ASSIGMENT ON…

Supreme Court Recent Judgement on Literal Rule

Submitted To Submitted By

Dr. Rakesh Meena Name- Vivek Raj

Roll no- 210619

Sub- Interpretation Of Statutes

Interpretation means the art of
finding out the true sense of an
enactment by giving the words
of the enactment their natural
and ordinary meaning. It is the
process of ascertaining the true
meaning of the words used in a
statute. The Court is not
expected to interpret arbitrarily
and
therefore there have been
certain principles which have
evolved out of the continuous
exercise
by the Courts. These principles
are sometimes called ‘rules of
interpretation’.
The object of interpretation of
statutes is to determine the
intention of the legislature
conveyed expressly or
impliedly in the language
used. As stated by
SALMOND, "by
interpretation or construction
is meant, the process by which
the courts seek to ascertain the
meaning of the legislature
through the medium of
authoritative forms in which it
is expressed."
Interpretation means the art of
finding out the true sense of an
enactment by giving the words
of the enactment their natural
and ordinary meaning. It is the
process of ascertaining the true
meaning of the words used in a
statute. The Court is not
expected to interpret arbitrarily
and
therefore there have been
certain principles which have
evolved out of the continuous
exercise
by the Courts. These principles
are sometimes called ‘rules of
interpretation’.
The object of interpretation of
statutes is to determine the
intention of the legislature
conveyed expressly or
impliedly in the language
used. As stated by
SALMOND, "by
interpretation or construction
is meant, the process by which
the courts seek to ascertain the
meaning of the legislature
through the medium of
authoritative forms in which it
is expressed."
Interpretation is as old a
Interpretation means the art of
finding out the true sense of an
enactment by giving the words
of the enactment their natural
and ordinary meaning. It is the
process of ascertaining the true
meaning of the words used in a
statute. The Court is not
expected to interpret arbitrarily
and
therefore there have been
certain principles which have
evolved out of the continuous
exercise
by the Courts. These principles
are sometimes called ‘rules of
interpretation’.
The object of interpretation of
statutes is to determine the
intention of the legislature
conveyed expressly or
impliedly in the language
used. As stated by
SALMOND, "by
interpretation or construction
is meant, the process by which
the courts seek to ascertain the
meaning of the legislature
through the medium of
authoritative forms in which it
is expressed."
Interpretation is as old a
INTRODUCTION

The term interpretation means “To give meaning to”. Governmental power has been divided
into three wings namely the legislature, the executive and the judiciary. Interpretation of
statues to render justice is the primary function of the judiciary. It is the duty of
the Court to interpret the Act and give meaning to each word of the Statute.
The most common rule of interpretation is that every part of the statute must be
understood in a harmonious manner by reading and construing every part of it together.
Literal interpretation
Giving words their ordinary and natural meaning is known as literal interpretation or litera
legis. It is the duty of the court not to modify the language of the Act and if such meaning is
clear and unambiguous, effect should be given to the provisions of a statute whatever may be
The consequence. The idea behind such a principle is that the legislature, being
the supreme law making body must know what it intends in the words of the statute.
Literal interpretation has been called the safest rule because the legislature’s
intention can be deduced only from the language through which it has expressed itself.
CASES…
1. Rajeev Suri vs Delhi Development Authority and Ors. (Transferred case (civil)
no. 230 of 2020)
CITATION
Transferred case (civil) no. 230 of 2020
CORAM

Supreme court of India: Civil Original Jurisdiction

Full bench: Justice A.M. Khanwilkar, Dinesh Maheshwari and Sanjiv Khanna.
ALSO KNOWN AS

The Central Vista Case

POINT OF CONSIDERATION

To undertake a comprehensive and heightened judicial scrutiny regarding the permissibility

of the Central Vista Project of the Government of India.
FACTS

1. The Parliament House building, a Grade-I heritage structure, was commissioned in

1927 and stands as a 93 years old structure today. Post 1971 census wherein the total
population of India was recorded as 548,159,6521, the number of seats for the House
of People was fixed at 545. Today, the population has spiralled exponentially and is
stated to have crossed the 130-crore mark. Accordingly, enhanced and commensurate
spatial requirements ought to be in place. Furthermore, the structure falls short of fire,
water and electrical safety norms and poses a grave security risk for the legislators
and secretariat staff.
2. In order to address the concerns stated above, the Central Government decided to
construct a new Parliament building with a futuristic approach and the House of
People being 3 times the size of the present chamber.
3. The petitioner in the present case raised objections, including but not limited to the
manner and procedure adopted for effecting the proposed changes in the central vista
precincts, to the Delhi Development Authority.
4. Public hearings were conducted thereagainst, the petitioners approached the High
Court of Delhi for challenging the Public Notice issued by the DDA. The High Court
(Single Judge) directed the respondents to inform the Court before taking any step in
furtherance of the impugned public notice.
5. The Union of India (Respondent) too exception to this and filed a Letter patent appeal
before the Division bench of the High Court. The Division Bench ordered ex-parte
stay on the above direction of learned single Judge vide order dated 28.2.2020.
Another writ petition being W.P. (C) No. 1575 of 2020 was also pending before the
High Court.
 6. Aggrieved by the order of the Division Bench, the petitioners approached the
Supreme Court vide Special Leave Petition which resulted in the withdrawal of the
entire subject matter before the Supreme Court.
7. analogously.

ISSUES RAISED & RATIO

 Whether the procedure involved in redevelopment is antithetical to the principle of
Natural Justice?

The court stated that “The principle of “Rule of Law” requires rule in accordance with the
law as it is, and not in accordance with an individual’s subjective understanding of law.
Substantial justice is the core of any such inquiry and it is in this direction that processes are
to be understood and adjudicated upon. The Court needs to be conscious of all aspects in a
non-adversarial public interest litigation where public interest is the sole premise of enquiry.

The petitioners have not been able to demonstrate any case of denial of natural justice. For,
the prescribed procedure, both by statute and convention, seems to have substantially been
followed. In fact, in circumstances when challenge is raised to a project of immense national
importance which is not limited to any particular city or state or intended to give benefit to
any private individual, impediments cannot be induced by reading in requirements which are not
mandated by law

 Thereafter, more petitions were filed and the apex court agreed to hear all petitions
Whether the Government Action was in excessive delegation of legislative
power?
It is no doubt true that the classification of legislative or administrative functions can no more
be done like a pigeon-holes classification. It was because of this reason that the phrases
“quasi-legislative” and “quasi-administrative” have made inroads in the modern
administrative law. In fact, in practical parlance, even quasi-legislative functions are treated
as falling under the wider ambit of administrative functions.
The precise challenge therein was regarding excessive delegation of legislative powers. The
Court recognised that it was not a case of excessive delegation as legislative functions like
preparation of comprehensive development plan and zoning of land in different use zones
could be delegated by the legislature to the development authorities for various reasons.
Strictly speaking, the Court in that case did not enter upon an examination of whether the
function of town planning was of an administrative character or legislative. The Court took it
to be of a legislative character and answered accordingly. The present question was not in
issue in that case.
Therefore, it cannot be stated as a direct authority upon the enquiry before us. However, the
fact that broad activities of town planning involved in that case are synonymous with the
activities involved in the present case is of guiding value. In the present case, what is being
modified is the master/zonal plan already in existence. True that is not an action that creates
new zones or new parameters. However, the underlying nature of activity being performed
here is of town planning and change in land use of one or couple of plots in a given zone. It is
a modification which will provide direction to all future development of the subject plots.
What is the status of Central Vista Committee (CVC)? Is the Government bound by the
opinion of CVC? Whether CVC has failed to exercise its mandate while granting “No
Objection” to the subject proposal? Whether the clearance by CVC stands vitiated due to
absence of reasons and non-application of mind?
The CVC was created by an Office Memorandum (executive fiat) by the Government at that
time as an advisory body to advice the Government on matters sent for its consideration. It
was not created by an Act of Parliament.
The creation of CVC was to have the benefit of an additional scrutiny over the development
of the central vista region in the form of approval. It has no binding authority on Government
action and in case of conflict, the decision of the Government must prevail.
The primary submission of the petitioner pertains to nonapplication of mind, absence of
reasons, mechanical approval and abdication of real duty envisaged for CVC.

The court held that, in cases when the statute itself provides for an express requirement of a
reasoned order, it is understandable that absence of reasons would be a violation of a legal
requirement and thus, illegal. However, in cases when there is no express requirement of
reasons, the ulterior effect of absence of reasons on the final decision cannot be sealed in a
straightjacketed manner. Such cases need to be examined from a broad perspective in the
light of overall circumstances.
Further, in cases where individual rights are affected by the decision, an opportunity of being
heard and application of mind couched in the form of reasons form part of the jurisprudential
doctrine. Such cases need to be distinguished from cases which do not impinge upon
individual rights and involve ordinary administrative processes. For, similar standards cannot
be deployed to decide both these cases.
Not being a statutory body, an advisory body’s opinion has no finality attached to it nor could
be appealed against to superior forum. The court held that, “What we are dealing with is the
opinion of an advisory (administrative) body which is appointed by the same Government
which calls for its advice and not to adjudicate upon rights of individuals. Even if we assume
that the no objection by an advisory body would have the effect of affecting the objectivity of
the final decision, the fact remains that it does not take the final decision. It is meant to
invoke its expertise in light of the subject proposal placed before it and advise the
Government as regards the feasibility of the proposed development in connection with the
existing central vista region. The final decision would be that of the competent authority of
the concerned department.”

Whether CVC performs functions akin to statutory bodies and has acted in contravention of
legitimate expectations of public.
Legitimate expectations may arise in cases when the decision-making body deviates from a
set standard, thereby impinging upon the rights of those who are subjected to the decision.
Since, In the present case, had the project proponent entirely skipped the step of consultation
with CVC, enforcing such consultation by operation of legitimate expectation may have
come into play.

 Whether the approval of DUAC (Delhi Urban Art Commission) was essential even
before the release of Consultation Services NIT? Whether DUAC acted in an
arbitrary manner while considering the proposal thereby vitiating the approval
granted by it?
The aforesaid scheme of the DUAC Act succinctly reveals that the mandate of DUAC is to
offer its advice in matters of preservation, development, re-development and maintenance of
aesthetic quality of urban and environmental design within Delhi. Such advice is not rendered
in context of each and every aspect of the proposal, rather, it only ensures that overall
aesthetic quality of the concerned region is not being disturbed. Over and above the concern
of aesthetics, there is no other aspect on which the Commission’s (DUAC’s) approval is
mandated.
 It is not meant to analyse any other aspect of the project. In that, it is
expected to apply its mind to those aspects of the project which may have a
bearing on aesthetics. The Minutes succinctly reveal that complete
information relating to designs was placed before the DUAC and it applied
itself on an array of factors including parking, plantation of trees, traffic,
appearance of facade, ventilation, landscape, building equipment etc. so far
as the same are relevant for its enquiry, to fulfil its advisory duties. The
allegation of arbitrariness is easy to raise in a theoretical discourse, but hard
to establish in a Court of law where unsubstantiated considerations have no
place. Other issues discussed by the Court includes:
1. Environmental Clearance: the court held that once an expert committee has duly
applied its mind to an application for EC, any challenge to its decision has to be
based on concrete material which reveals total absence of mind. Absent that
material, due deference must be shown to the decisions of experts. “The facts of
the case do not reveal any deliberate concealment of fact/information from the
EAC or supply of any misinformation.”
2. Timeline of the Project: Once the project proponent frames a conscious timeline
of completion of various projects which broadly fall under the umbrella of a
common vision for the region, the same cannot be disturbed on the notion that the
whole vision should go through the regulatory compliances at once. That would
defeat the whole purpose of advance planning of a development activity. Planning
involves in-depth consideration of a wide range of concerns including regulatory
requirements. The decision to attribute different timelines and purposes to
different projects is a domain of planning and the Court cannot readily attribute
the label of mala fides to such informed decision until and unless there is a clear
attempt to evade the requirements of law.
3. Selection/Appointment of Consultant: In this case, the process of tender was
used to select the consultant wherein uniform conditions were prescribed for all
the participants who were eligible and free to participate in the process. Upon
submission of bids, their applications were analysed on pre-determined set of
objective parameters which were duly notified to all the participants beforehand.
The petitioners have not shown that the conditions of tender were deliberately
crafted in a manner to make them suitable for a particular participant. Nor, have
they shown that the conditions were violative of any mandatory requirement.
Hence, Just because the Government has followed a particular method of
selection/appointment of the Consultant for the stated project and another one
 would have been a better option cannot be the basis to quash the appointment
already made after following a fair procedure consequent to inviting tenders from
eligible persons similarly placed.
4. Public Trust Doctrine: “For proving a violation of public trust, it falls upon the
petitioners to establish that public resources are being squandered and used or planned
to be used in a manner which cannot be termed as beneficial public use. As for the
respondents, it falls upon them to establish that the proposed use of public resources is
aligned in the direction of beneficial use and in public interest.” Since, in the present
case, the respondents have elaborately demonstrated the imminent need for the
project. Also, the change in land use does not result into any deprivation of
recreational spaces. On the contrary, the changes would result into optimisation and
greater access to open spaces including entail in assets creation.
5. Availability of information in Public Domain: Evidently, all relevant documents
from the stage of expression of need for the project by Speaker of Lok Sabha to
appointment of consultant, issuance of public notice, conduct of public hearing, final
notification for change in land use and minutes of meetings of CVC, DUAC and EAC
were placed in public domain. The petitioners have not pointed out a single document
which formed a part of the process and was not placed in public domain.

2. M/s. Adani Power (Mundra) Ltd. v/s Gujarat Electricity Regulatory Commission &

Others

  At, Supreme Court of India

    By, THE HONOURABLE MR. JUSTICE ARUN MISHRA

    By, THE HONOURABLE MR. JUSTICE B.R. GAVAI & THE HONOURABLE MR.
JUSTICE SURYA KANT

    For the Appellant: Gopal Jain, Sr. Advocate, Ashish Prasad, Praveen Kumar, Advocates.
For the Respondent: Hemantika Wahi, Puja Singh, Ranjeetha Ramachandran, A.P. Mayee,
Deepanwita Prinka, Abhiram Naik, M/s. Parekh & Co., Prashant Bhushan, Advocates.

Judgment

1. The appellant has approached this Court being aggrieved by the judgment and order passed
by the Appellate Tribunal for Electricity ("the Appellate Tribunal" for short) in Appeal No.
184 of 2010 dated 07.09.2011 thereby dismissing the appeal filed by the present appellant
and confirming the judgment and order passed by the Gujarat Electricity Regulatory
Commission ("the Commission" for short) dated 31.08.2010.

2. The facts in brief giving rise to the present appeal are as under. Respondent No. 2, namely,
Gujarat Urja Vikas Nigam Ltd. (hereinafter referred to as "the procurer") is a holding
company engaged in the business of bulk purchases from the power generators and supply to
the distribution companies in the State of Gujarat. On 01.02.2006, the procurer initiated the
process of bidding for supply of power on long term basis, by issuing a Request For
Qualification ("RFQ" for short). Three separate bids for purchase of power in accordance
with the provisions of Section 63 of the Electricity Act, 2003 were invited. Each of the three
bids envisaged purchase of power to the maximum extent of 2000 Mega Watt ("MW" for
short). The RFQ was followed by Request For Proposal ("RFP" for short) on 24.11.2006. The
present matter concerns bid No. 2 in respect of which the appellant was selected as a
successful bidder.

3. On being successful in the bidding process, the procurer issued a Letter of Intent ("LOI" for
short) in respect of bid no. 2, to the appellant on 11.01.2007 for supplying 1000 MW power
at the rate of Rs. 2.35 per Kwh. Consequently, the Power Purchase Agreement ("PPA" for
short) came to be entered into between the procurer and the appellant, for purchase and sale
of 1000 MW power from the appellant's power project at Korba, Chhatisgarh, at the delivery
point at Nani Khakhar in the State of Gujarat.Similarly, on 06.02.2007 another PPA came to
be executed by the procurer with the appellant in respect of bid No. 1, which project was to
be executed by using imported coal. The rate determined was Rs. 2.89 per unit in respect of
bid No. 1.

4. On 12.02.2007, the appellant informed the procurer that it would supply power against bid
No. 2, from Mundra Power Project in Gujarat instead of Chhatisgarh Project. Accordingly, a
supplemental PPA was entered into between the appellant and the procurer on 18.04.2007, to
off take the contracted capacity of 1000 MW against bid No. 2, from Mundra Power Project.

5. The appellant contended that, the bid submitted by it in respect of bid No. 2 was on the
basis of the assurance given by Gujarat Mineral Development Corporation ("GMDC" for
short) to supply 4 million tonnes of coal. It also contended that, the GMDC was not abiding
by the said assurance. So it addressed a communication to the Government of Gujarat on
21.05.2007 to find out a solution. Since the Fuel Supply Agreement ("FSA" for short) could
not be executed, as contemplated between the appellant and the GMDC; the appellant
informed the procurer that the FSA between it and the GMDC had not yet been finalized.
Again, a communication came to be addressed by the appellant on 01.05.2008 to the
Government of Gujarat, requesting it to impress upon the GMDC to adhere to its assurance
and supply the coal from the coal blocks allocated to the GMDC. The procurer, thereafter, in
the month of June, 2008, addressed a communication to the appellants stating that, since it
had not complied with certain conditions stipulated in the PPA and as such, it should furnish
an additional performance bank guarantee. The appellant addressed another communication
to the procurer on 17.01.2009, reiterating its inability to supply the power to the procurer in
the absence of FSA with GMDC. It also informed that it had no other option except to
terminate the PPA. On 27.02.2009, the Government of Gujarat wrote to the GMDC, asking it
to supply coal to the appellant from Naini block.

6. It appears that there was a dispute between the appellant and the GMDC with regard to
certain terms and conditions of the FSA and as such the FSA could not be finalized. The
record would further reveal, that there was a long correspondence between the Government
of Gujarat, the GMDC, the procurer and the appellant with regard to the commitment by the
GMDC to supply coal to the appellant in respect of bid No. 2 and non-adherence by the
GMDC to abide by the said commitment. The appellant addressed a communication dated
15.11.2008 specifically informing the procurer that the bid was on the basis of the assurance
by the GMDC to supply coal. It also informed the procurer that though it was in a position to
comply with all other conditions subsequent but they are unable to execute the FSA since the
GMDC had not cooperated in the matter. Another communication was addressed by the
appellant on 17.01.2009 reiterating that in the absence of FSA with the GMDC, the appellant
will not be in a position to supply contracted capacity of power to GUVNL/the procurer in
the absence of FSA with the GMDC. It further informed that the appellant shall have no other
option than to terminate the PPA unless the coal supply comes from the GMDC from Morga-
II coal block. However, it appears that, thereafter, there was an attempt to amicably settle the
matter between the appellant, the procurer, the GMDC as well as the Government of Gujarat.
As such, the appellant addressed communication dated 28.04.2009 keeping its notices dated
15.11.2008 and 17.01.2009 in abeyance till the matter was resolved between the appellant
and the GMDC/Government of Gujarat. It, however, appears that the said attempts were not
fruitful. Finally, the appellant by a communication dated 28.12.2009, issued notice to the
procurer, terminating the PPA with effect from 04.01.2010. The procurer addressed a
communication to the Government of Gujarat on 30.12.2009, requesting the Government to
impress upon the appellant to withdraw its termination notice dated 28.12.2009 and also
impress upon the GMDC for resolution of FSA with the appellant. The procurer also
addressed a communication to the appellant on 05.01.2010, requesting it to keep the notice of
termination dated 28.12.2009 in abeyance. On 06.01.2010, the appellant addressed another
communication to the procurer, informing it that since the period of termination has already
expired, the PPA stands terminated with effect from 4.01.2010. The appellant also deposited
an amount of Rs. 25 crores with the procurer towards liquidated damages in addition to the
performance bank guarantee of Rs. 75 crores, which was already with the procurer. On
13.01.2010 the procurer sent a letter to the appellant, returning the amount of Rs. 25 crores
and calling upon it to withdraw the termination notice. However, the appellant asserted that
termination was valid.

7. The procurer, thereafter, filed a petition under Sections 86(1)(f) and 95 of the Electricity
Act, 2003, for adjudication of the dispute between the procurer and the appellant on
01.02.2010 before the Commission. The Commission by its judgment dated 31.08.2010
allowed the petition of the procurer, holding that the termination of the PPA was illegal and
directed the appellant herein to supply the power to the procurer at the rate determined in the
PPA. Being aggrieved, the appellant approached the Appellate Tribunal for Electricity. By
the judgment and order impugned dated 07.09.2011, the Appellate Tribunal dismissed the
appeal. Hence, the present appeal.

8. We have heard Mr. Gopal Jain, learned senior counsel for the appellant, and Mr. M.G.
Ramachandran, learned senior counsel for the respondent(s).

9. The main contention raised on behalf of the appellant is that the bid which was submitted
by the appellant in respect of bid No. 2 was on the basis of the commitment given to it by the
GMDC that it will supply the coal. It is submitted that the PPA executed between the
appellant and the procurer was on the premise that the GMDC would abide by its
commitment. It is also submitted that since the GMDC had failed to abide by its commitment
and had not executed the FSA with the appellant, there was a non-compliance with the
conditions stipulated in Article 3.1.2 of the PPA and therefore the appellant was entitled to
terminate the agreement, by giving 7 days notice in writing in accordance with the provisions
of Article 3.4.2 of the PPA. So the only liability of the appellant was to pay the liquidated
damages at the rate of Rs. 10 lakhs per Mega Watt of the contracted capacity, which is
worked out to Rs. 100 crores for 1000 MW.

10. It is the submission of Mr. Jain, learned senior counsel, that the Commission and the
Appellate Tribunal have grossly erred in holding that unless there was an agreement between
the parties to the effect that there was non-compliance with the conditions mentioned in
Article3.1.2 of the PPA, the appellant was not entitled to invoke the provisions of Article
3.4.2 of the PPA. Mr. Jain further submitted that since the contract also provided for
liquidated damages, the Commission as well the Appellate Tribunal, ought not to have given
a direction for specific performance. Reliance in this respect is placed on the judgments of
this Court in the case of Indian Oil Corporation vs. Amritsar Gas Services Ltd., (1991) 1 SCC
533 and Her Highness Maharani Shanti Devi Gaekwad vs. Savji Haribhai Patel & Ors. (2001)
11. Mr. Jain further submitted that the Appellate Tribunal by the impugned judgment has
varied the terms of the contract executed between the parties, which is not permissible in law.
Reliance in this respect is placed on the judgments of this Court in the case of Vermagiri vs.
Transco, 2007 SCC On Line APTEL 107 and Gujarat Urja Vikas Nigam Ltd. vs. Solar
Semiconductor Power Company, (2017) 16 SCC 498.

12. Per contra, Mr. Ramachandran, learned senior counsel appearing on behalf of the
procurer, would submit that the PPA which was entered into between the parties, was not
executed on the basis of commitment by the GMDC. He submits that the procurer is not
concerned with the issue as to from where the appellant would arrange for its supply of coal.
The PPA between the appellant and the procurer is only in respect of supply of power. It is
submitted that on the GMDC's failure to adhere to its commitment to supply indigenous coal,
it was the responsibility of the appellant to make arrangement for an alternative source and to
enter into FSA with any other coal supplier. It is submitted that as a matter of fact, the
appellant is importing the coal from other nations and using it for generation of power, both
for the plant under bid No. 1 and the plant under bid No. 2. Shri Ramachandran, learned
senior counsel, further submits that, by not making arrangements for fuel supply, it is the
appellant who had committed default and, therefore, a party in default cannot be permitted to
terminate the agreement. Reliance in this respect is placed on various judgments of English
Courts as well as this Court. Reliance is also placed on various judgments of this Court, in
support of the proposition that in spite of the provision of liquidated damages in the PPA, the
courts are not powerless to direct a specific performance of the contract.

13. Shri Ramachandran further submitted that the contract is required to be read as a whole
and the provisions of the contract cannot be read in isolation. He, therefore, submits that the
Commission as well as the Appellate Tribunal has rightly held that Article 3.4.2 and Article
14.1 and Article 14.2 have to be read together. Thus, no fault could be found with the
reasoning given by the Commission as well as the Appellate Tribunal. Learned senior
counsel, therefore, submits that the appeal has no merit and deserves to be dismissed.

3. Dheeraj Mor v. Hon'ble High Court Of Delhi

. The issues raised in these petitions pertain to the interpretation of Article 233 of the
Constitution of India in the matter of appointment of District Judges by way of direct
recruitment.

2. The petitioners have raised mainly two contentions - (i) in case a candidate has completed
seven years of practise as an advocate, he/she shall be an eligible candidate despite the fact
that on the date of the application/appointment, he/she is in the service of Union or State; (ii)
the members who are in judicial service as Civil Judge, Junior Division or Senior Division, in
case they have completed seven years as Judicial Officers or seven years as Judicial Officer-
cum-Advocate, they should be treated as eligible candidates.

3. Extensive reference has been made to various judgments of this Court which pertain to
Article 233 of Constitution of India. To provide a complete picture of the matter, we shall
briefly discuss the relevant cases.

4. The case of Rameshwar Dayal v. State of Punjab and others, AIR 1961 SC 816 pertains to
eligibility for appointment as District Judge counting also the period of practise in Lahore
High Court, before partition. At paragraphs 11 and 13, this Court made the following
observations:
"11. This is the background against which we have to consider the argument of learned
Counsel for the appellant. Even if we assume without finally pronouncing on their
correctness that learned Counsel is right in his first two submissions, viz., that the word "
advocate" in Clause (2) of Article 233 means an advocate of a Court in India and the
appointee must be such an advocate at the time of his appointment, no objection on those
grounds can be raised to the appointment of three of the respondents who were factually on
the roll of Advocates of the Punjab High Court at the time of their appointment; because
admittedly they were advocates in a Court in India and continued as such advocates till the
dates of their appointment. The only, question with regard to them is whether they can count.
in the period of seven years their period of practise in or under the Lahore High Court..."

xxx xxx xxx

13. ... It is perhaps necessary to add that we must not be understood to have decided that the
expression has been must always mean what learned Counsel for the appellant says it means
according to the strict rules of grammar. It may be seriously questioned if an organic
Constitution must be so narrowly interpreted, and the learned Additional Solicitor-General
has drawn our attention to other Articles of the Constitution like Article 5(c) where in-the
context the expression has a different meaning. Our attention has also been drawn to the
decision of the Allahabad High Court in Mubarak Mazdoor v. K. K. Banerji AIR 1958
Allahabad 323 where a different meaning was given to a similar expression occurring in the
proviso to sub-section (3) of section 86 of the Representation of The People Act, 1951. We
consider it unnecessary to pursue this matter further because the respondents we are now
considering continued to be advocates of the Punjab High Court when they were appointed as
district judges and they had a standing of more than seven years when so appointed. They
were clearly eligible for appointment under Clause 2 of Article 233 of the Constitution."
(Emphasis Supplied)

5. In Chandra Mohan v. State of Uttar Pradesh and others, AIR 1966 SCC 1987, this Court
interpreted the expression "the service" in clause 2 of Article 233 to mean judicial service.

6. In Satya Narain Singh v. High Court of Judicature at Allahabad and Others, (1985) 1 SCC
225 , this Court considered the question as to whether judicial officers who had seven years
standing at the Bar before entering service would be eligible for appointment as District
Judges. To quote:
"1. The petitioners in the several writ petitions now before us as well as the appellants in
Civil Appeal No. 548 of 1982 and the petitioners in Writ Petitions Nos. 6346-6351 of 1980
which we dismissed on October 11, 1984 were members of the Uttar Pradesh Judicial Service
in 1980 when all of them, in response to an advertisement by the High Court of Allahabad,
applied to be appointed by direct recruitment to the Uttar Pradesh Higher Judicial Service.
They claimed that each of them had completed 7 years of practise at the bar even before their
appointment to the Uttar Pradesh Judicial Service and were, therefore, eligible to be
appointed by direct recruitment to the Higher Judicial Service. ..." (Emphasis Supplied)

After referring to the text of Article 233, this Court held as follows :-
"3. ... It is only in respect of the persons covered by the second clause that there is a
requirement that a person shall be eligible for appointment as District Judge if he has been an
advocate or a pleader for not less than 7 years. In other words, in the case of candidates who
are not members of a Judicial Service they must have been advocates or pleaders for not less
than 7 years and they have to be recommended by the High Court before they may be
appointed as District Judges, while in the case of candidates who are members of a Judicial
Service the 7 years rule has no application but there has to be consultation with the High
Court. A clear distinction is made between the two sources of recruitment and the dichotomy
is maintained. The two streams are separate until they come together by appointment.
Obviously the same ship cannot sail both the streams simultaneously.." (Emphasis Supplied)

In Satya Narain Singh (supra), the Court specifically referred to Rameshwar Dayal (supra) to
note that Article 233 is a self contained provision regarding appointment of District Judges.
Finally, at paragraph 5, after discussing Chandra Mohan (supra), it was held that:
"5. Posing the question whether the expression "the service of the Union or of the State"
meant any service of the Union or of the State or whether it meant the Judicial Service of the
Union or of the State, the learned Chief Justice emphatically held that the expression "the
service" in Article 233(2) could only mean the Judicial Service. But he did not mean by the
above statement that persons who are already in the service, on the recommendation by the
High Court can be appointed as District Judges, overlooking the claims of all other seniors in
the Subordinate Judiciary contrary to Article 14 and Article 16 of the Constitution."

(Emphasis Supplied)
7. In Deepak Aggarwal v. Keshav Kaushik and Others, 2013(1) S.C.T. 752 : 2013(1) Recent
Apex Judgments (R.A.J.) 587 : (2013) 5 SCC 277 , a three-judge Bench of this Court held
that the appellants did not cease to be advocates while working as Assistant District
Attorney/Public Prosecutor/Deputy Advocate General. In arriving at this decision, this Court
also dealt with the expression, "if he has been for not less than 7 years an advocate" in Article
233(2). Paragraphs 51 and 102 read as follows :-
"51. From the above, we have no doubt that the expression, "the service" in Article 233(2)
means the "judicial service". Other members of the service of the Union or State are as it is
excluded because Article 233 contemplates only two sources from which the District Judges
can be appointed. These sources are: (i) judicial service; and (ii) the advocate/pleader or in
other words from the Bar. The District Judges can, thus, be appointed from no source other
than judicial service or from amongst advocates. Article 233(2) excludes appointment of
District Judges from the judicial service and restricts eligibility of appointment as District
Judges from amongst the advocates or pleaders having practise of not less than seven years
and who have been recommended by the High Court as such."

xxx xxx xxx

"102. As regards construction of the expression, "if he has been for not less than seven years
an advocate" in Article 233(2) of the Constitution, we think Mr Prashant Bhushan was right
in his submission that this expression means seven years as an advocate immediately
preceding the application and not seven years any time in the past. This is clear by use of "has
been". The present perfect continuous tense is used for a position which began at sometime in
the past and is still continuing. Therefore, one of the essential requirements articulated by the
above expression in Article 233(2) is that such person must with requisite period be
continuing as an advocate on the date of application."
(Emphasis Supplied)

8. Vijay Kumar Mishra and Another. v. High Court of Judicature at Patna and Others,
2016(4) S.C.T. 267 : 2016(5) Recent Apex Judgments (R.A.J.) 332 : (2016) 9 SCC 313 is a
case where an advertisement was issued inviting applications from eligible advocates for
direct recruitment for the post of District Judge. Pursuant to the advertisement, the appellants
appeared in the preliminary as well as main examination. In the meantime, the appellants
qualified for the Subordinate Judicial Service of the State of Bihar and joined service in
August, 2015. The result of the mains examination for the post of District Judge was declared
in January, 2016 and the appellants qualified for the same. However, they were denied
permission by the Registrar General of Patna High Court to appear for the interview in view
of Article 233(2) of the Constitution, as they were already in the State Subordinate Judicial
Service. To quote Chelameswar, J. :-
"7. It is well settled in service law that there is a distinction between selection and
appointment. Every person who is successful in the selection process undertaken by the State
for the purpose of filling up of certain posts under the State does not acquire any right to be
appointed automatically. Textually, Article 233(2) only prohibits the appointment of a person
who is already in the service of the Union or the State, but not the selection of such a person.
The right of such a person to participate in the selection process undertaken by the State for
appointment to any post in public service (subject to other rational prescriptions regarding the
eligibility for participating in the selection process such as age, educational qualification,
etc.) and be considered is guaranteed under Articles 14 and 16 of the Constitution.

8. The text of Article 233(2) only prohibits the appointment of a person as a District Judge, if
such person is already in the service of either the Union or the State. It does not prohibit the
consideration of the candidature of a person who is in the service of the Union or the State. A
person who is in the service of either the Union or the State would still have the option, if
selected, to join the service as a District Judge or continue with his existing employment.
Compelling a person to resign from his job even for the purpose of assessing his suitability
for appointment as a District Judge, in our opinion, is not permitted either by the text of
Article 233(2) nor contemplated under the scheme of the Constitution as it would not serve
any constitutionally desirable purpose."

(Emphasis Supplied)

9. This Court took note of the judgment in Satya Narain Singh (supra) but distinguished it
holding that:
"10. In first of the above mentioned judgments, the appellant-petitioners before this Court
were members of the Uttar Pradesh Judicial Service. In response to an advertisement by the
High Court, they applied to be appointed by direct recruitment to the Uttar Pradesh Higher
Judicial Service (District Judges). It appears from the judgment "as there was a question
about the eligibility of the members of the Uttar Pradesh Judicial Service to appointment by
direct recruitment to the higher Judicial Service ..." (Satya Narain case, SCC p. 227, para 1),
some of them approached the High Court by way of writ petitions which were dismissed and
therefore, they approached this Court. It is not very clear from the judgment, as to how the
question about their eligibility arose and at what stage it arose. But the fact remains, by virtue
of an interim order of this Court, they were allowed to appear in the examination. The
argument before this Court was that all the petitioners had practised for a period of seven
years before their joining the Subordinate Judicial Service, and therefore, they are entitled to
be considered for appointment as District Judges notwithstanding the fact that they were
already in the Judicial Service.

11. It appears from the reading of the judgment in Satya Narain Singh case that the case of
the petitioners was that their claims for appointment to the post of District Judges be
considered under the category of members of the Bar who had completed seven years of
practise ignoring the fact that they were already in the Judicial Service. The said fact operates
as a bar undoubtedly under Article 233(2) for their appointment to the Higher Judicial
Service. It is in this context this Court rejected their claim. The question whether at what
stage the bar comes into operation was not in issue before the Court nor did this Court go into
that question." (Emphasis Supplied)
This Court also held that the decision in Deepak Aggarwal (supra) had no relevance to the
issue at hand.

10. In the supplementing opinion, Sapre, J. made the following observations which are
extremely pertinent in this context :-
"21. Mr. Ranjit Kumar, Solicitor General of India appearing for the respondent (High Court),
however, contended that the word " appointed" occurring in Article 233(2) of the
Constitution should necessarily include the entire selection process starting from the date of
submitting an application by the person concerned till the date of his appointment. It was his
submission that if any such person is found to be in service of the Union or the State, as the
case may be, on the date when he has applied then such person would suffer disqualification
prescribed in clause (2) of Article 233 and would neither be eligible to apply nor be eligible
for appointment to the post of District Judge.

22. This submission though looks attractive, is not acceptable. Neither the text of Article and
nor the words occurring in Article 233(2) suggest such interpretation. Indeed, if his argument
is accepted, it would be against the spirit of Article 233(2). My learned Brother for rejecting
this argument has narrated the consequences, which are likely to arise in the event of
accepting such argument and I agree with what he has narrated.

23. In my view, there lies a subtle distinction between the words " selection " and "
appointment" in service jurisprudence. (See Prafulla Kumar Swain v. Prakash Chandra
Misra.) When the Framers of the Constitution have used the word "appointed" in clause (2) of
Article 233 for determining the eligibility of a person with reference to his service then it is
not possible to read the word "selection" or "recruitment" in its place. In other words, the
word "appointed" cannot be read to include the word "selection", "recruitment" or
"recruitment process".

24. In my opinion, there is no bar for a person to apply for the post of District Judge, if he
otherwise, satisfies the qualifications prescribed for the post while remaining in service of the
Union/State. It is only at the time of his appointment (if occasion so arises) the question of his
eligibility arises. Denying such person to apply for participating in selection process when he
otherwise fulfils all conditions prescribed in the advertisement by taking recourse to clause
(2) of Article 233 would, in my opinion, amount to violating his right guaranteed under
Articles 14 and 16 of the Constitution of India."
11. Some of the learned counsel have also invited our attention to All India Judges
Association and others v. Union of India and others, 2002(2) S.C.T. 735 : (2002) 4 SCC 247 ,
Shri Kumar Padma Prasad v. Union of India and others, 1992(2) S.C.T 309 : (1992) 2 SCC
428 and State of Assam v. Horizon Union and another, [1967] 1 SCR 484.
12. In the order dated 03.04.2017 in Sukhda Pritam and Anr v. Honble High Court of
Rajasthan and Anr which is one of the cases in the batch, there is also a reference to rules
framed by certain states which provide that "in computing the period of seven years there
shall be included a period during which he (a candidate) has held judicial office". This is also
an issue which is required to be considered.
13. In view of the various decisions of this Court, one major issue arising for consideration is
whether the eligibility for appointment as district judge is to be seen only at the time of
appointment or at the time of application or both. Thus, having regard to the contentions and
the materials placed before us and having regard to the ratio and observations in the cases
referred to above, some of which are apparently diverse, we are also of the view that these
cases involve substantial questions of law as to the interpretation of Article 233 of the
Constitution of India. Therefore, we are of the opinion that this matter should be placed
before Honble the Chief Justice of India for constituting an appropriate Bench.

14. Learned counsel for the petitioners pointed out that all the petitioners herein, by virtue of
interim orders, have appeared in the written examinations and in some cases they have also
attended the interview. We are informed that in some of the cases, appointment of other
eligible candidates is held up on account of pendency of these cases.

15. The Registry may seek appropriate orders from Honble the Chief Justice of India having
regard to the special circumstances referred to above, for an early posting.
4. Anuj Jain, Interim Resolution Professional for Jaypee Infratech Limited v. Axis Bank
Etc.

Facts:

1. Jaiprakash Associates Limited ("JAL") is a Public Listed Company and Jaypee

Infratech Limited ("JIL") is its subsidiary.
2. JAL obtained finance from a consortium of banks and financial institutions, ICICI
Bank Limited, Standard Chartered Bank Limited and State Bank of India ("JAL
Lenders"), the security of which inter alia comprised of mortgage created by JIL of
certain lands held by it.
3. IDBI Bank Limited, a creditor of JIL, instituted a petition under Section 7 of the
Insolvency and Bankruptcy Code, 2016 ("Code") before the National Company Law
Tribunal, Allahabad Bench ("NCLT") for seeking initiation of CIRP against JIL
while alleging that JIL had committed a default in repayment of its dues to the tune of
526.11 crores.
4. NCLT initiated CIRP against JIL on 9th August 2017.
5. The NCLT on 9th May 2018 and 15th May 2018 approved the decision of the IRP of
JIL rejecting the claims of the JAL Lenders to be recognized as financial creditors of
the Corporate Debtor JIL on the strength of the mortgages created by Corporate
Debtor JIL as collateral security of the debt of its holding company JAL.
6. Further, the NCLT on 16th May 2018 held certain transactions by which the Corporate
Debtor JIL had mortgaged its properties as collateral securities for loans and advances
 made by the JAL Lenders, as being preferential, undervalued and fraudulent under
Section 43, 45 and 66 of the Code.
7. The National Company Law Appellate Tribunal, New Delhi ("NCLAT") on
1st August 2019 by a common order set aside the NCLT order dated 16 th May 2018
and also allowed the appeals by the Lenders of JAL to be financial creditors of
Corporate Debtor JIL. However, the entire NCLAT judgement had only been in
relation to the order dated 16th May 2018 passed by NCLT on the application for
avoidance filed by the IRP and no reasons were given for reversing the NCLT
judgments of 9th May 2018 and 15th May 2018.
8. The appeals from the NCLAT judgement dated 1st August 2019 are addressed by the
present Supreme Court judgment.

Major Issues Involved:

1. Whether the mortgage transactions in question deserve to be avoided as being

preferential, undervalued and fraudulent under Section 43, 45 and 66 of the Code?
2. Could the JAL Lenders be recognized as financial creditors of the Corporate Debtor
JIL on the strength of the mortgage created by the Corporate Debtor, as collateral
security of the debt of its holding company JAL?

In this article, we examine the judgment only in relation to the issue of the third-party
mortgages being preferential, undervalued and fraudulent under Section 43, 45 and 66 of the
Code.

Judgment:
The Supreme Court has carefully analysed each provision of Section 43 to see whether the
mortgage transactions by JIL in favour of the JAL Lenders is preferential and has identified
five key requirements which need to be satisfied for a transaction to fall within its ambit.

i. Whether such transfer is for the benefit of a creditor or a surety or a guarantor?

i. In the present case the Supreme Court held that the creditor-debtor relationship
between the banks and the corporate debtor (i.e. the parties to the transaction in
question) will not be decisive of the question of ultimate beneficiary.
 ii. The Court further held that as JIL owed operational debts towards JAL, JAL was an
operational creditor of JIL.
iii. It was further held that the nature of mortgage created by JIL in favour of the JAL
Lenders, made JAL the ultimate beneficiary as it was able to raise finance based on
such mortgage.
iv. Thus, the transactions in question were made for the benefit of a creditor as the
creditor was the ultimate beneficiary despite not being a party to the transaction
sought to be set aside.

II. As to whether such transfer is for or on account of an antecedent financial debt or

operational debt or other liabilities owed by the corporate debtor?

In light of the facts of the matter, the Court held that corporate debtor JIL owed antecedent
financial debts as also operational debts and other liabilities towards JAL.

III. As to whether such transfer has the effect of putting such creditor or surety or
guarantor in a beneficial position than it would have been in the event of distribution
of assets being made in accordance with Section 53?

The Court held that JAL was obviously put in an advantageous position vis-à-vis other
creditors because of the receipt of huge amount of loans by way of facilities and by way of
the abovementioned transaction JAL's liability towards its creditors has been reduced in so
far as the mortgaged properties is concerned. In light of these facts JAL stands clearly
benefited by way of distribution of assets being made in accordance with manner other than
laid down in Section 53, at the cost of exclusion of other creditors and stakeholders of
corporate debtor JIL.

IV. If such transfer had been for the benefit of a related party (other than an employee), as
to whether the same was made during the period of two years preceding the
insolvency commencement date; and if such transfer had been for the benefit of an
unrelated party, as to whether the same was made during the period of one year
preceding the insolvency commencement date?

Coming to the look-back period and contention of Section 43 and 44 having only prospective
effect, the bench was of the view that both the sections came into operation as the
comprehensive scheme of corporate insolvency resolution and liquidation from the date of
being effective, and merely because the look-back period is envisaged for the purpose of
relevant time, it cannot be said that the provision itself is retrospective in operation. Further,
the contentions urged on behalf of the respondents would result in postponing the effective
date of operation Section 43(4) for a period of 2 years in case of related parties and one year
in the case of unrelated party, and thereby, effectively postponing the application of entire
Section 43 for a period of two years which was never the intention of legislature and thus
such contentions were rejected.

Thus, the look-back period is 2 years preceding the insolvency commencement date i.e.
9th August 2017. Therefore, transactions commencing from 10 th August 2015 until date of
insolvency shall fall under the scanner. The flow of mortgages provided by corporate debtor
JIL are as follows:

 In relation to the first and second transaction in question, the initial mortgage deed
dated 24th February 2015 for the mortgage in favour of some of the JAL Lenders, was
released and re-mortgaged on 15th September 2015 as well as on 29th December 2016,
changing the facility amount from 3250 Crores to 24109 Crores and from 24109
Crores to 23491 Crores respectively.
 In relation to the third transaction, the initial mortgage deed dated 12th May 2014 in
favour of ICICI Bank Limited was released in three transactions vide release deeds
dated 30th December 2015, 24th June 2016 and 7th March 2017 and thereafter was
subsequently re-mortgaged on 7th March 2017.
 In relation to the fourth transaction, the initial mortgage deed dated 12 th May 2014 in
favour of ICICI Bank Limited was released and re-mortgaged on 7th March 2017.
 In relation to the fifth transaction, the initial mortgage deed dated 24 th June 2009 in
favour of Standard Chartered Bank Limited was extended to secure the increased
facility amount from 900 Crores to 1300 Crores by mortgage deed dated
27th November 2012. Further additional land was added to increase the facility
amount from 1300 Crores to 1750 Crores by mortgage deed dated 23 rd March 2013.
Subsequently the mortgage deed dated 23rd March 2013 was released on 4th November
2015 and re-mortgaged on 24th May 2016.
 In relation to the sixth transaction, mortgage deed dated 4th March 2016 was entered
in favour of State Bank of India.
In relation to the "re-mortgages", the bench was of the view that on release by the mortgagee
the mortgage ceases to exist and thus in all its legal effects and connotations such mortgages
can only be regarded as fresh mortgages. Further, these "re-mortgages" were also made in
some cases to secure an increased facility amount in some transactions, thereby extending
unwarranted advantage to JAL at the cost of the estate of corporate debtor JIL. Thus, all the
six transactions identified by the IRP fell within the look back period.

V. As to whether such transfer is not an excluded transaction in terms of sub-section (3)

of Section 43?

Section 43(3) of the Code excludes certain transactions which would otherwise be considered
preferential transactions. These exclusions are as follows:

(a) transfer made in the ordinary course of the business or financial affairs of the corporate
debtor or the transferee;

(b) any transfer creating a security interest in property acquired by the corporate debtor to the
extent that –

i. such security interest secures new value and was given at the time of or after the
signing of a security agreement that contains a description of such property as security
interest, and was used by corporate debtor to acquire such property; and
ii. such transfer was registered with an information utility on or before thirty days after
the corporate debtor receives possession of such property:

Provided that any transfer made in pursuance of the order of a court shall not, preclude such
transfer to be deemed as giving of preference by the corporate debtor.

On the point of ordinary course of business, the JAL Lenders forcefully argued that they
being the transferees executed the transactions in the ordinary course of business of providing
financial support with loans and advances and therefore these transactions should not be
considered preferential under Section 43(2). The Bench however accepted the contention of
the IRP that the use of the word 'or' in Section 43(3) is required to be read as 'and' so as to be
conjunctive and covering only the transactions in the ordinary course of business or financial
affairs of both the corporate debtor and the transferee.
Further, the whole of conspectus of sub-section (3) is that only if any transfer is found to have
been made by the corporate debtor, either in the ordinary course of its business or financial
affairs or in the process of acquiring any enhancement in its value or worth, that might be
considered as having been done without any tinge of favour to any person in preference to
others and thus, might stand excluded from the purview of being preferential, subject to
fulfilment of other requirements of sub-section (3) of Section 43. If the transfers are
examined with reference to ordinary course of business of transferee alone, all such
transactions may conveniently get excluded from the rigour of Section 43(2), which was
never the intention of the legislature.

The Supreme Court agreed that the ordinary course of business or financial affairs of the
corporate debtor JIL cannot be that of providing mortgages to secure loans and facilities
obtained by its holding company, that too at the cost of its own financial health and thus the
transactions were neither in the ordinary course of business or financial affairs of corporate
debtor JIL nor did they secure new value in the property acquired by corporate debtor JIL and
hence are not excluded transactions under Section 43(3).

The Supreme Court thus noted that all the requirements of Section 43 were satisfied in the
present case and the transactions were hit by Section 43 and the IRP was correct in issuing
directions for release and discharge of the mortgages under Section 44.

The Supreme Court did not elaborate on whether the transactions were also undervalued and
fraudulent as they had already been decided as preferential and their avoidance was approved.
However, the Supreme Court noted that in the present case the NCLT recorded combined
findings on the transactions being preferential, undervalued and fraudulent without making
requisite enquiries to find out whether the transactions were indeed undervalued or
fraudulent. The Bench therefore remarked that in the future it would be appropriate to deal
with each question and issue separately and distinctly as the scope of enquiry to determine
whether a transaction is undervalued is entirely different from determining whether it is
fraudulent and/or preferential.

The Bench has further laid down a checklist to be followed by a resolution professional in
order to identify and avoid preferential transactions under Section 43 of the Code. Thus, a
transaction involving security provided by a third party does not automatically fall under the
category of "preferential transaction" and these steps are required to be performed by the
resolution professional to determine whether such transaction falls within the ambit of
Section 43:

a) Organizing all the transactions backwards from the date of commencement of insolvency
to the preceding two years and identify the person involved and categorize them as related
parties and others;

b) Bifurcate the identified transactions into two sub-sets and the transactions involving non-
related parties are to be further trimmed to include transaction of the preceding one year from
the date of commencement of insolvency;

c) Examine the sub-sets to find (i) as to whether the transaction is of transfer of property or an
interest thereof of the corporate debtor; and (ii) whether the beneficiary involved in the
transaction stands in the capacity of creditor or surety or guarantor qua the corporate debtor.
This would lead to shortlisting those transaction which seem to be preferential;

d) Scrutinize the transaction to find if the transfer is made on account of antecedent financial
or operational debt or other liability owed by corporate debtor;

e) Scrutinize whether the transfer in question has the effect of putting such creditor, guarantor
or surety in a beneficial position than it would have been in the event of distribution of assets
as per Section 53 of the Code; if affirmative the transaction is a preferential transaction
entered into in relevant time;

f) The last filtration is to make the transaction pass through clauses (a) and (b) of Section
43(3);

g) After the analysis, the IRP is required to apply to the Adjudicating Authority for necessary
transactions that had passed through all the positive tests of sub-section (2) and (4) and also
the negative test under sub-section (3).

While rejecting the argument that this judgment would have far reaching ramifications across
the financing sector, as a large number of transactions become liable to be set aside as
preferential, the Supreme Court has noted that bankers or financial institutions are supposed
to, and they indeed, take up 'due diligence' so as to study inter alia, that the security against
their loan/advance/facility is genuine and adequate. If they are at all entering into a
transaction whereby a third party security, including that of a subsidiary company, is to be
taken as collateral, they are obliged to undertake further due diligence so as to ensure that
such third party security is a prudent and viable one and is not likely to be hit by any law. In
that sequence, they remain under obligation to assure themselves that such third party whose
security is being taken, is not already indebted or in red and is not likely to fail in dealing
with its own indebtedness. In the context of IBC, such requirement is moreover imperative on
a bare look at the provisions contained in Part II thereof. To conclude, if despite the
knowledge that the security provider is itself in a precarious financial position, the lenders
choose to take the business risk of accepting security from such third party and that too, for
securing the loans/advances/facilities of a related party, they themselves remain responsible
for present legal consequences.

5. Pharmacy Council of India v. Dr. SK Toshniwal Educational Trusts

Vidarbha Institute of Pharmacy

CITATION
2020 SCC OnLine SC 296

CORAM

Supreme Court of India

Full Bench - Hon’ble Justice Arun Mishra , Hon’ble Justice Vineet Saran
and Hon’ble Justice M.R. Shah
FACTS
1. As common questions of law and facts arose in several group of cases, all these cases
were decided together by this common judgment and order.
2. In all these petitions, respective respondent-Colleges approached the respective High
Courts with the grievance regarding actions of approval of the second shift by the
Pharmacy Council of India (hereinafter referred to as the PCI) and restriction on
increasing the intake capacity of students for various pharmacy courses.
3. Since the respective respondent Colleges increased the intake of students, based upon
the requisite permission/approval obtained from the All India Council of Technical
Education (hereinafter referred to as the AICTE), the respective High Courts have
allowed the colleges to increase/continue with the increase in intake. The respective
High Courts have concluded that AICTE is the supreme authority between the two
 bodies, namely, AICTE and PCI and the decision of AICTE will prevail over the
decision of PCI.
4. By the interim orders, the High Court allowed the Institutions to continue with the
increased number of intake as approved/permitted by AICTE.
5. However, in some of the cases, such interim orders have been made absolute.
6. Therefore, the issue involved in the present batch of cases is regarding the
applicability of the Pharmacy Act, 1948 (hereinafter referred to as the Pharmacy Act)
or the All India Council of Technical Education Act, 1987 (hereinafter referred to as
the AICTE Act) in relation to the subject of Pharmacy, including approval of courses
of study, minimum standards of education required for qualification as a Pharmacist,
registration as a Pharmacist, regulation of future professional conduct etc.

ISSUES RAISED & RATIO

 Whether the Pharmacy Act, 1948 or the AICTE Act, 1987 is applicable in relation
to subject of pharmacy including the approval of courses of study, minimum
standards of education required for qualification as a pharmacist, registration as a
pharmacist, regulation of future professional conduct etc?
As per the Preamble of the Pharmacy Act, 1948, the Pharmacy Act has been enacted to make
better provision for the regulation of the profession and practice of Pharmacy and for that
purpose to constitute Pharmacy Councils. The Pharmacy Act, it covers all areas inclusive of
approval of courses, laying down course content, eligibility conditions for students as well as
teachers, evaluation of standards of examination, grant of registration, entry of higher
qualification, taking action for any infamous conduct etc. The relevant provisions in the
Pharmacy Act are Sections 10, 12, 13, 16, 29, 32, 35, 36 and 42. (Refer to the Pharmacy Act,
1948)
Thus, considering the various provisions of the Pharmacy Act and the regulations made
therein, it can be said that the Pharmacy Act is a complete Code in itself in the subject of
pharmacy. The PCI has been constituted as a body empowered to regulate the education and
profession of pharmacy in India. It also contains a penal provision. Thus, the legislative intent
in enacting the Pharmacy Act seems to be to ensure that there is seamless regulation of the
profession.
On the other hand, the AICTE Act can be said to be a general law applicable to the technical
institutions and technical education. Thus, it can be said that the AICTE Act can be said to be
a general law with respect to technical education. It is true that in the definition, as per
Section 2(g) of the AICTE Act, “technical education” also means “pharmacy”. It is
submitted that the amendment in Section 2(g) of the AICTE Act was proposed, but thereafter
there is no further progress in the wake of formation of newly proposed Higher Education
Council of India and finalization of NEP, which as such has nothing to do with the Pharmacy
Act. Therefore, the word ‘pharmacy’ is to be deleted from the definition of ‘technical
education’ contained in Section 2(g) of the AICTE Act.
The Pharmacy Act is a Special Act in the field of pharmacy and it is a complete code in itself
in the field of pharmacy, the Pharmacy Act shall prevail over the AICTE Act which, as
observed hereinabove, is a general statute dealing with technical education/institutions.
Therefore, the submission on behalf of AICTE and/or concerned educational institutions that
the AICTE Act is a subsequent law and in the definition of “technical education” it includes
the “pharmacy” and therefore it can be said to be an “implied repeal”, cannot be accepted.
 Whether AICTE or PCI would primarily be responsible for regulation of
pharmaceutical regulation in India?
PCI consists of experts in the field of pharmacy and related subjects connected with the
education of pharmacy. Therefore, under the statute, specialized persons in the field of
pharmaceutical, pharmacy etc. shall be the members of the PCI.

On the other hand, so far as AICTE is concerned, only one member would be from the field
of pharmacy and that too representative of PCI. Under the circumstances, the PCI is the body
of experts connected with the subject of pharmacy and related subjects and therefore it will
be in the larger interest and more particularly in the interest of education of pharmacy that
PCI shall alone have the Jurisdiction in the field of pharmacy, rather than AICTE.
Both, the PCI and AICTE are the creature of the statute. Therefore, it is not at all healthy that
the two regulators, both being Central authorities, can be permitted to fight for supremacy.
The fight of supremacy between both the regulators is unhealthy for the education sector as
well as the institutions to permit two regulators to function in the same field. Therefore also
and more particularly when the PCI is consisting of the experts in the field of pharmacy and
other related subjects, it is in the larger interest in the field of pharmacy that the PCI must be
given the power to regulate in the field of pharmacy.