[Editorial Note: Justice is an indivisible concept. We cannot, therefore, discuss contemporary Supreme Court judgments without also acknowledging the Court’s failure – at an institutional level – to do justice in the case involving sexual harassment allegations against a former Chief Justice. This editorial caveat will remain in place for all future posts on this blog dealing with the Supreme Court, until there is a material change in circumstances.]
[This post, by Dhruva Gandhi and Sahil Raveen, responds to Arti Gupta’s Reply, on the issue of the Supreme Court’s IBC judgment.]
In her response to our blog post, Arti makes a valid point that when considered together, the timelines under the Insolvency and Bankruptcy Code, 2016 (“the Code”) and the Competition Act, 2002 (“CA”) could lead to a situation where the time stipulated in Section 12 of the Code is construed as being ‘irrational’. In fact, the conundrum that she mentions was spoken of even at the time the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 was passed. (See here). [This conundrum though was not before the court in Essar. It does not feature in the discussion either].
However, the discourse around the time of the Amendment also suggested that this was an intentional and calculated move made by the Union Parliament. (See also: The Notes on Clauses to the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2018) It seems that Parliament consciously wanted the Resolution Professional acting under the Code and the Competition Commission of India to complete all the necessary formalities within a time frame of 330 days. Parliament’s decision can be said to have been motivated one of two considerations. One, could have been that most of the combinations under Sections 5 and 6 of the CA had till then not needed to enter Phase II at all. They had been either resolved or approved within thirty days of notification. Two, in light of the urgent need to revive stressed assets, Parliament wanted the Competition Commission to clear combinations emerging out of CIRPs on a ‘fast-track’ basis. (See here) If the 210 days provided to the Competition Commission under the CA were also excluded under the IBC, CIRP would become a two-year long cumbersome process. One can only wonder if the Code would have been less of a success then as compared to what it is now.
Further, Arti’s argument too does not make out a case for the need to invoke a constitutional doctrine. As mentioned by us previously as well, a potential economic hardship arising out of a one-off scenario ought not by itself to make the law manifestly arbitrary. If necessary, a combined reading of Section 31 of the CA and Section 12 of the Code could have been undertaken to read the timeline as being ‘non-mandatory’. Tools of statutory interpretation would have sufficed for the exercise. There was no need to resort to a constitutional doctrine. The use of the doctrine of ‘manifest arbitrariness’ was even less called for because this was not a situation where no rationale could be gleaned from the statute.
On the other hand, this intersection of the CA and the Code may only add to the critique that Nariman J. brushed aside in Sharaya Bano. The Legislature has made a conscious policy decision. To hold it unconstitutional because the interaction of two statutes leads to a possible hardship (and in this case, one that may well have been foreseen by Parliament) does entail substituting the legislative wisdom with a judicial one. Our point remains that there is a need to maintain a circumspect attitude when it comes to invoking ‘manifest arbitrariness’.