From powers of NCLT and HCs to DRAT rules, here're key court orders

Balancing powers of NCLT and HCs
 

The interplay of the power of the Company Court and the National Company Law Tribunal (NCLT) in winding up proceedings of a defaulting company has been a subject of several judgments in the past two years. In a comprehensive judgment two weeks ago, the Supreme Court clarified in detail when such proceedings can be transferred by the court to the tribunal. It ruled that even after the appointment of a liquidator, discretion is vested in the Company Court to transfer such petition to NCLT. It is only when the proceedings have reached a stage where it would be irreversible should the Company Court go ahead with the winding up. Whether that stage has reached would depend upon the facts of each case. The court thus upheld the view of the Delhi High Court in its judgment, Action Ispat Co vs Shyam Metalics. Action, which faced winding up proceedings, had argued that once a winding up order has been passed by the Company Judge, those proceedings must continue only before the High Court. SBI, a secured creditor, opposed it contending that discretion is now vested in the court to transfer the proceedings to NCLT.
 

Court can’t second-guess on tenders
 

The Supreme Court has reiterated that “unless arbitrariness or mala fide on the part of the tendering authority is alleged”, a writ court should not second-guess the valuation of the tender. This is particularly so in the matter of technical evaluation. The court stated so in its judgment, Galaxy Transport Agencies vs New JK Roadways, while quashing the decision of the high court. The IGP of Kashmir invited e-tenders from transporters to supply vehicles to carry troops. Galaxy won, but the decision was challenged in the high court. The single judge stated that it would not be in public interest to cancel the contract. However, the division bench reversed the ruling. Galaxy’s appeal against it was allowed. In a similar judgment, the Supreme Court set aside the judgment of the Madhya Pradesh high court in State vs UP State Bridge Corpn. The UP corporation was disqualified because it had suppressed the fact that its bridge in Varanasi had collapsed, killing 15 and injuring many others.

Count ‘future prospects’ for compensation
 

Several courts have been found to omit the “future prospects” in income of youth who die in road accidents while calculating compensation. In the latest Supreme Court judgment, it faulted the Sikar road accident tribunal and the Rajasthan high court for not computing future prospects in the case of a 34-year-old sales executive. In this appeal, Anita Sharma vs New India Assurance, the court enhanced the compensation by 40 per cent, taking into consideration his future prospects in career.

Pre-deposit before DRAT mandatory
 

The Delhi High Court has underlined that the Debt Recovery Appellate Tribunal (DRAT) cannot waive the requirement of 50 per cent pre-deposit of the amount due to a secured creditor under Section 18 of the Securitisation (“Sarfaesi”) Act. According to this provision, a defaulting borrower who appeals against the debt recovery tribunal order must first pre-deposit half of the due amount to be entitled to be heard by DRAT. This rule is mandatory and can be relaxed to 25 per cent after recording the reasons in a particular case. In this judgment, Prudent Arc Ltd vs Sidha Paper Industries, DRAT waived the rule without valid explanation, relying on an invalid judgment of the same high court. Therefore, the appeal of Prudent Arc, which was assigned the debt by Andhra Bank, was allowed.
 

SC analogy on state of legal proceedings
 

“A lot of noise but no music!” was an unusual start to a recent Supreme Court judgment. It explained: “The present case is a classic one where multiple proceedings have been initiated but have resulted in no culmination over a period just short of a decade. And this is not so because of any interdicts from the courts in preventing these legal proceedings, yet the proceedings have hardly moved. The result is that the culpability of two persons has not been determined — thus, a cloud hangs over their conduct and that is all.” The case, Indian Commodity Exchange Ltd vs Neptune Overseas Ltd, was under the repealed Forward Contracts (Regulation) Act. The long story narrated in the judgment started with a journalist alleging irregularities against the vice-chairman of the National Multi Commodity Exchange of India Ltd. The curtain has not fallen yet, as the suit has been dropped in the lap of Sebi.