Major Supreme Court Judgments On Reservation in Promotions PDF

3/26/2020 Major Supreme Court Judgments On Reservation In Promotions
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Major Supreme Court Judgments On

Reservation In Promotions
Shinto Mathew Abraham 11 Feb 2020 1:01 PM
https://www.livelaw.in/know-the-law/explained-major-sc-decisions-on-reservation-in-promotions-152580?infinitescroll=1 1/31
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The Supreme Court's recent decision that there is no fundamental right to claim
reservation in promotions has become a subject matter of intense debate.
The decision was discussed in the Parliament, and the Centre has told the House that
the matter was under the study and consideration of the Government at "high level".
In this backdrop, this article traces the legal evolution of the concept of "Reservation
in Promotions".
Also Read - Insolvency and Bankruptcy Code (Amendment) Act, 2020 : A Primer
Reservation not con ned to initial appointment : Rangachari Case (AIR 1962 SC 36)
In this case (General Manager, Southern Railway v A Rangachari), validity of the
circulars issued by the Railway administration providing for reservation in favour of
Scheduled Castes / Scheduled Tribes in promotions (by selection) was questioned.
The contention was that Article 16(4) of the Constitution does not take in promotions
and that it is con ned to direct recruitment only. The Madras High Court agreed with
this contention. It held that the word "appointments" in clause (4) did not denote
promotion and further that the word "posts" in the said clause referred to posts
outside the cadre concerned.
Also Read - [Explained] Homebuyers Under Insolvency & Bankruptcy Code :
Evolution Of Law & Present Position
On appeal, the Supreme Court reversed by a majority of 3 : 2. Certain notable points
from the judgment written by Justice Gajendragadkar for the majority are as follows :
• The promotion to a selection post is also included in the matters relating to
employment.
• Art.16(1) guarantees equality of opportunity to all citizens who enter service
even in regard to promotion.
• The condition precedent for the exercise of the powers conferred by Art.16(4)
is that the State ought to be satis ed that any backward class of citizens is not
adequately represented in its services.
• This condition precedent may refer either to the numerical inadequacy of
representation in the services or even to the qualitative inadequacy of
representation.
• The advancement of the socially and educationally backward classes requires
not only that they should have adequate, representation in the lowest rung of
services but that they should aspire to secure adequate representation in
selection posts in the services as well.

State of Punjab v. Hiralal (AIR 1971 SC 1777)
In this case, validity of an order made by the Government of Punjab providing for
reservation in promotion (in addition to initial recruitment) was questioned. Though
the High Court upheld the challenge, the Supreme Court (Shah, Hegde and Grover, JJ.)
reversed and upheld the validity of the Government order following Rangachari
(supra).
N M Thomas v State of Kerala ( AIR 1976 SC 490)
This case was not exactly pertaining to reservation in promotions, but was regarding
the legality of a concession granted by Government to SC/ST members for availing
departmental promotion.
In this case, 7-judge bench upheld by 5:2 majority the amendment brought by State of
Kerala to its service rules to grant exemption to members of SC/STs from appearing in
a departmental examination for promotion.
The majority held that Article 16(4) was not in the nature of an exception, and was a
facet of equality under Articles 14 and 16(1).
"The rule giving preference to an unrepresented or under-represented backward
community does not contravene Art.14, 16(1) or 16(2)", held the Court.
No reservation in promotions : Indira Sawhney v Union of India (1992)
The Supreme Court's nine-judge constitutional bench in Indra Sawhney v. Union of
India (1992), commonly called as Mandal Commission case, while allowing the
extension of the reservation policy to Other Backward Classes (OBCs), held that
reservation, under Article 16(4), cannot be extended to subsequent promotion within
the place of employment.
Among several other issues on reservation, the Court also considered this speci c
issue :
" Whether clause (4) of Art.16 provides reservation only in the matter of initial
appointments / direct recruitment or does it contemplate and provide for reservations
being made in the matter of promotion as well?"
Ultimately, the judgment decided that reservation would apply at the stage of initial
entry only and would not apply at the stage of promotion. The majority disagreed with
the view expressed in Rangachari. Concerns regarding e ciency of administration
were expressed by the majority in this judgment. It was even remarked that "crutches
cannot be provided throughout one's career".
In the words of the Court :
"While it is certainly just to say that a handicap should be given to backward class of
citizens at the stage of initial appointment, it would be serious and unacceptable
inroad into the rule of equality of opportunity to say that such a handicap should be
provided at every stage of promotion throughout their career. That would mean
creation of a permanent separate category apart from the mainstream a vertical
division of the administrative apparatus. The members of reserved categories need
not have to compete with others but only among themselves. There would be no will
to work, compete and excel among them. Whether they work or not, they tend to think,
their promotion is assured. This in turn is bound to generate a feeling of despondence
and 'heart burning' among open competition members. All this is bound to affect the
e ciency of administration.
Putting the members of backward classes on a fast track would necessarily result in
leap frogging and the deleterious effects of "leap frogging" need no illustration at our
hands. At the initial stage of recruitment reservation can be made in favour of
backward class of citizens but once they enter the service, e ciency of administration
demands that those members too compete with others and earn promotion like all
others; no further distinction can be made thereafter with reference to their "birth
mark", as one of the learned Judges of this Court has said in another connection. They
are expected to operate on equal footing with others. Crutches cannot be provided
throughout one's career. That would not be in the interest of e ciency of
administration nor or at in the larger interest of the nation".
Though the Court held that Art.16(4) does not permit provision for reservations in the
matter of promotion, it did not unsettle the promotions already given by applying
reservations. The judgment was held to operate only prospectively.
Constitutional Amendments to overturn Indira Sawhney view on promotions
There was public opinion against the judgment and the Parliament, in 1995, through
the Constitutional (77th Amendment) Act, bypassed the restriction set by the Indira
Sawhney, by inserting Article 16(4)(A), thereby, enabling the state to pass laws for
reservation in promotion for SCs and STs.
Later, the Supreme Court in Union of India v. Viral Singh Chauhan (1995) and Ajit
Singh (II) v. State of Punjab (1999) denied consequent seniority for employees
promoted through reservation. To over come the same, the Parliament, in 2001,
through the Constitutional (85th Amendment) Act, provided consequent seniority for
the bene ciaries of reservation in promotion.
Article 16(4)(A) now reads:
"Nothing in this article shall prevent the State from making any provision for
reservation in matters of promotion [, with consequential seniority,] to any class or
classes of posts in the services under the State in favour of the Scheduled Castes and
the Scheduled Tribes which, in the opinion of the State, are not adequately
represented in the services under the State."
Alongside Article 16(4)(A), the Parliament has inserted Article 16(4)(B) through the
Constitutional (81st Amendment) Act in 2000. It ensures that vacant posts arising out
of reservation shall be carried out to subsequent years and such vacant posts will not
be considered to determine the ceiling of 50% reservation on total number of
vacancies.
Quanti able data showing backwardness and inadequacy of representation needed
for reservation in promotions : M Nagraj
The Constitutional Amendments which introduced Articles 16(4)(A) and 16(4)(B) were
challenged in the SC as violative of basic structure. However, a ve-judge
Constitutional bench of Supreme Court in M. Nagaraj v. Union of India (2006) upheld
these amendments.
It was held :
"The impugned constitutional amendments by which Articles 16(4-A) and 16(4-B)
have been inserted ow from Article 16(4). They do not alter the structure of Article
16(4). They retain the controlling factors or the compelling reasons, namely,
backwardness and inadequacy of representation which enables the States to provide
for reservation keeping in mind the overall e ciency of the State administration under
Article 335. These impugned amendments are con ned only to SCs and STs. They do
not obliterate any of the constitutional requirements, namely, ceiling limit of 50%
(quantitative limitation), the concept of creamy layer (qualitative exclusion), the sub-
classi cation between OBCs on one hand and SCs and STs on the other hand as held
in Indra Sawhney, the concept of post-based roster with inbuilt concept of
replacement as held in R.K. Sabharwal".
The Court also added that the State is not bound to make reservation for SC/ST in
promotions. Certain conditions were also introduced by the Court for granting
reservation in promotion. It was held that State has to collect "quanti able data
showing backwardness of the class and inadequacy of representation of that class in
public employment in addition to compliance of Article 335(which speaks of e ciency
in administration)". It was added that such reservations should not breach the 50%
cealing limit or obliterate the creamy layer or extend the reservation inde nitely.
It may be pertinent to note that the Court in this case observed that the concept of
"creamy layer" is applicable even to SC/STs.
In the words of the Court :
"The ceiling-limit of 50%, the concept of creamy layer and the compelling reasons,
namely, backwardness, inadequacy of representation and overall administrative
e ciency are all constitutional requirements without which the structure of equality of
opportunity in Article 16 would collapse...
The State is not bound to make reservation for SC/ST in matter of promotions.
However if they wish to exercise their discretion and make such provision, the State
has to collect quanti able data showing backwardness of the class and inadequacy of
representation of that class in public employment in addition to compliance of Article
335. It is made clear that even if the State has compelling reasons, as stated above,
the State will have to see that its reservation provision does not lead to excessiveness
so as to breach the ceiling-limit of 50% or obliterate the creamy layer or extend the
reservation inde nitely..."
It is clear, therefore, that Nagaraj (supra) has, in unmistakable terms, stated that the
State has to collect quanti able data showing backwardness of the Scheduled Castes
and the Scheduled Tribes for giving them reservations in promotions.
Data showing backwardness not a precondition for reservation in promotions for
SC/STs - SC clari es in 2018
A 5-judge bench of the SC held in the 2018 decision in the case of Jarnail Singh v.
Lachhmi Narain Gupta (2018) held that there cannot be an insistence on collection of
quanti able data of backwardness in relation to SCs and STs. Any such insistence
was held to be against the decision in Indra Sawhney case.
"The conclusion in Nagaraj (supra) that the State has to collect quanti able data
showing backwardness of the Scheduled Castes and the Scheduled Tribes, being
contrary to the nine-Judge Bench in Indra Sawhney (1) (supra) is held to be invalid to
this extent", the bench ruled.
The bench however left undisturbed the ndings in Nagraj regarding application of
"creamy layer" test to SC/STs.
"when Nagaraj (supra) applied the creamy layer test to Scheduled Castes and
Scheduled Tribes in exercise of application of the basic structure test to uphold the
constitutional amendments leading to Articles 16(4-A) and 16(4-B), it did not in any
manner interfere with Parliament's power under Article 341 or Article 342. We are,
therefore, clearly of the opinion that this part of the judgment does not need to be
revisited"
B K Pavitra decision - SC upholds Karnataka law giving reservation in promotions
In 2019, the Supreme Court upheld the Constitutional validity of the Karnataka
Extension of Consequential Seniority to Government Servants Promoted on the Basis
of Reservation (to the Posts in the Civil Services of the State) Act 2018.
The said enactment provided for consequential seniority to persons belonging to the
Scheduled Castes and Scheduled Tribes promoted under the reservation policy of the
State of Karnataka.
An earlier version of this Act passed in 2002 was held to be unconstitutional by the SC
in 2017 on the ground that an exercise for determining 'inadequacy of representation',
'backwardness' and the impact on 'overall e ciency' had not preceded the enactment
of the law.
Thereafter, the Government of Karnataka constituted the Ratna Prabha Committee
headed by the Additional Chief Secretary to the State of Karnataka to submit a report
on the backwardness and inadequacy of representation of SCs and STs in the State
Civil Services and the impact of reservation on overall administrative e ciency in the
State of Karnataka.
On the basis of the Ratna Prabha Committee report, the Government of Karnataka
introduced the Karnataka Extension of Consequential Seniority to Government
Servants Promoted on the Basis of Reservation (to the Posts in the Civil Services of
the State) Bill 2017 which received assent of the President on 14 June 2018 and was
published in the o cial Gazette on 23 June 2018.
This new law on promotions was upheld by the SC in BK Pavitra II decision in May
2019.
No fundamental right to reservation in promotion
In the latest case of Mukesh Kumar v. State of Uttarakhand (2020) the Supreme
Court, rea rming it's decision in Suresh Chand Gautam v State of U.P. (2016), has
denied the request to pass a mandamus to the state to collect quanti able data
relating to adequacy of representation of the SCs and STs. The Supreme Court has
reiterated the decision in Ajit Singh case (1999) that reservation is not a fundamental
right. Most importantly, the Supreme Court has limited its own power of judicial review
when it stated:
"Even if the under- representation of Scheduled Castes and Schedules Tribes in public
services is brought to the notice of this Court, no mandamus can be issued by this
Court to the State Government to provide reservation in light of the law laid down by
this Court in C.A. Rajendran (1968) and Suresh Chand Gautam (2016)...
The State is not bound to make reservation for Scheduled Castes and Scheduled
Tribes in matters of promotions. However, if they wish to exercise their discretion and
make such provision, the State has to collect quanti able data showing inadequacy of
representation of that class in public services."
(The author is a Kerala-based lawyer who graduated from NUALS Kochi)
TAGS RESERVATION IN PROMOTIONS #ARTICLE 16(4) CONSTITUTION OF INDIA
#ARTICLE 16(1) CONSTITUTION OF INDIA #RESERVATION #INDIRA SAWHNEY DECISION
M NAGRAJ JARNAIL SINGH
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KNOW THE LAW
Insolvency and Bankruptcy Code

(Amendment) Act, 2020 : A Primer
Abhishek Gupta 26 March 2020 11:21 AM
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"Recovery is incidental under the IBC. Its primary objective is rescuing companies in
distress." – Dr. M.S. Sahoo (Chairperson, Insolvency and Bankruptcy Board of India)
The above quoted words of Dr. Sahoo from his article in the print edition of Indian
Express on March 14, 2020 under the title: 'The real reform', form the underlying theme
of the Insolvency and Bankruptcy Code (Amendment) Act, 2020 ("2020 Amendment
Act", for short). The Statement of Objects and Reasons of the corresponding bill
ascribes the need for the fourth legislative intervention to the Insolvency and
Bankruptcy Code, 2016 ("IBC 2016", for short) to conferment of highest priority in
repayment to last mile funding to corporate debtors to prevent insolvency, prevention
of potential abuse of the Code by certain classes of nancial creditors, provision of
immunity against prosecution of the corporate debtor and action against the property
of the corporate debtor and the successful resolution, and lling of the critical gaps in
the corporate insolvency framework.
All such objectives and reasons are primarily aimed at rescuing the 'titanic' from
sinking than airlifting-securing a few in uential and powerful passengers, though at
the cost of some damage and dis gurement of the ship; a sentiment that has echoed
with the NCLAT in its judgment of March 12, 2020 in the IL&FS matter. The NCLAT,
while rejecting the objections raised by some nancial creditors over distribution of
funds under the revised distribution framework, has upheld the scheme of pro-rata
distribution suggested by the Union of India and IL&FS, stating that it would be in
consonance with the public interest.
The 2020 Amendment Act was passed by the Lower House of the Parliament on
March 6, 2020 and by the Upper House on March 12, 2020. After receiving the assent
of the President, the Amending Statute was published in the O cial Gazette on March
13, 2020. This Article attempts to underscore and unfold the changes introduced in
the Code by the 2020 Amendment Act.
Key Highlights of the 2020 Amendment Act:
The Act inter alia aims to provide a timebound completion of the insolvency process,
confers preference upon secured nancial creditors over operational creditors in the
matter of distribution of assets upon resolution of a corporate debtor, and lays down
the manner of voting by an authorised representative on behalf of the class of
nancial creditors.
1. Insolvency Commencement Date
Section 2 of the 2020 Amendment Act deletes the proviso from the de nition of
"insolvency commencement date" u/s 5(12) of the Code such that the insolvency
resolution process commences from the date of admission of an application for
initiating corporate insolvency resolution process (CIRP), and not when the Interim
Resolution Professional (IRP) is appointed by the adjudicating authority ("AA", for
short). The corresponding change brought out in Section 16(1) of the Code mandates
the AA to appoint the IRP on the insolvency commencement date, thereby
withdrawing the leeway of 14 days from the insolvency commencement date for the
appointment of IRP. The above amendment curtails the anticipated delay in
completion of resolution to the extent of 14 days.
2. Expansion of de nition of 'interim nance'
The legislature has expanded the ambit of 'interim nance' u/s 5(15) of the Code by
insertion of the words "and such other debt as may be noti ed" at the end of its
de nition. Interim nance essentially refers to short-term loans required to keep a
company under the CIRP running as a going concern. The Code allows an IRP/RP to
raise interim nance in order to protect and preserve the value of the property of a
corporate debtor ("CD", for short) and to manage its operations as a going concern. In
the Code, the term 'insolvency resolution process cost' includes any interim nance
raised for a corporate debtor along with the cost of raising such interim nance. The
distribution waterfall u/s 53 of the Code provides for the highest priority to be given to
insolvency resolution process costs, which includes such interim nance.
Thus, the Parliament, by expanding the de nition of 'interim nance', has underscored
its importance in the management of the operations of CD and endeavoured to give
some free hand to the IRP and Committee of Creditors ("CoC", for short) to run and
maintain the company as a going concern.
3. Section 7 – Initiation of corporate insolvency resolution process by nancial
creditor
The 2020 Amendment Act raises the minimum threshold for certain classes of
nancial creditors for initiating CIRP, prescribing that the application by these creditors
u/s 7(1) of the Code should be led jointly by at least 100 such creditors or 10% of
their total number, whichever is less. These classes include real estate allottees and
security or deposit holders represented by a trustee/agent. The amendment also
clari es that where such an application for initiating the CIRP against a CD has not
been admitted by the AA before the commencement of the 2020 Amendment Act,
such application shall be modi ed to comply with the aforesaid requirements within
thirty days of the commencement of the said Act, failing which the application shall
be deemed to be withdrawn before its admission.
This can easily be touted as the most far-reaching amendment to the IBC' 2016 which
is likely to be greeted with a constitutional challenge by the homebuyers. It is
noteworthy that through the Second Amendment Act of 2018, the government, by
inserting an explanation to Section 5(8)(f) of the IBC, had accorded homebuyers the
status of nancial creditors in order to empower them to be part of the Committee of
Creditors (CoC). However, builders had challenged the constitutional validity of that
amendment before the Apex Court in Pioneer Urban Land and Infrastructure Limited
vs. Union of India. The Apex Court, vide its judgment dated August 9, 2019, held the
amendment to be constitutional and rejected the developers' plea. In this matter, the
builders had suggested introduction of a minimum threshold for homebuyers to
trigger the Code but that was not accepted by the Court on the ground that, "the
doctrine of reading down would apply only when general words used in a statute or
regulation can be con ned in a particular manner so as not to infringe a constitutional
right.". Hence, the Apex Court having rejected the matter of minimum threshold in view
of a perceived legislative lacuna, the legislature has incorporated such requirement in
the Code sans over-reaching the Pioneer judgment.
While the legislature has sought to placate the developers from over-exposure to
remedial and welfare legislations, the concerns of homebuyers remain with respect to
implementation of the amendment. The minimum threshold criteria is fraught with
practical di culties since sale is a continuous process, and how will a homebuyer
know how many units have been sold to determine the 10% of total number of units
sold in real estate project, especially when 10% is less than 100. That said, the
aggrieved homebuyers can still look elsewhere (RERA, or COPRA) for redressal of their
complaints against the developers and builders.
4. Corporate debtors entitled to make application
Section 4 of the 2020 Amendment Act inserts an explanation u/s 11 of the Code
which stipulates that a corporate debtor undergoing CIRP, or having completed CIRP
12 months preceding the date of making of the application or in respect of whom a
liquidation order has been made, etc. shall be entitled to make an application to
initiate CIRP against other corporate debtors. This step is likely to enhance the
maximisation of value of a corporate debtor. It is pertinent to note that NCLT, Mumbai
and NCLT, Delhi had adopted two divergent views in Jai Ambe Enterprise vs. S. N.
Plumbings Pvt. Ltd. and Asian Plumbings and Mandhana Industries Ltd. vs. Instyle
Exports Pvt. Ltd. respectively, and there was a pressing need for clari cation. Now,
with the newly inserted explanation to Section 11, the legislature has settled the
debate in agreeing with the NCLT, Mumbai and upholding its viewpoint that it is one of
the duties of the RP to recover the outstanding debts of a CD against whom the CIRP
is already in progress and it is a right course of action for managing the affairs of the
nancially stressed company.
5. Section 14 – Mushrooming ambit of Moratorium
6. Section 5 of the 2020 Amendment Act inserts an explanation to Section 14(1) of
the Code which extends the moratorium under IBC to protect the license, permit,
registration, quota, concessions, clearances and other similar grants or rights
given by the Central or State Government, local authority, sectoral regulator or
any other authority from suspension and termination during the CIRP, unless
there is a default in payment of the current dues for its use or continuation during
the moratorium period. This amendment was necessary in view of the Supreme
Court ruling in Embassy Property Development Pvt. Ltd. v. State of Karnataka,
Civil Appeal No. 9170 of 2019, dated December 3, 2019, wherein it dealt with the
issue of deemed extension of lease granted by the government. It was observed
by the Apex Court that the purpose of moratorium is only to preserve the status
quo and not to create a new right, and that Section 14(1)(d) only prohibits the
right not to be dispossessed, but not the right to have renewal of the lease of
such property. The newly inserted explanation to Section 14(1) augments the
hopes of a CD facing CIRP, and advances the intent of IBC to preserve the status
of a CD as a going concern. It also does well to premise such protection on the
payment of current dues.
The 2020 Amendment Act inserts sub-section (2A) u/s 14 that empowers the IRP
or RP to maintain the supply of critical goods and services, and prevent
termination, suspension or interruption of arrangements relating to such supply
so as to protect the value of the CD. The interpretation of 'essential goods and
services' u/s 14(2) has been a subject of con icting stances of NCLAT in ICICI
Bank Ltd. vs. M/s. Innoventive Industries Ltd. and Canara Bank vs. Deccan
Chronicle Holdings Ltd., where the former swears by the bare reading and strict
interpretation of the de nition of 'essential goods and services' under the CIRP
Regulations, 2016, but the latter holds that water, electricity, printing ink, printing
plates, printing blankets and solvents will come under the purview of exemption
granted to essential services u/s 14(2) of the Code, implying thereby that the
de nition is exhaustive. The Insolvency Law Committee had also felt the need for
expanding the scope of mandatory essential supplies covered u/s 14(2) of the
Code. Therefore, the newly inserted sub-section (2A) u/s 14 confers precedence
to the discretion of IRP/RP in determining which goods and services are critical
to protect and preserve the value of the CD and manage its operations as a going
concern.
The amendment, drawing sustenance from the judgments of NCLAT in Dakshin
Gujarat VIJ Company Limited v. ABG Shipyard and Innoventive Industries Ltd. v.
Maharashtra State Electricity Distribution Company Ltd., speci es that the supply of
critical goods and services to the CD is predicated on payment of dues arising from
such supply. The Insolvency and Bankruptcy Board of India is empowered under the
newly inserted clause (ia) u/s 240(2) to make regulations to provide for
circumstances in which supply of critical goods or services may be terminated,
suspended or interrupted during the period of moratorium u/s 14(2A).
The amended Section 14(3)(a) protects not only the transactions from
moratorium now, but also agreements or other arrangements noti ed by the
Central Government.
6. Section 23 – Management of operations of the CD
The substitution of the Proviso u/s 23(1) of the Code clari es that a RP shall continue
to manage the affairs of the CD till the Resolution Plan is approved by the AA u/s
31(1) or till the appointment of a liquidator u/s 34 by the AA in the event of rejection of
the resolution plan for failure to meet requirements mentioned in Section 30. This is
expected to ease the functioning of a RP and dispenses with the requirement of ling
endless applications seeking suitable direction/s. It also expressly authorises
management of affairs by RP during the interregnum from the rejection to RP till
appointment of liquidator.
7. Insertion of Section 32A in the Code
The insertion of Section 32A in the Code is the most signi cant amendment brought
out by the Government, that strives to shield the successful resolution applicants and
their property from the threat of criminal proceedings qua the offences committed by
the former promoters of the CD.
The newly inserted Section 32A(1) of the Code provides that the liability of a CD
for an offence committed prior to the commencement of the CIRP shall cease
and the CD shall not be prosecuted for such an offence from the date on which
the resolution plan has been approved by the AA u/s 31 of the Code. However,
this bene t only kicks in when the change in the management or control of the
CD is not to a person who was the erstwhile promoter or partook in the
management or control of the CD or is a related party of such a person. It has
been further clari ed that the person in charge of the management should not be
the one with respect to whom any investigating authority has reason to believe
that he had abetted or conspired for the commission of the offence, and has
submitted or led a report or a complaint to the relevant statutory authority or
Court. While Section 32A insulates the CD, but continues to hold the following
persons liable for such offences:
(a) every person who was a "designated partner" as de ned in clause (j) of Section 2
of the Limited Liability Partnership Act, 2008;
(b) an "o cer who is in default", as de ned in clause (60) of Section 2 of the
Companies Act, 2013;
(c) a person who was in any manner in charge of, or responsible to the CD for the
conduct of its business or associated with the CD in any manner; and
(d) a person who was directly or indirectly involved in the commission of such offence
as per the report submitted or complaint led by the investigating authority.
Also, the proviso to Section 32A(1) provides for discharge of a previous prosecution,
instituted during the CIRP against such CD, from the date of approval of the resolution
plan.
The 2020 Amendment Act adds another sub-section (2) to Section 32A of the
IBC, which proscribes any action including attachment, seizure, retention or
con scation of property of the CD in relation to an offence committed prior to the
commencement of CIRP, in case such property is covered by the resolution plan
approved by the AA. The immunity from such action is also conditioned on the
requirements of change in control or management of the CD, as present u/s
32A(1). However, it is to be noted that action against the properties of any person
other than the CD or the person who acquired such properties through CIRP or
liquidation process, is not barred, and action may be taken under the relevant law.
Notwithstanding the immunity given, Section 32A makes it mandatory for the CD and/
or any person who may be required to assist or co-operate with any authority
investigating an offence committed prior to the commencement of the CIRP, to
provide necessary assistance and co-operation.
The imposition of criminal liability on the CD and co-existence of the Code with other
penal statutes has been traversed by the Courts in a few instances, albeit sans
certitude. The NCLT, Mumbai in Sterling SEZ Infrastructure Ltd. vs. Deputy Director,
Directorate of Enforcement, had held that IBC would have an overriding effect on the
PMLA and that if an attachment order of the assets of the CD is passed, the said order
would be a nullity and non-est in law. Per Contra, the Delhi High Court in The Deputy
Director, Directorate of Enforcement, Delhi vs. Axis Bank & Ors. held that regulations
such as the Recovery of Debts Due to Bank and Financial Institutions Act, 1993, the
Securitisation and Reconstruction of Financial Assets and Enforcement of Securities
Interest Act, 2002, the PMLA and the Code must co-exist and shall be construed and
enforced harmoniously, without one being in derogation of the other. The NCLAT had
taken a similar view in Varrsana Ispat Limited vs. Deputy Director, Directorate of
Enforcement, and thereafter, in Rotomac Global Private Limited vs. Deputy Director,
Directorate of Enforcement, wherein it has been held had the PMLA relates to different
elds of penal action of 'proceeds of crime', and therefore, Section 14 of the Code is
not applicable to the criminal proceedings or any penal action taken pursuant to the
criminal proceedings that can be invoked simultaneously with the Code, having no
overriding effect of one Act over the other. Now, by way of the insertion of Section
32A, the legislature has clari ed that in cases where the CD is undergoing
investigation by the CBI, SFIO and/ or the ED, criminal liability can be imposed on the
successful resolution applicant s.t. ful lment of certain pre-requisites.
8. Section 227 – Financial Service Providers
The newly inserted explanation to Section 227 of the Code provides that the
proceedings for insolvency and liquidation for nancial service providers or categories
of nancial service providers may be conducted with such modi cations and in such
manner as may be prescribed. This comes in the wake of noti cation of the
Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial
Service Providers and Application to Adjudicating Authority) Rules, 2019 in November
last year. The nancial predicament faced by IL&FS and DHFL had raised disturbing
doubts over the functioning and operation of FSPs (like housing nance companies
and other speci ed non-banking nancial companies), thereby inducing demand for
noti cation of Code for the FSPs.
Conclusion:
The Insolvency and Bankruptcy Code, 2016 has proved to be a game-changer in way
the rest of world perceives India as a purely commercial destination. India has jumped
several ranks and crossed several hurdles to fare well in the global indexes and
parameters of "Ease of Doing Business". This is primarily attributable to dynamism
and resilience demonstrated by the present regime to adapt the arbitration act and
insolvency code with the evolving scenario-landscape and changing demands of
India's corporate sector.
Of the many reforms the 2020 Amendment introduces, it inaugurally equips the CD to
initiate CIRP against other CDs, mushrooms the ambit of Section 14, and inserts
Section 32A to immune the CD and its new management post the resolution process.
The Code, just like any other edgling legislation, grappled with divergent views of the
Courts, experts and other stakeholders on its interpretation and implementation. But
taking cue from a number of felicitous and far-reaching expositions done by the
judiciary, the legislature has responded well to timely intervene in lling certain
existing critical lacunae in the Code.
Now, on ipping the coin, we notice that the time consumed for completion of the
CIRP is still a far cry from the original 270-days timeline envisaged under the Code.
Quoting the March 18, 2020 edition of the Indian Express, "in a substantial number of
cases, the 270-day deadline was breached. In September 2019, this deadline was
extended to 330 days (eased further after the Essar Steel case). Yet, cases continue to
drag on. Of the 1,961 cases that are currently undergoing resolution, 635 (32 per cent)
have crossed the 270-day deadline. Further, the average time taken by the 190
resolution processes stood at 394 days. As a time-bound resolution process was one
of the key tenets of the IBC, delays reduce its attractiveness. Thus, reports that the
government is set to undertake a review of the law to reduce the time taken are indeed
welcome.". Thus, there is a pressing need to arrest this delay and ensure timely
completion of the process, lest it evaporates the value of assets and lead to greater
costs for both lenders and corporate bidders.
That said, the Code is a welcome change when compared to other regimes of winding
up and BIFR, which used to devour decades for its culmination. Quoting Dr. Sahoo,
"Achievement of the Insolvency Code is that debtors now resolve defaults in early
stages in the long term.". The government has, since its introduction, taken several
steps to ensure a smooth sail for the Code, and it must continue to do so. The
institutional capacity needs to be bolstered to deal with the burgeoning cases that are
going through the process. The setting up of NCLAT-Chennai is a step in the right
direction, but more needs to be done to deal with pending insolvency cases and speed
up the process.
(The author is a Delhi-based advocate. Email ID: sgassociates444@gmail.com,

abhishek_1509@hotmail.com; Mob.: 9971065767)
TAGS IBC AMENDMENT 2020 INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT) 2020
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Major Supreme Court Judgments On Reservation in Promotions PDF

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3/26/2020 Major Supreme Court Judgments On Reservation In Promotions

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Major Supreme Court Judgments On

reservation in promotions has become a subject matter of intense debate.

In this case (General Manager, Southern Railway v A Rangachari), validity of the

circulars issued by the Railway administration providing for reservation in favour of

Scheduled Castes / Scheduled Tribes in promotions (by selection) was questioned.

outside the cadre concerned.

Also Read - [Explained] Homebuyers Under Insolvency & Bankruptcy Code :

Evolution Of Law & Present Position

On appeal, the Supreme Court reversed by a majority of 3 : 2. Certain notable points

• The promotion to a selection post is also included in the matters relating to

• Art.16(1) guarantees equality of opportunity to all citizens who enter service

even in regard to promotion.

adequately represented in its services.

• This condition precedent may refer either to the numerical inadequacy of

representation in the services or even to the qualitative inadequacy of

• The advancement of the socially and educationally backward classes requires

services but that they should aspire to secure adequate representation in

selection posts in the services as well.

State of Punjab v. Hiralal (AIR 1971 SC 1777)

reservation in promotion (in addition to initial recruitment) was questioned. Though

N M Thomas v State of Kerala ( AIR 1976 SC 490)

the legality of a concession granted by Government to SC/ST members for availing

a departmental examination for promotion.

facet of equality under Articles 14 and 16(1).

"The rule giving preference to an unrepresented or under-represented backward

No reservation in promotions : Indira Sawhney v Union of India (1992)

The Supreme Court's nine-judge constitutional bench in Indra Sawhney v. Union of

reservation, under Article 16(4), cannot be extended to subsequent promotion within

the place of employment.

appointments / direct recruitment or does it contemplate and provide for reservations

being made in the matter of promotion as well?"

the view expressed in Rangachari. Concerns regarding e ciency of administration

cannot be provided throughout one's career".

In the words of the Court :

citizens at the stage of initial appointment, it would be serious and unacceptable

creation of a permanent separate category apart from the mainstream a vertical

division of the administrative apparatus. The members of reserved categories need

their promotion is assured. This in turn is bound to generate a feeling of despondence

hands. At the initial stage of recruitment reservation can be made in favour of

throughout one's career. That would not be in the interest of e ciency of

administration nor or at in the larger interest of the nation".

reservations. The judgment was held to operate only prospectively.

Constitutional Amendments to overturn Indira Sawhney view on promotions

the bene ciaries of reservation in promotion.

Article 16(4)(A) now reads:

reservation in matters of promotion [, with consequential seniority,] to any class or

represented in the services under the State."

be considered to determine the ceiling of 50% reservation on total number of

Quanti able data showing backwardness and inadequacy of representation needed

for reservation in promotions : M Nagraj

challenged in the SC as violative of basic structure. However, a ve-judge

Constitutional bench of Supreme Court in M. Nagaraj v. Union of India (2006) upheld

"The impugned constitutional amendments by which Articles 16(4-A) and 16(4-B)

backwardness and inadequacy of representation which enables the States to provide

in Indra Sawhney, the concept of post-based roster with inbuilt concept of

replacement as held in R.K. Sabharwal".

showing backwardness of the class and inadequacy of representation of that class in

public employment in addition to compliance of Article 335(which speaks of e ciency