of India and others (2015) 8 SCC 583, wherechallenge to the constitutional validity of creation of NCLT and the NationalCompany Law Appellate Tribunal (NCLAT, for short) was rejected, yet inparagraph 31 it was observed that the draft rules regarding the manner offunctioning of the NCLT and the NCLAT were being prepared.

14.We have considered the said contentions but do not find any merit inthe same and are therefore not inclined to issue notice in the present writpetition.

15.The Parliament has enacted the Code. The object and purpose forenacting the Code was that the existing laws relating to insolvency andbankruptcy of companies, including SIC Act, 1985, Recovery of Debts Dueto Banks and Financial Institutions Act, 1993, Violation and Reconstructionof Financial Provision and Security Interest Act, 2002, etc. had, as per theLegislature, proved to be ineffective and inefficacious, and were consideredto be inadequate. Despite the aforesaid enactments there was spiralincrease and jump in the quantum of loans falling in the category of non-performing assets, adversely impacting financial institutions and bankingsector with negative fiscal repercussions on the economy. Delays and failureof the existing quasi-judicial mechanism in dealing with the aforesaidproblem was cause of grave concern and anxiety. This was adverselyimpacting India's rating on ease of doing business and investments. Needwas felt to replace the said enactments with the Code, having dissimilar anddistinct provisions with strict and fixed time limits. The objective of theCode is to consolidate and amend the laws relating to insolvency resolutionof corporate persons, partnership firms and individuals in time boundmanner for maximization of value of assets of such persons, to promoteentrepreneurship,availabilityofcreditandbalancetheinterestofstakeholders including alteration in the order of priority of payment ofgovernment dues and to establish an Insolvency and Bankruptcy Board ofIndia, and for matters connected therewith and incidental thereto.

16.Recently, the Supreme Court had the occasion to deal with theprovisions of the Code in M/s Innoventive Industries Ltd. v. ICICI Bank &Anr., 2017 (11) SCALE 4, and has observed as under:

“12. The Insolvency and Bankruptcy Code, 2016 has beenpassed after great deliberation and pursuant to variouscommittee reports, the most important of which is the report ofthe Bankruptcy Law Reforms Committee of November, 2015.The Statement of Objects and Reasons of the Code reads asunder:

“STATEMENT OF OBJECTS AND REASONS

There is no single law in India that deals with insolvency andbankruptcy. Provisions relating to insolvency and bankruptcyfor companies can be found in the Sick Industrial Companies(Special Provisions) Act, 1985, the Recovery of Debt Due toBanks and Financial Institutions Act, 1993, the Securitisationand Reconstruction of Financial Assets and Enforcement ofSecurity Interest Act, 2002 and the Companies Act, 2013. Thesestatutes provide for creation of multiple fora such as Board ofIndustrial and Financial Reconstruction (BIFR), Debt RecoveryTribunal (DRT) and National Company Law Tribunal (NCLT)andtheirrespectiveAppellateTribunals.LiquidationofcompaniesishandledbytheHighCourts.Individual

bankruptcy and insolvency is dealt with under the PresidencyTowns Insolvency Act, 1909, and the Provincial Insolvency Act,1920 and is dealt with by the Courts. The existing frameworkfor insolvency and bankruptcy is inadequate, ineffective andresults in undue delays in resolution, therefore, the proposedlegislation.

2. The objective of the Insolvency and Bankruptcy Code, 2015is to consolidate and amend the laws relating to reorganizationand insolvency resolution of corporate persons, partnershipfirms and individuals in time bound manner for maximizationof value of assets of such persons, to promote entrepreneurship,availability of credit and balance the interests of all thestakeholders including alteration in the priority of payment ofgovernmentduesandtoestablishanInsolvencyandBankruptcyFund,andmattersconnectedtherewithorincidental thereto. An effective legal framework for timelyresolutionofinsolvencyandbankruptcywouldsupportdevelopment of credit markets and encourage entrepreneurship.It would also improve Ease of Doing Business, and facilitatemore investments leading to higher economic growth anddevelopment.

3. The Code seeks to provide for designating the NCLT andDRT as the Adjudicating Authorities for corporate persons andfirms and individuals, respectively, for resolution of insolvency,liquidation and bankruptcy. The Code separates commercialaspects of insolvency and bankruptcy proceedings from judicialaspects. The Code also seeks to provide for establishment of theInsolvency and Bankruptcy Board of India (Board) forregulation of insolvency professionals, insolvency professionalagencies and information utilities. Till the Board is established,the Central Government shall exercise all powers of the Boardor designate any financial sector regulator to exercise thepowers and functions of the Board. Insolvency professionalswill assist in completion of insolvency resolution, liquidationandbankruptcyproceedingsenvisagedintheCode.Information Utilities would collect, collate, authenticate anddisseminatefinancialinformationtofacilitatesuchproceedings. The Code also proposes to establish fund to be

called the Insolvency and Bankruptcy Fund of India for thepurposes specified in the Code.

4. The Code seeks to provide for amendments in the IndianPartnership Act, 1932, the Central Excise Act, 1944, CustomsAct, 1962, Income-Tax Act, 1961, the Recovery of Debts Due toBanks and Financial Institutions Act, 1993, the Finance Act,1994, the Securitisation and Reconstruction of Financial Assetsand Enforcement of Security Interest Act, 2002, the SickIndustrial Companies (Special Provisions) Repeal Act, 2003,the Payment and Settlement Systems Act, 2007, the LimitedLiability Partnership Act, 2008, and the Companies Act, 2013.

5. The Code seeks to achieve the above objectives.”

(Emphasis Supplied)

13. One of the important objectives of the Code is to bring theinsolvency law in India under single unified umbrella with theobject of speeding up of the insolvency process. As per the dataavailable with the World Bank in 2016, insolvency resolution inIndia took 4.3 years on an average, which was much higherwhen compared with the United Kingdom (1 year), USA (1.5years) and South Africa (2 years). The World Bank's Ease ofDoing Business Index, 2015, ranked India as country number135 out of 190 countries on the ease of resolving insolvencybased on various indicia.......”

(Emphasis Supplied)”

17.It cannot be denied that Parliament has the right to enact the aforesaidCode and repeal the earlier enactments. To this extent, the petitioner has notchallenged and questioned the Code or for that matter, Section 4(b) and5(1)(d) of the Repeal Act. The Code has been enacted to replace the SICAct. The enactment of the Code and its provisions reflect and relate to therealm of policy and legislative supremacy on such matters. The governmentin exercise of its legislative and executive functions and after dueconsideration, has enforced the provisions of the Repeal Act and has also

made them applicable to sick companies where draft schemes were pendingconsideration before BIFR and had not been approved.

18.Section 4(b) of the Repeal Act in clear and categorical terms statesthat on dissolution of the BIFR/Board or the Appellate Authority under SICAct, any appeal or reference made or inquiry pending under SIC Act shallabate on such date as notified by the Central Government in this behalf.Thus, all proceedings under SIC Act pending before the Appellate Authorityor the BIFR/Board on the date notified by the Central Government in thisbehalf, after the dissolution of the aforesaid authorities, stood abated. Thisdictum applies uniformly. There are no exceptions.

19.Section 5(1)(d) of the Repeal Act, which incorporates the savingclause, provides that the repeal would not affect any order where schemeshave already been sanctioned. Section 4(b) and Section 5(1)(d) have to beread harmoniously. The effect of Section 5(1)(d) is that any order made bythe Board/BIFR sanctioning the schemes before the date of abatement, asnotified under Section 4(b), such schemes would not get affected. Read inthis manner, the two provisions draw distinction between cases where draftschemes have been approved by the Board before enforcement of the RepealAct and cases where inquiry or draft scheme was pending considerationbefore the Board.In the latter case, the proceedings pending before theBoard abate and come to an end. In fact, proceedings pending before theAppellate Authority under SIC Act also abate.

20.We would now refer to the provisos to Section 4(b) of the Repeal Act,including third and fourth provisos, enacted vide notification dated 24thMay, 2017. The first proviso to Section 4(b) of the Repeal Act postulates

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that company in respect of which appeal, reference or inquiry was pendingand stands abated, is at liberty to make reference to NCLT under the Codewithin 180 days from the commencement of the said Code in accordancewith the provisions of the Code. The petitioner, therefore, has remedy tomove to the NCLT under this provision. Necessarily, the petitioner would begoverned by the Code and cannot rely upon the provisions of the SIC Actwhich are no longer enforceable and applicable law.

21.The second proviso to Section 4(b) of the Repeal Act stipulates thatno fee shall be payable under the Code by company whose appeal,reference, or inquiry stands abated under the said clause.

22.Notification dated 24[th]May, 2017 states that certain difficulties hadbeen noticed with regard to reviewing and monitoring of the Schemessanctioned under the SIC Act after enforcement of the Repeal Act andomission of Sections 253 to 269 of the Companies Act, 2013. In order toremove the said difficulties, the Central Government, in exercise of powersconferred by sub-section (1) of Section 242 of the Code, had issued the saidorder inserting the third proviso to clause (b) of Section 4 of the Repeal Act.As result thereof, where any scheme which has been sanctioned under sub-section (4) or is under implementation under sub-section (12) of Section 18of the SIC Act, it shall be deemed to be an approved resolution plan undersub-section (1) of Section 31 of the Code and shall be dealt with inaccordance with the provisions of Part II of the Code. The fourth provisoadded to clause (b) to Section 4 of the Repeal Act by the same notificationprovides that in cases where the statutory period within which an appeal wasallowed under the SIC Act against an order of the BIFR had not expired, an

appeal against any such deemed approved resolution plan can be preferredbefore NCLAT within 90 days of publication of the order. The expression‘deemed approved resolution plan’ used in the fourth proviso added toClause (b) of Section 4 of the Repeal Act has to be understood by makingreference to the third proviso and provisions of Section 31 (1) of the Code,which related to the resolution plan and its approval. By virtue of the thirdproviso to Section 4(b) of the Repeal Act Scheme sanctioned under sub-section (4) or (12) of Section 18 of SIC Act is deemed to be an approvedresolution plan under sub-section (1) to Section 31 of the Code. Henceforth,the Code and its provisions would apply. Fourth proviso would come intooperation where statutory period for filing of appeal under SIC Act againstapproval or an order relating its implementation under sub-section (12) ofSection 18 of SIC Act has not expired. In such cases party aggrievedagainst an order sanctioning the scheme or under Section 18(12) of the SICAct, can file an appeal before NCLAT. Deemed approved resolution planused in fourth proviso, refers to the sanctioned Scheme. It has limitedoperation and gives limited right in specified cases.

23.Having interpreted the said sections and provisos, we would now dealwith the issue whether or not Section 4(b) of the Repeal Act as substitutedby the Code which differentiates between sick companies where draftschemes have been approved, or which are treated as deemed approvedresolution plans, and the sick companies where draft schemes have not beenapproved by the BIFR and thus are covered under the Code, violates and/orfalls foul of Article 14 of the Constitution of India.

24.Article 14 of the Constitution requires equal treatment in equal and

like circumstances, for there cannot be any discrimination between oneperson and another with respect to the subject matter of legislation whentheir position is identical. It is latter part of the said dictum, which oftenarises for consideration as uniform applicability of law can at times, by itselflead to discrimination and arbitrariness, violating Article 14. Article 14,therefore, does not per se conflict with the Government’s right to classify forlegislative purposes; be it principal legislation or delegated legislation.Article 14 accepts and does not negate or prohibit the Legislature or theExecutive from determining categories which would be embraced within thescopeoflegislation.Perceptibly,legislations,includingdelegatedlegislations, often deal with complex areas where several alternatives exist.Legislation cannot be rendered to be invalid or violative of Article 14 ongeneral principles of equality. As long as the Government supposedly acts injust, fair and equitable manner, after taking all relevant options intoconsideration in manner reasonable, it would satisfy the test of equalitybecause the Government acts to effectuate the purpose of public good and issupposed to act in general public interest. There is always presumption infavour of constitutionality of an enactment, for it is assumed that theLegislature, as well as Executive, in case of delegated legislation, understandsand correctly appreciates the needs of its own people and enacts laws basedupon experience and the distinction drawn thereunder. Discrimination made isbased on adequate grounds. (see State of Bombay and Anr. Vs. F.N.Balsara, 1951 SCR 682 and R.K. Garg Vs. Union of India, AIR 1981 SC2138.)

25.Article 14 does not empower the Court to don the role of Legislatureor the Executive and decide which is the best alternative or the most

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equitable criteria. Thus, better classification is not ground to reject andquash the classification made by the Government, unless the classification ispalpably arbitrary and results in hostile discrimination. Courts recognise thatit is difficult to perceive perfect classification for there could always bevaried situations where defects could arise.

26.Equally, the court decisions have recognized that when classificationdeals with persons belonging to well defined class, the said classification isnot open to challenge and cannot be called to question on the ground that itdoes not apply to others. Thus, so long as the classification is based upon arational basis and so long as the persons falling in the same class are treatedalike, there is no question of violating the equality norm. If there is equalityand uniformity in each group, law cannot be condemned as discriminatory,though due to some fortuitous circumstances arising out of peculiarsituation, some included in the class gets advantage over others so long asthey are not singled out for special treatment (see K.R. Lakshman & Ors.Vs. State of Karnataka Electricity Board & Ors., (2001) 1 SCC 442).27.Therefore, whenever violation of Article 14 is alleged, it is necessaryto ascertain the policy underlying the statute and the object sought to beachieved by it. Then the court has to apply the dual test, namely, whether theclassification is rational and based upon intelligible differentia whichdistinguished persons or things that are grouped together from others that areleft out of the group, and secondly, whether the basis of differentiation hasany rational nexus or relation with the avowed policy and object.

28.We have referred to the objects and purposes of the Code in somedetail, for whenever challenge is made to legislation that it offends the

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guarantee under Article 14, it is the duty of the courts to see purpose andpolicy of the Act and then discover whether the classification made has areasonable relation to the object of the legislation. The purpose and object ofthe Act is ascertained from title, preamble and other provisions. [see KedarNath Bajoria Vs. State of West Bengal, AIR 1953 SC 404 P.B. Roy Vs.Union of India, (1972) 3 SCC 432]. In the context of the present case, thereis no doubt and debate that the Code has been enacted as the earlierlegislation i.e the SIC Act, was found to be ineffective and flawed inoperation and practice. It had failed to achieve its objective and was prone toabuse. The problems and ill effects caused and created were sought to berectified by repealing the SIC Act and creating rights and enforcingobligations under the Code. The Code enacts provisions which seek torectify and remove the anomalies and defects in the earlier legislation. It is areforming act. The object and purpose of the legislation is to apply the Codeand its provisions to all and not to leave any exception. This is the reasonwhy it applies even to companies declared ‘sick’. However, an exception hasbeen carved out in cases where draft schemes of rehabilitation weresanctioned or approved under Section 18 (4) or (12) of the SIC Act. Thereason to carve the exception is obvious and does not require muchelucidation. The sick companies where schemes had been sanctioned andapproved, would obviously form separate and different class. Anyprovision of the Code or the Repeal Act, nullifying sanctioned rehabilitationscheme could have fallen foul on the ground of arbitrariness, especially,when there was no challenge to the sanction or approval of the rehabilitationscheme had attained finality. The Code is made applicable even in suchcases for future, with the sanctioned schemes being deemed to be approved

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resolution plans under Section 31(1) of the Code.

29.Resultantly,ithastobeheldthattheclassificationmade,differentiating between cases where schemes stand sanctioned under Section18(4) and (12) of the SIC Act and where the draft scheme for rehabilitationwere pending consideration, is valid, germane and realistic classification.These cases form well defined class by themselves.

30.The subsequent Notification S.O. 1683(E) dated 24[th]May, 2017,which has also been described as “Removal of Difficulty Order, 2017”,enacts two more provisos under clause (b) to Section 4 of the repealed Actto clarify that the schemes sanctioned under Section 18(4) or (12) of the SICAct shall be deemed to be approved resolution plan under Section 31(1) ofthe Act. The fourth proviso protects and gives limited right to specifiedparties in situations stipulated, to file an appeal before NCLAT within 90days of publication of the order against the deemed approved resolutionplan. The aforesaid classification is rational and certainly not discriminatory.

31.We would now refer to some judgments in support of our findings. InF.N. Balsara (supra), validity of specific provisions of the BombayProhibition Act, 1949 as well as the entire Act was challenged and partiallyaccepted by the High Court on the ground that definition of ‘liquor’ was toowide and beyond the power vested with the Legislature under the relevantentry of List-II by declaring various sections as invalid. On the question ofArticle 14 of the Constitution and its meaning and scope, the followingprinciples were summarized:-

“(1)Thepresumptionisalwaysinfavouroftheconstitutionality of an enactment, since it must be assumed that

the legislature understands and correctly appreciates the needsof its own people, that its laws are directed to problems mademanifest by experience and its discriminations are based onadequate grounds.

(2) The presumption may be rebutted in certain cases byshowing that on the face of the statute, there is no classificationat all and no difference peculiar to any individual or class andnot applicable to any other individual or class, and yet the lawhits only particular individual or class.

(3) The principle of equality does not mean that every law musthave universal application for all persons who are not bynature, attainment or circumstances in the same position, andthe varying needs of different classes of persons often requireseparate treatment.

(4) The principle does not take away from the State the power ofclassifying persons for legitimate purposes.

(5) Every classification is in some degree likely to producesome inequality, and mere production of inequality is notenough.

(6) If law deals equally with members of well defined class,it is not obnoxious and it is not open to the charge of denial ofequal protection on the ground that it has no application toother persons.

(7)Whilereasonableclassificationispermissible,suchclassification must be based upon some real and substantialdistinction bearing reasonable and just relation to the objectsought to be attained, and the classification cannot be madearbitrarily and without any substantial basis.”

It was further held that Article 14, which guarantees equal protection, doesnot prohibit classification but prohibits classification, that does not rest upon

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the reasonable grounds of distinction with reference to the objects to whichit is directed. It does not take away the Government’s power to classify butthey should do so on reasonable basis. Similarity and not identity oftreatment is enough and meet the requirements of Equality. Mathematicalnicety and perfect equality is not required. The said discussion wasnecessary in view of the exemptions provided in the Repeal Act.

32.In State of West Bengal Vs. Anwar Ali Sarkar, AIR 1952 SC 75,Patanjali Sastri, C.J., on the question of challenge to constitution of SpecialCourts on the ground of discrimination and inequality violating Article 14,has held that the State in exercise of its governmental power necessarily hasto make laws operating differently on different groups or class to attainparticular ends to giving effect to its policies, and possesses large powers ofdistinguishing and classifying persons or things to be subjected to such laws.Thus, every classification makes distinction and differentiates the twogroups but this inequality in no manner determines the matter ofconstitutionality. The Government must encounter and deal with problemswhich come in infinite varieties of relations and classification is recognitionof those circumstances and, therefore, the Government has wide latitude ordiscretion. (see paragraph 8).

33.In T.M.A. Pai Foundation Vs. State of Karnataka, (2002) 8 SCC481, Ruma Pal, J. on the question of Article 14 and non-discrimination hasobserved that classification for the purpose of deciding differential treatmentmust be intelligible and reasonable; reasonable being determined withreference to the object for which action is taken.Paradoxically, equalitypermits rational or discriminating discrimination.

34.In Mardia Chemicals Ltd. & Ors. Vs. Union of India & Ors. (2004)4 SCC 311, constitutional validity of provisions of Securitization ofFinancial Assets and Enforcement of Security Interest Act, 2002 waschallenged. It was observed that while dealing with economic legislations,the courts while not jettisoning their jurisdiction to curb arbitrary action orunconstitutional legislation, should interfere only in those cases where theview reflected in the legislation is not possible to be taken at all. The courtshave to exercise caution for these are legislations relating to economicpolicies and such legislations have to be judged by the generality of theprovisions and not by its crudities or equities or by possibility of abuse ofany of the provisions.In such matters of fiscal and economic policiesresorted to in public interest, there is presumption of constitutionality infavour of the validity of the legislation. It is, however, necessary to see thatthe person aggrieved gets fair deal at the hands of those vested with powerunder the legislation.

35.In Suraj Mall Mohta and Co. Vs. A.V. Visvanatha Sastri and Anr.,AIR 1954 SC 545, it was observed:-

“It is well settled that in its application to legal proceedingsArticle 14 assures to everyone the same rules of evidence andmodes of procedure; in other words, the same rule must existfor all in similar circumstances. It is also well settled that thisprinciple does not mean that every law must have universalapplication for all persons who are not by nature, attainment orcircumstance,inthesameposition.TheStatecanbyclassification determine who should be regarded as class forpurposes of legislation and in relation to law enacted on aparticular subject, but the classification permissible must bebased on some real and substantial distinction bearing just

and reasonable relation to the objects sought to be attained andcannot be made arbitrarily and without any substantial basis.Classification means segregation in classes which have asystematic relation, usually found in common properties andcharacteristics.”

36.In the Special Courts Bill, 1978, In Re (1979) 1 SCC 380 themajority judgment adverted to large number of judicial decisionsinterpreting Article 14 and after referring to the exercise of the Governmentpower to differentiate, distinguish and classify persons or things on thequestion of Article 14 and the principle underlying, observed as under:

"72. As long back as in 1960, it was said by this Courtin Kangsari Haldar that the propositions applicable to casesarising under Article 14 “have been repeated so many timesduring the past few years that they now sound almostplatitudinous”. What was considered to be platitudinous some18 years ago has, in the natural course of events, become evenmore platitudinous today, especially in view of the avalanche ofcases which have flooded this Court. Many learned Judge ofthis Court has said that it is not in the formulation of principlesunder Article 14 but in their application to concrete cases thatdifficulties generally arise. But, considering that we are sittingin larger Bench than some which decided similar cases underArticle 14, and in view of the peculiar importance of thequestions arising in this reference, though the questionsthemselves are not without precedent, we propose, thoughundoubtedly at the cost of some repetition, to state thepropositions which emerge from the judgments of this Courtinsofar as they are relevant to the decision of the points whicharise for our consideration. Those propositions may be statedthus:

“(1) The first part of Article 14, which was adopted from theIrish Constitution, is declaration of equality of the civil rightsof all persons within the territories of India. It enshrines abasic principle of republicanism. The second part, which is acorollary of the first and is based on the last clause of the firstsectionoftheFourteenthAmendmentoftheAmericanConstitution, enjoins that equal protection shall be secured toall such persons in the enjoyment of their rights and libertieswithout discrimination of favouritism. It is pledge of theprotection of equal laws, that is, laws that operate alike on allpersons under like circumstances.(2) The State, in the exercise of its governmental power, has ofnecessity to make laws operating differently on different groupsor classes of persons within its territory to attain particularends in giving effect to its policies, and it must possess for thatpurpose large powers of distinguishing and classifying personsor things to be subjected to such laws.

(3) The constitutional command to the State to afford equalprotection of its laws sets goal not attainable by the inventionand application of precise formula. Therefore, classificationneed not be constituted by an exact or scientific exclusion orinclusion of persons or things. The courts should not insist ondelusive exactness or apply doctrinaire tests for determiningthe validity of classification in any given case. Classification isjustified if it is not palpably arbitrary.

(4) The principle underlying the guarantee of Article 14 is notthat the same rules of law should be applicable to all personswithin the Indian territory or that the same remedies should bemadeavailabletothemirrespectiveofdifferencesofcircumstances. It only means that all persons similarlycircumstancedshall betreatedalike bothinprivilegesconferred and liabilities imposed. Equal laws would have to be

applied to all in the same situation, and there should be nodiscrimination between one person and another if as regardsthesubject-matterofthelegislationtheirpositionissubstantially the same.

(5) By the process of classification, the State has the power ofdetermining who should be regarded as class for purposes oflegislation and in relation to law enacted on particularsubject. This power, no doubt, in some degree is likely toproduce some inequality; but if law deals with the liberties ofa number of well defined classes, it is not open to the charge ofdenial of equal protection on the ground that it has noapplicationtootherpersons.Classificationthusmeanssegregation in classes which have systematic relation, usuallyfound in common properties and characteristics. It postulates arational basis and does not mean herding together of certainpersons and classes arbitrarily.

(6) The law can make and set apart the classes according to theneeds and exigencies of the society and as suggested byexperience. It can recognise even degree of evil, but theclassification should never be arbitrary, artificial or evasive.

(7) The classification must not be arbitrary but must berational, that is to say, it must not only be based on somequalities or characteristics which are to be found in all thepersons grouped together and not in others who are left out butthose qualities or characteristics must have reasonablerelation to the object of the legislation. In order to pass the test,twoconditionsmustbefulfilled,namely,(1)thattheclassification must be founded on an intelligible differentiawhich distinguishes those that are grouped together fromothers and (2) that that differentia must have rational relationto the object sought to be achieved by the Act.

(8) The differentia which is the basis of the classification andthe object of the Act are distinct things and what is necessary isthat there must be nexus between them. In short, while Article14 forbids class discrimination by conferring privileges orimposing liabilities upon persons arbitrarily selected out of alarge number of other persons similarly situated in relation tothe privileges sought to be conferred or the liabilities proposedto be imposed, it does not forbid classification for the purposeof legislation, provided such classification is not arbitrary inthe sense abovementioned.

(9) If the legislative policy is clear and definite and as aneffective method of carrying out that policy discretion isvested by the statute upon body of administrators or officersto make selective application of the law to certain classes orgroups of persons, the statute itself cannot be condemned as apiece of discriminatory legislation. In such cases, the powergiven to the executive body would import duty on it to classifythe subject-matter of legislation in accordance with theobjective indicated in the statute. If the administrative bodyproceeds to classify persons or things on basis which has norational relation to the objective of the legislature, its actioncan be annulled as offending against the equal protectionclause. On the other hand, if the statute itself does not disclosea definite policy or objective and it confers authority onanother to make selection at its pleasure, the statute would beheld on the face of it to be discriminatory, irrespective of theway in which it is applied.

(10) Whether law conferring discretionary powers on anadministrative authority is constitutionally valid or not shouldnot be determined on the assumption that such authority willact in an arbitrary manner in exercising the discretioncommitted to it. Abuse of power given by law does occur; but

the validity of the law cannot be contested because of such anapprehension.Discretionarypowerisnotnecessarilyadiscriminatory power.

(11) Classification necessarily implies the making of adistinction or discrimination between persons classified andthose who are not members of that class. It is the essence of aclassification that upon the class are cast duties and burdensdifferent from those resting upon the general public. Indeed, thevery idea of classification is that of inequality, so that it goeswithout saying that the mere fact of inequality in no mannerdetermines the matter of constitutionality.

(12) Whether an enactment providing for special procedure forthe trial of certain offences is or is not discriminatory andviolative of Article 14 must be determined in each case as itarises, for, no general rule applicable to all cases can safely belaid down. practical assessment of the operation of the law inthe particular circumstances is necessary.

(13) rule of procedure laid down by law comes as muchwithin the purview of Article 14 as any rule of substantive lawand it is necessary that all litigants, who are similarly situated,are able to avail themselves of the same procedural rights forrelief and for defence with like protection and withoutdiscrimination.”

37.In Babua Ram and Ors. Vs. State of U.P. & Anr. (1995) 2 SCC689 and other connected cases, reference was made to the decision ofConstitution Bench in D.S. Nakara Vs. Union of India (1983) 1 SCC 305 asfollowed in Delhi Cloth & General Mills Co. Ltd. Vs. Union of India(1983) 4 SCC 166 to observe that statute is not properly called retroactivestatute because part of its requisites for its action is drawn from time

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antecedent to its passing. statute is not retroactive merely because itaffects existing right nor is it retroactive because part of its requisites forits action is drawn from its antecedent to its passing.Then, referring toArticle 14, it was observed that class of similar persons who had availed ofright and remedy but were unsuccessful can be treated as distinct class,and this by no means can be said to be an arbitrary classification in thecontext of Section 28A of the Land Acquisition Act, 1898.

38.In the light of the aforesaid dictum and principles when we refer tothe provisions under challenge, it is palpable that the Government wanted toenforce the provisions of the Code to all sick companies and upondeliberation has decided in principle to withdraw and repeal SIC Act for ithad not the desired effect and consequences, which were envisaged. Thedraw-back and failure in application and enforcement had outweighed theminiscule benefits secured by some. Adverse impact was apparent andtherefore, legislature in its wisdom felt that in all cases where the draftschemes had not been sanctioned could apply under the Code and would begoverned by the provisions of the Code. For this purpose they havedifferentiated between the classes of cases where draft schemes had beensanctioned and other cases where draft schemes had not been sanctioned.There is clear differentiation between the two sets of cases. The differencebetween the two sets is too apparent and not blurred or make belief.Withdrawal or nullification of sanctioned draft scheme would have createdinnumerable and monstrous difficulties and problems. Thus sanctionedrehabilitation schemes have been treated as schemes deemed to have beensanctioned under Section 31(1) of the Code. Their implementation is to bedealt with under the provisions of the Code and not as per the mandate of the

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repealed legislation i.e. SIC Act. This is mandate of the third proviso toclause (b) of Section 4 of the Repealed Act, enacted as consequence ofpower conferred under Section 252 of the Code. The intent and object ofClause (b) to Section 4 of the Repeal Act including provisos is to ensureeffective implementation of the Code, yet at the same time not cancel therehabilitative schemes which have been sanctioned and were underimplementation. Of course, the Code would be applicable as the aforesaidprovisions of the Repeal Act postulates that implementation would be doneas per and in terms of the provisions of the Code.

39.Though not admitted, it is palpable that the petitioner, like othercompanies who were declared sick companies are disturbed in view ofwithdrawal of the protection under the umbrella of Section 22 of SIC Act,which we were aware had received adverse comments from several quarters.There were allegations of misuse and abuse of the said provision.

40.We must also reject the argument that it must be assumed in somecase there would be discrimination for in some cases there would be lapseson the part of the BIFR or the Appellate Authority under the SIC Act.Validity and legality of an enactment on the ground of violation of Article14 cannot be contested on the basis of such assumptions or apprehension. Itis normally presumed that the public authorities have acted reasonably inexercise of statutory powers. State in exercise of its Government powers hasto enact laws which would operate differently in different groups and classesto attain particular comments in giving effect to its policies.For thispurpose it has wide and extensive power of distinguishing and classifyingpersons or things to be subjected to such powers. It will be difficult and

rather impossible to find precise and perfect formula for classificationwhen an executive enacts dedicated legislation. Classification need not beexact or strict. Courts do not insist on legislation delusive exactness nor itapplydoctrinairetestfordeterminingvalidityofclassification.Classification is justified where it is not palpably arbitrary.

41.Notification S.O. 1683(E) dated 24th May, 2017 under thirdproviso to clause (b) of Section 4, draws distinction between cases where ascheme was sanctioned or was under implementation of the SIC Act andwhere it was not sanctioned. Former cases have to be dealt with inaccordance with the provisions of Part II of the Code. In effect thereof, acut-off date was prescribed for the purpose of Section 4(b) to determinewhich proceedings were to abate and which were to continue before theNCLT. The petitioner cannot submit that it should be treated at par withthose whose schemes were sanctioned.

42.Whenever any enactment is to be enforced, cut-off date has to beprescribed. This is true also when an enactment which repeals an earlierenactment or when section is omitted and replaced by new provision.Sometimes, the legislature leaves it to the executive to prescribe the cut-offdate. Fixing cut off date for enforcement of an act or provision is anexercise of government function and power, be it legislative or executive.These would be largely matters relating to administration and policy. Fixingof cut-off date is normally not interfered and interjected with by the courtsunless the date so fixed is blatantly discriminatory or arbitrary. Particularcut-off date is fixed keeping in mind the administrative and other conditionsi.e. when alternative institutions and authorities and infrastructure are in

place. Economic and financial considerations etc. also have role to play.The government must be given free play in the joints and judicial restraint iswell advised and must be adhered to.

43.Thus whether legislature fixes cut-off date or leaves it to theexecutive to prescribe cut-off date and same is prescribed, the legislativeor the executive action per se is not violative of Article 14 or arbitrary. If itis to be held to be contrary then no cut-off date can be ever prescribed.Judicial interference on validity of cut-off date is therefore, rare and onlywhen the cut-off date is per se absurd and is apparently disclosesarbitrariness in the said fixation.

44.In Government of Andhra Pradesh v. N. Subbarayudu & Ors.(2008) 14 SCC 702, the Supreme Court held that unless the cut-off dateleads to some blatantly capricious or outrageous results the Court should notinterfere. The Supreme Court observed:

“5. In catena of judgments of this Court it has been held thatcut-off date is fixed by the executive authority keeping in viewthe economic conditions, financial constraints and many otheradministrative and other attending circumstances. This Court isalso of the view that fixing of cut-off date is within the domainof the executive authority and the court should not normallyinterfere with the fixation of cut-off date by the executiveauthority unless such order appears to be on the face of itblatantly discriminatory and arbitrary.cut-off date is fixed by the executive authority keeping in viewthe economic conditions, financial constraints and many otheradministrative and other attending circumstances. This Court isalso of the view that fixing of cut-off date is within the domainof the executive authority and the court should not normallyinterfere with the fixation of cut-off date by the executiveauthority unless such order appears to be on the face of itblatantly discriminatory and arbitrary.

6. No doubt in D.S. Nakara v. Union of India this Court hadstruck down the cut-off date in connection with the demand ofpension. However, in subsequent decisions this court hasconsiderably watered down the rigid view taken in Nakara case

as observed in para 29 of the decision of this Court in State ofPunjab v. Amar Nath Goyal.

7. There may be various considerations in the mind of theexecutive authorities due to which particular cut-off date hasbeenfixed.Theseconsiderationscanbefinancial,administrative or other considerations. The court must exercisejudicial restraint and must ordinarily leave it to the executiveauthorities to fix the cut-off date. The Government must be leftwith some leeway and free play at the joints in this connection.8. In fact several decisions of this Court have gone to the extentof saying that the choice of cut-off date cannot be dubbed asarbitrary even if no particular reason is given for the same inthe counter-affidavit filed by the Government (unless it is shownto be totally capricious or whimsical), vide State of Bihar v.Ramjee Prasad, Union of India v. Sudhir Kumar Jaiswal,Ramrao v. All India Backward Class Bank Employees WelfareAssociation,UniversityGrantsCommissionv.SadhanaChoudhary, etc. It follows, therefore, that even if no reason hasbeen given in the counter-affidavit of the Government or theexecutive authority as to why particular cut-off date has beenchosen, the court must still not declare that date to be arbitraryand violative of Article 14 unless the said cut-off date leads tosome blatantly capricious or outrageous result.”

45.In Ramrao v. All India Backward Class Bank Employees WelfareAssociation 2004 2SCC 76, the Supreme Court held the fixation of cut-off date would be valid so long as it had nexus with the object it sought toachieve. Even if section of society were to face hardship, that by itselfwould not be ground to hold the fixation of cut-off date as ultra vires.The settled principle, therefore, is that the fixation of cut-off date by itself

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is not arbitrary or whimsical so long as the classification is based onintelligible differentia.

46.Earlier in Union of India & Anr. Vs. Parameswaran Match Works &Ors. 1975 (1) SCC 305, the Supreme Court upheld the date specified forpurpose of classification observing:

“10. In the matter of granting concession or exemption fromtax, the Government has wide latitude of discretion. It neednot give exemption or concession to everyone in order that itmay grant the same to some. As we said, the object of grantingthe concessional rate of duty was to protect the smaller units inthe industry from the competition by the larger ones and thatobject would have been frustrated, if, by adopting the device offragmentation, the larger units could become the ultimatebeneficiaries of the bounty. That classification can befounded on particular date and yet be reasonable, has beenheld by this Court in several decisions. The choice of date asa basis for classification cannot always be dubbed as arbitraryeven if no particular reason is forthcoming for the choiceunless it is shown to be capricious or whimsical in thecircumstances. When it is seen that line or point there mustbe and there is no mathematical or logical way of fixing itprecisely, the decision of the legislature or its delegate must beaccepted unless we can say that it is very wide off thereasonable mark.”

(emphasis supplied)

47.As held by the Supreme Court in Parmeshwaran Match Works(supra) it is settled position in law that no person can claim an entitlementto benefit or an exemption as matter of right. Consequently, there is noright to have reconstruction of company when company becomes sick.The provision to apply for reconstruction or to have scheme sanctioned

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for reconstruction is to be only provided by law and does not exist outsideit. Thus, in the present case, it is from the date of incorporation of theEighth Schedule into the Code and substitution of section 4(b) of theRepeal Act, that the Code becomes operational and all rights and remedieshave to be availed as per the Code. The contention of the petitioner that thepetitioner should still be governed by provisions of the SIC Act, if acceptedwould violate and negate the very object of the Code.

48.Counsel for the petitioner has further challenged the vires of theaforesaid Removal of Difficulties Order 2017/Notification S.O. 1683(E)dated 24th May, 2017 on the ground that the same could not have beenpassed in exercise of power under Section 242 of the Code. It is submittedthat Section 242 is provision which merely confers the powers to ‘removedifficulties’ in the Code and cannot be extended to amend the extantprovisions of the Repeal Act, or other enactments like Recovery of DebtsDue to Banks and Financial Institutions Act, 1993, Violation andReconstruction of Financial Provision and Security Interest Act, 2002 andCompanies Act, 2013.

49.We have considered the said contention limited and confined to thetwo provisions enacted vide S.O. No. 1683(E) but do not find any merit inthe contention. As noticed above, the aforesaid notification has been issuedby the Central Government in exercise of power conferred under sub-Section (1) of Section 242 and 252 of the Code. perusal of the impugnednotification, extracted above, and Section 252 of the Code extracted below,clearly shows that the Eighth Schedule is part of the Code and Section

4(b) of the Repeal Act as amended was incorporated in the Code vide theSchedule. Section 252 of the Code reads:-

"252. Amendments of Act 1 of 2004. – The Sick IndustrialCompanies (Special Provisions) Repeal Act, 2003 shall beamended in the manner specified in the Eighth Schedule."

As per Section 252 of the Code, the Repeal Act was amended in the mannerspecified in the Eighth Schedule. The Eighth Schedule of the Code asoriginally enacted had amended Section 4(b) of the Repeal Act, and hasbeen already reproduced above. Thus amended clause (b) to Section 4 of theRepeal Act was specifically incorporated and included in the EighthSchedule. In this manner, Section 4 clause (b) of the Repeal Act became partand parcel of the Code. Thus, the said order is not ultra vires as what hasbeen done, in effect, is under the Code itself. This being the position, we donot think that the petitioner is correct in contending that the CentralGovernment could not have issued the Removal of Difficulties Order, torectify and correct anomalies noticed while implementing the Code.

50. Reference can be made to the judgment of the Constitution Bench ofthe Supreme Court in Madeva Upendra Sinai and others v. Union of Indiaand others (1975) 3 SCC 765, wherein, it has been held as under:

36.This raises two questions: (1) Is this ‘difficulty’ within thecontemplation of clause (7) of the Regulation? (2) Is the CentralGovernment in the exercise of its power under that clausecompetent to supply of deficiency or casus omissus of this nature?

38.For proper appreciation of the points involved, it isnecessary to have general idea of the nature and purpose of a“removal of difficulty clause” and the power conferred by it onthe Government.

39.To keep pace with the rapidly increasing responsibilities ofa welfare democratic State, the Legislature has to turn out aplethora of hurried legislation, the volume of which is oftenmatched with its complexity. Under conditions of extremepressure, with heavy demands on the time of the Legislature andendurance and skill of the draftsman, it is well nigh impossible toforesee all the circumstances to deal with which statute isenacted or to anticipate all the difficulties that might arise in itsworking due to peculiar local conditions or even local law. Thisis particularly true when Parliament undertakes legislation whichgives new dimension to socio-economic activities of the State orextends the existing Indian laws to new territories or areas freshlymerged in the Union of India. In order to obviate the necessity ofapproaching the Legislature for removal of every difficulty,however trivial, encountered in the enforcement of statute, bygoing through the time-consuming amendatory process, theLegislature sometimes thinks it expedient to invest the Executivewith very limited power to make minor adaptations andperipheraladjustmentsinthestatute,formakingitsimplementation effective, without touching its substance. That iswhy the “removal of difficulty clause”, once frowned upon andnick-named as “Henry VIII clause” in scornful commemoration oftheabsolutistwaysinwhichthatEnglishKinggotthe“difficulties” in enforcing his autocratic will removed through theinstrumentality of servile Parliament, now finds acceptance as apracticalnecessity,inseveralIndianstatutesofpost-independence era."

51.The petitioner, we may notice, has not challenged Section 252 of theCode which had the effect of amending, in the manner as specified in theEighth Schedule, the provisions of the Repeal Act.

52.In view of the above discussion, it is held that the CentralGovernment, in exercise of power conferred under Section 242 of the Code

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could have removed the difficulties which came to its notice uponenforcement of the Code and its implementation. Clause (b) to Section 4 ofthe Repeal Act, in fact, was substituted in terms of Eighth Schedule insertedby Section 252 of the Code.

53.To summarise -

(i)the classification of cases where draft schemes for reconstruction havebeen sanctioned and those cases where schemes are pending is non-discriminatory and is based on intelligible differentia as also has nexus to theobject sought to be achieved by enacting the Code;

(ii) the inclusion of the Eighth Schedule to the Code is in exercise of powersunder Section 242 and Section 252 and is thus not ultra vires;

(iii)the prescribing of cut-off date by way of notifications i.e. 1[st]December, 2016 is not contrary to law;

54.The Petitioner, if it is so advised may avail of the remedy providedunder the Code. As the time period of 180 days has already lapsed, if thePetitioner approaches the NCLT, the request for condonation of delay, ifany, be considered if permissible in law.

55.The writ petition is accordingly dismissed with no order as to costs.

SANJIV KHANNA, J

PRATHIBA M. SINGH, J

NOVEMBER 01, 2017j/r

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