T-11

UNIVERSITY MOOT COURT SELECTIONS 2019

BEFORE,

THE HON’BLE SUPREME COURT OF NARNIA

UNDER THE WRIT JURISDICTION OF THE SUPREME COURT

ENSHRINED UNDER ARTICLE 32 OF THE CONSTITUTION OF NARNIA

WRIT PETITION (CIVIL) No. 123 UMSC/2019

INNER PEACE PVT. LTD…………………………………………………..PETITIONER

V.

LE TRANQUILLE PVT. LTD…………………………………….……….RESPONDENT

-ON SUBMISSION TO THE HON’BLE SUPREME COURT OF NARNIA

-MEMORIAL ON BEHALF OF THE PETITIONERS

- INNER-PEACE PRIVATE LIMITED

1
 TABLE OF CONTENTS

LIST OF ABBREVIATIONS..........................................................................................................4
INDEX OF AUTHORITIES...........................................................................................................5
STATEMENT OF JURISDICTION...............................................................................................7
ISSUES RAISED.............................................................................................................................8
STATEMENT OF FACTS..............................................................................................................9
SUMMARY OF ARGUMENTS...................................................................................................11
ARGUMENTS ADVANCED.......................................................................................................13
[ISSUE 1] THAT THE HON’BLE SUPREME COURT OF NARNIA HAS THE
JURISDICTION AND THE PETITION IS MAINTAINABLE BEFORE THE COURT...........13
[1.1] THE HON’BLE SUPREME COURT OF NARNIA HAS THE JURISDICTION TO HEAR
THE WRIT PETITION FILED BY INNER PEACE PRIVATE LIMITED................................13
[1.2] THE PETITION FILED BY IPL IS MAINTAINABLE IN THE COURT.........................14
[ISSUE-II] THAT THE NCLT’S ORDER DATED 17TH NOVEMBER 2018 ADMITTING
THE PETITION UNDER § 10 FILED BY LE TRANQUILLE PVT. LTD. AND
CONSEQUENTIAL PROCEEDINGS THERETO SHOULD BE SET ASIDE..........................15
[II.1] THAT THE NCLT HASN’T COMPLIED WITH THE PRINCIPLE OF NATURAL
JUSTICE WHILE PASSING THE ORDER ADMITTING CIRP OF LE TRANQUILLE.........16
[II.1.1] THAT THE ARMORICA JUDGMENT DATED 1ST NOVEMBER 2018 IS
CONCLUSIVE UNDER § 13 OF CPC.........................................................................................16
[II.1.1.1] THAT THE ARMORICA JUDGMENT HAS BEEN PRONOUNCED BY THE
COURT OF COMPETENT JURISDICTION AND IS IN COMPLIANCE WITH THE
INTERNATIONAL AND THE INDIAN LAW...........................................................................17
[II.1.1.2] THAT THE ARMORICA JUDGMENT HAS BEEN GIVEN ON THE MERITS OF
THE CASE AND IT WAS IN CONFORMITY WITH THE PRINCIPLES OF NATURAL
JUSTICE........................................................................................................................................18
[II.1.2] THAT IPL IS A CREDITOR OF LE TRANQUILLE AS THERE IS DEBT OWED TO
IT....................................................................................................................................................19
[II.1.3] NCLT’S ACTION OF NOT GIVING NOTICE TO IPL BEFORE ADMITTING THE
PETITION IS A VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE.......................19
[II.2] THAT THERE WAS MALICIOUS INITIATION OF CIRP..............................................20
[ISSUE III] THAT NCLT WAS WRONG IN ORDERING THE STAY OF THE “ARMORICA
EP” BY WAY OF AN INTERIM ORDER...................................................................................21

2
[III.1] NCLT DOES NOT HAVE POWER TO PASS SUCH AN ORDER.................................22
INITIATION OF CIRP WAS BASED ON MALA FIDE INTENTION.......................................23
VIOLATION OF § 21A C.P.C.-...................................................................................................23
VIOLATION OF § 420 OF COMPANIES ACT, 2013...............................................................24
[III.2] THE INTERIM ORDER PASSED BY NCLT IS ARBITRARY......................................24
[ISSUE IV] – THAT §S 10, 30(2)(B), 30(1) AND 65 OF THE INSOLVENCY AND
BANKRUPTCY CODE ARE CONSTITUTIONALLY INVALID.............................................25
[IV.1] THAT § 10 OF IBC VIOLATES FUNDAMENTAL RIGHTS OF THE PERSONS.......25
[IV.2] § 30(2) (B) VIOLATES THE FUNDAMENTAL RIGHTS OF A PERSON....................26
[IV.4] § 65 OF INSOLVENCY AND BANKRUPTCY CODE IS UNCONSTITUTIONAL.....27
PRAYER........................................................................................................................................31

3
 LIST OF ABBREVIATIONS

ABBREVIATION – FULL FORM

1. CIRP- Corporate Insolvency Resolution Process

2. CPC- Code of Civil Procedure, 1908
3. Cr. - Crores
4. IBC- Insolvency and Bankruptcy Code, 2016
5. IPL- Inner Peace Private Limited
6. Ltd. -Limited
7. NCLAT- National Company Law Appellate Tribunal
8. NCLT- National Company Law Tribunal
9. Pvt. - Private
10. SC- Supreme Court
11. U.K. - United Kingdom
12. U.S. - United States
13. v. - versus

4
 INDEX OF AUTHORITIES

Cases

Alcon electronics pvt. Ltd. v. Celem [Link] Fos 34320 Roujan, (2017) 2 SCC 253....................16
Anil Goel v. Amar Remedies Ltd, 2019 SCC OnLine NCLT 1....................................................22
Anita Kushwaha v Pushap Sudan, (2016) 8 SCC 509...................................................................31
APC Credit Rating Pvt. Ltd. v. ROC, NCT of Delhi & Haryana, 2018 SCC Online NCLAT 370
...................................................................................................................................................25
Binani Industries limited v. Bank of Baroda & Anr, 2018 SCC OnLine NCLAT 521.................23
Chormal Balchand Firm v. Kasturi Chand, AIR 1938 Cal 511.....................................................17
Delhi Transport Corporation v. D.T.C. Mazdoor Congress, AIR 1991 SC 101...........................13
Fertilizer Corporation Kamargar Union v. Union of India, AIR 1981 SC 344.............................15
[Link] v. Union of India, AIR 1989 568...............................................................................14
Harbanslal Sahnia v. Indian Oil Corpn. Ltd, AIR 2003 SC 2120.................................................15
Innoventive Industries v. ICICI Bank 2017 SCC OnLine NCLAT 70..........................................20
International Woollen Mills v. Standard Wool (UK) Ltd., AIR 2000 P H 182............................19
[Link] & Others v. Union Of India & Ors, 2006 SCC Online 212.........................................30
Maneka Gandhi v. Union of India, 1978 AIR 597........................................................................20
Mohd. Usman v. State of Andhra Pradesh, AIR 1971 SC 1801....................................................31
NUI Pulp and Paper Industries Pvt. Ltd. v. Ms. Roxcel Trading GMBH, 2019 SCC Online
NCLAT 642...............................................................................................................................23
People’s Union for Democratic Rights v. Union of India, SCR 1983 (1) 456..............................15
Praveen Kumar Mundra v. CIL Securities Ltd., 2019 SCC OnLine NCLAT 334........................22
Rajesh Arora v. Sanjay Kumar Jaiswal, (AT)(Insolvency) No. 634 of 2018................................20
Ramalakshamamma v. Govt. of Andhra Pradesh, AIR 1967 AP 280...........................................30
Ramanathan Chettiar v. Kalimuthu Pillai, AIR 1914 Mad 556.....................................................17
Treloar v. Bigge, (1874) L. R. 9 Exch. 151...................................................................................26
Trilochan Choudhury v. Dayanidhi Patra, AIR 1961 Ori 158.......................................................18
Tukaram G Gaokar v. R N Shukla & Ors, AIR 1968 1050...........................................................13
Ujjam Bai v. State of UP, AIR 1957 SC 790.................................................................................14
United India Insurance Co. Ltd. v. Rajendra Singh, INSC 2000 374............................................14
Usha Holdings Corp LLC v. Francorp Advisors, 2018 SCC OnLine NCLAT 548......................23
Watson v. Fort Worth Bank & Trust, 487 U.S. 977 (1988)..........................................................29
Statutes

CODE CIV. PROC., 1908...........................................................................................................16, 17

INDIA CONST. art 32.......................................................................................................................13
Indian Evidence Act, 1872............................................................................................................19
INSOLVENCY AND BANKRUPTCY CODE, 2016...................................................................19, 20, 30
5
Books

Henry Campbell Black, BLACK'S LAW DICTIONARY 237 (11 ed. Thomson Reuters West
2019)..........................................................................................................................................25
M.P. Jain, INDIAN CONSTITUTIONAL LAW 977 (8 ed. Lexis Nexis)...................................13
Online Sources

Bennett Alexander, The Use of Disparate Impact Analysis in Subjective Criteria Employment
Discrimination Cases: All that Glitters Isn't Gold, National Black Law Journal
(Sep.1,2019), [Link]
Comity of Nations, Legal Information Institute (Sep1,
2019), [Link]
Companies Act, 2013.....................................................................................................................24
Lydia Kerketta, Audi Alterem Partem Right to fair hearing, Legal Services [Link] (Sep. 1,
2019), [Link]
[Link]...............................................................................................................................14
National Company Law Tribunal Rules, 2016 (August 21, 2019, 09:30 PM),
[Link]
National Company Law Tribunal Rules, 2016 (August 21, 2019, 09:30
PM),[Link] 23
The Report of the Bankruptcy Law Reforms Committee (August 19, 2019, 10:30 PM),.............31

6
 STATEMENT OF JURISDICTION

The Counsel for the Petitioners submits before the Hon’ble Supreme Court, the memorandum for
Petitioners in the Writ Petition (Civil) No. 123 UMSC/2019 under Article 32 of the Constitution
of Narnia.1

1
Remedies for enforcement of rights conferred by this Part
(1) The right to move the Supreme Court by appropriate proceedings for the enforcement of the rights conferred by
this Part is guaranteed
(2) The Supreme Court shall have power to issue directions or orders or writs, including writs in the nature of habeas
corpus, mandamus, prohibition, quo warranto and certiorari, whichever may be appropriate, for the enforcement of
any of the rights conferred by this Part
(3) Without prejudice to the powers conferred on the Supreme Court by clause ( 1 ) and ( 2 ), Parliament may by law
empower any other court to exercise within the local limits of its jurisdiction all or any of the powers exercisable by
the Supreme Court under clause ( 2 )
(4) The right guaranteed by this article shall not be suspended except as otherwise provided for by this Constitution

7
 ISSUES RAISED

I. WHETHER THIS HON’BLE COURT HAS JURISDICTION TO ENTERTAIN THE

PETITION AND WHETHER THE PETITION FILED BY INNER PEACE PRIVATE
LIMITED IS MAINTAINABLE?

II. WHETHER THE NCLT’S ORDER DATED 17TH NOVEMBER 2018 ADMITTING
THE PETITION UNDER SECTION 10 FILED BY LE TRANQUILLE PRIVATE
LIMITED AND CONSEQUENTIAL PROCEEDINGS THERETO SHOULD BE SET
ASIDE?

III. WHETHER THE NCLT WAS RIGHT IN ORDERING THE STAY OF THE
ARMORICA EP BY WAY OF AN INTERIM ORDER?

IV. WHETHER SS. 10, 30 (2) (B), 31 (1) AND 65 OF THE IBC ARE
CONSTITUTIONAL?

8
 STATEMENT OF FACTS

SET UP OF INNER PEACE PRIVATE LIMITED.

Mr. Oogway, started a company in 1992 called the “Inner-Peace Private Limited” (“IPL”) and
became its Founder and Managing Director. Shifu immediately came to the notice of Oogway,
who at that point of time was in the process of developing a combination of plant extracts for
curing the illness. Oogway’s research eventually resulted in the creation of a potion named “The
Secret Ingredient Potion” (“SIP”), which cured the illness. IPL had obtained several intellectual
property rights, including patents for the SIP developed by Oogway, in Narnia as well as
overseas. One of the biggest market for IPL was in the country of Armorica, where SIP was sold
the most.

RELATIONSHIP OF OOGWAY AND SHIFU.

The professional relationship between the two have remained cordial over the years. On
21.03.2018, Shifu announced that he was taking a short break from his responsibilities in the
company. While so, on 07.05.2018, Shifu resigned from IPL without any advance intimation. In
July 2018, IPL had initiated arbitration proceedings against Shifu for breach of terms of his
employment and sought for compensation. In the same proceedings, The arbitrator had set – off
the claims against each other.

PATENT INFRINGEMENT SUIT

In August 2018 itself, IPL brought a patent infringement suit against Le Tranquille in Armorica.
While Le Tranquille entered appearance in the said suit proceedings and filed its written defence,
Despite providing more than five opportunities for appearance of Le Tranquille, when the latter
did not appear, the Court of Armorica awarded a default judgment on 1st November 2018 in
favour of IPL. The Court held that Le Tranquille was guilty of patent infringement and was
liable to pay Narnian 30 Crores. Shifu had learnt about this judgment through informal sources in
the form of his friends in Armorica.

ORDER OF ARMORICAN EP.

9
Le Tranquille was the owner of a real estate property situated in Armorica where some business
activities of the company were being carried out. IPL filed for the execution of the default
judgment in Armorica on 22nd November 2018 and prayed for attachment of the said real estate
property. The Courts in Armorica passed an order of attachment (“Armorica EP”) but this
attachment would satisfy 10% of the amount due under the default judgment.

FILING OF BANKRUPTCY

Le Tranquille had made a representation that the corporate insolvency resolution process of the
Le Tranquille had commenced on 17th November 2018 pursuant to a petition filed by Le
Tranquille, through Shifu under laws of Narnia as per Section 10 of the Insolvency and
Bankruptcy Code, 2016 (“IBC”). As per an order dated 17th November 2018, Shifu filed the
Petition under Section 10 of the IBC for voluntary initiation of CIRP could amicably settle any
dispute and was nicknamed as Dr. Fixit in the Narnian corporate world.

INTERIM RESOLUTION PROFESSIONAL

Oogway wrote an email on 30thNovember, To this Mr Geriatrix replied on 1st December 2018,
to submit his claims andthey will be considered in accordance with law.

NCLT ORDER

Le Tranquille made an application to the NCLT for interim orders praying that the Armorica EP
must not be enforced on the grounds that the courts in Armorica did not have jurisdiction to pass
such an order against the company. The NCLT ruled that the courts of Armorica did not have the
jurisdiction to pass such an order.

10
 SUMMARY OF ARGUMENTS

I. WHETHER THIS HON’BLE COURT HAS JURISDICTION TO ENTERTAIN THE

PETITION AND WHETHER THE PETITION FILED BY INNER PEACE PRIVATE
LIMITED IS MAINTAINABLE?

It is humbly submitted before the Supreme Court that the Writ Petition filed under Article 32

of the Constitution of Narnia comes under the jurisdiction of this Hon’ble Court as it fulfills

all the criteria’s required for a petition to be heard in this Court under article 32 and is

maintainable in the court as well because it fulfills the criteria required to test the

maintainability of the petition, viz.: - (1) Locus standi and (2) merit.

II. WHETHER THE NCLT’S ORDER DATED 17TH NOVEMBER 2018 ADMITTING
THE PETITION UNDER SECTION 10 FILED BY LE TRANQUILLE PRIVATE
LIMITED AND CONSEQUENTIAL PROCEEDINGS THERETO SHOULD BE SET
ASIDE?
The petitioner humbly submits that the NCLT hasn’t complied with the principle of Natural

justice while admitting Le Tranquille’s application for CIRP and Le Tranquille has

applied for CIRP with mala fide intention. Therefore, NCLT’s order dated 17th

November 2018 admitting petition under § 10 filed by Le Tranquille and consequential

Proceedings thereto should be set aside.

III. WHETHER THE NCLT WAS RIGHT IN ORDERING THE STAY OF THE
ARMORICA EP BY WAY OF AN INTERIM ORDER?
NCLT was wrong in ordering the stay of the Armorica EP as the Armorican court was working
within its jurisdiction as the real estate property over which order of attachment was passed lies
in Armorica, default judgment was passed by the court of Armorica and hence the order. NCLT
does not have power to pass such an order as the whole proceedings were initiated over mala fide
intentions neither the NCLAT allows NCLT to go into legality and merits of a foreign decree.
Also, Decree passed is conclusive.

11
IV. WHETHER SS. 10, 30 (2) (B), 31 (1) AND 65 OF THE IBC ARE
CONSTITUTIONAL?
The above stated provisions are unconstitutional as they are in violation of Article 14 of the
constitution on the following grounds-constitutional validity of Section 10 with respect to not
granting of opportunity of being heard and NCLT’s obligation to determine “default”; Section
30(2)(b) with respect to prescription of a minimum threshold for payment of dues during the
stage of insolvency resolution process by comparing “CIRP” to “Liquidation process”; Section
31(1) where the basis for approving/rejecting a plan is not subjective and Section 65 of the IBC,
with respect to the provision limiting to levy of penalty as opposed to rejection of the petition for
reasons contained therein.

12
 ARGUMENTS ADVANCED

[ISSUE 1] THAT THE HON’BLE SUPREME COURT OF NARNIA HAS THE

JURISDICTION AND THE PETITION IS MAINTAINABLE BEFORE THE COURT.
1. It is humbly submitted before the Supreme Court that the Writ Petition filed under Article 32
of the Constitution of Narnia comes under the jurisdiction of this Hon’ble Court as it fulfills
all the criteria’s required for a petition to be heard in this Court under article 32 and is
maintainable in the court as well because it fulfills the criteria required to test the
maintainability of the petition, viz.:- (1) Locus standi and (2) merit.

[1.1] THE HON’BLE SUPREME COURT OF NARNIA HAS THE JURISDICTION TO HEAR THE WRIT

PETITION FILED BY INNER PEACE PRIVATE LIMITED

2. Article 32 has given the right to move the Supreme Court directly for the enforcement of the
fundamental rights2. Hence, under Article 32, the Supreme Court has jurisdiction over all
cases concerning fundamental freedoms enumerated in Article 14 to 32. In the case of
Tukaram [Link] v R. N. Shukla & Ors 3 it was held by the hon’ble Supreme Court that a
petition under Article 32 will lie where the impugned decision is discriminatory and
arbitrary. The court also held in the case of Delhi Transport Corporation v D.T.C. Mazdoor
Congress4 that a petition will lie under the ambit of Article 32 where any tribunal or authority
has deprived a person of being heard as the audi alterum partem rule essentially enforces the
equality clause in Article 14. In the same case it was held that “equality and arbitrariness are
sworn enemies and that Article 14 strikes at arbitrariness in state action and ensures fairness
and equality of treatment”5. The order given by the NCLT clearly shows the arbitrary
disposal of the case as the Inner Peace Pvt Ltd which was a party to the order Armorica EP
and did not get a chance of hearing in this case. The Supreme Court in [Link] V. Union
of India6 observed: “in our opinion, the post-decisional opportunity of hearing does not sub-
serve the rules of natural justice. The authority which embarks upon a post-decisional hearing
will normally proceed with a closed mind and there is hardly any chance of getting a proper
2
INDIA CONST. art 32.
3
Tukaram G Gaokar v. R N Shukla & Ors, AIR 1968 1050.
4
Delhi Transport Corporation v. D.T.C. Mazdoor Congress, AIR 1991 SC 101.
5
M.P. Jain, INDIAN CONSTITUTIONAL LAW 977 (8 ed. Lexis Nexis).
6
[Link] v. Union of India, AIR 1989 568.

13
 consideration of the representation at such a post-decisional opportunity.” Thus, in every case
where the pre-decisional hearing is warranted post-decisional hearing will not validate the
action except in every exceptional circumstance 7. Violation of any of the principles of
Natural Justice amount to the violation of the Right to Equality guaranteed by the Article 14
of the Narnian Constitution due to which it comes under the jurisdiction of the Hon’ble
Supreme Court to take action in this concern.
3. A petition under Article 32 to quash a quasi-judicial decision which affects a fundamental
right shall lie – (i) Where the action taken is procedurally ultra vires i.e. in violation of
principles of natural justice8 or (ii) where a person obtains an order from a tribunal by fraud
as fraud and justice never go together9. Since the IPL classifies as a creditor of Le Tranquille
by virtue of a judgment dated 1 st November 2018 which was pronounced by the Court of
Armorica against Le Tranquille on the grounds of deliberate patent infringement.
Considering all this and the fact that Le Tranquille has to provide a compensation of Narnian
Rupees 30 Crores, it is very clear that Le Tranquille has approached the NCLT with unclean
hands so as to obtain the moratorium, with a mala fide intention to stop all the proceedings
that the IPL can initiate at law to recover its dues. Therefore, the order of insolvency petition
has been taken on the grounds of a malicious intent and the orders of the NCLT admitting the
petition and staying Armorica EP are discriminatory, arbitrary and ultra vires of principles of
natural justice. Hence, it is in violation of Article 14 of the Narnian Constitution.

[1.2] THE PETITION FILED BY IPL IS MAINTAINABLE IN THE COURT

4. The question of maintainability of a petition in the court is tested on the basis of (1) Locus
Standi and (2) Merit. Hon’ble Supreme Court in Fertilizer Corporation Kamargar Union v.
Union of India10 has observed that the concept of locus standi must be enlarged to meet the
challenges of the time. Similarly, in People’s Union for Democratic Rights v. Union of
India11 , the apex court held “The traditional rule of standing which confines access to the
judicial process only to those to whom legal injury is caused or legal wrong is done has now
been jettisoned by this Court and a new dimension has been given to the doctrine of locus

7
Lydia Kerketta, Audi Alterem Partem Right to fair hearing, Legal Services [Link] (Sep. 1,
2019), [Link]
8
Ujjam Bai v. State of UP, AIR 1957 SC 790.
9
United India Insurance Co. Ltd. v. Rajendra Singh, INSC 2000 374.
10
Fertilizer Corporation Kamargar Union v. Union of India, AIR 1981 SC 344.
11
People’s Union for Democratic Rights v. Union of India, SCR 1983 (1) 456.

14
 stand. It is therefore necessary to evolve a new strategy by relaxing this traditional rule of
standing in order that justice may become available to the lowly and the lost”. In Harbanslal
Sahnia v. Indian Oil Corpn. Ltd.12 it was held that the rule of exclusion of writ jurisdiction by
availability of an alternative remedy is a rule of discretion and not one of compulsion. In an
appropriate case in spite of availability of the alternative remedy, the High Court may still
exercise its writ jurisdiction in at least three contingencies: (i) where the writ petition seeks
enforcement of any of the Fundamental Rights; (ii) where there is failure of principles of
natural justice. The locus standi in this case is highlighted in the facts itself that the IPL
suffered a legal injury in this case. The rules of natural justice have been violated which is a
violation of Article 14 itself. The IPL didn’t get a chance to represent them before the court
which led to the pronunciation of the order given by the NCLT staying Armorica EP in an
arbitrary manner. By the means of a Certiorari, the IPL is demanding for the enforcement of
its fundamental rights which were violated through the order passed by the NCLT. Therefore
the petition filed before the Hon’ble Supreme Court of Narnia has locus standi in the case
and is maintainable on this aspect. As far as the question of merit in the case is concerned,
The IPL suffered losses due to the deliberate patent infringement done by the Le Tranquille
and was awarded a sum of Narnian Rupees 30 Crore as compensation to that injury by the
Armorican court. But due to the mala fide intentions of the Le Tranquille, which initiated a
corporate insolvency resolution process and obtained a moratorium on that basis the award
given by the Armorican courts was not delivered to the IPL which led to a lot of financial
hardships being faced by the company. Therefore it is very important for the Hon’ble court to
look into this matter and submit the petition as it has the merit for maintainability. Since the
Supreme Court has been constituted into the protector and guarantor of the Fundamental
Rights13, it has the jurisdiction to entertain this petition as well as the issues mentioned in this
petition.

[ISSUE-II] THAT THE NCLT’S ORDER DATED 17TH NOVEMBER 2018 ADMITTING
THE PETITION UNDER § 10 FILED BY LE TRANQUILLE PVT. LTD. AND
CONSEQUENTIAL PROCEEDINGS THERETO SHOULD BE SET ASIDE.

12
Harbanslal Sahnia v. Indian Oil Corpn. Ltd, AIR 2003 SC 2120.
13
M.P. Jain, INDIAN CONSTITUTIONAL LAW 1429 (8th ed. Lexis Nexis).

15
5. The petitioner humbly submits that the NCLT hasn’t complied with the principle of Natural
justice while admitting Le Tranquille’s application for CIRP [II.1] and Le Tranquille has
applied for CIRP with mala fide intention [II.2]. Therefore, NCLT’s order dated 17th
November 2018 admitting petition under § 10 filed by Le Tranquille and consequential
proceedings thereto should be set aside.

[II.1] THAT THE NCLT HASN’T COMPLIED WITH THE PRINCIPLE OF NATURAL JUSTICE WHILE

PASSING THE ORDER ADMITTING CIRP OF LE TRANQUILLE.

6. It is humbly submitted that since the Armorica judgment is conclusive under § 13 [II.1.1] and
that IPL is a creditor of Le Tranquille [II.1.2] therefore, the action of NCLT of not giving
notice to IPL before admitting the petition is a gross violation of the principle of Natural
Justice [II.1.3].

[II.1.1] THAT THE ARMORICA JUDGMENT DATED 1ST NOVEMBER 2018 IS CONCLUSIVE
UNDER § 13 OF CPC.
7. One of the main pre-requisites of a foreign decree to be enforceable in Narnia is that it should
be conclusive under § 13 of CPC. 14 § 13 of CPC provide grounds for when a foreign
judgment cannot be held conclusive. 15 The grounds mentioned therein are – a) where the
judgment has not been pronounced by the court of competent jurisdiction 16; b) where it has
not been given on the merits of the case 17; c) where it appears on the face of the proceedings
to be founded on an incorrect view of international law or a refusal to recognise the law
of [India] in cases in which such law is applicable 18; d) where the proceedings in which the
judgment was obtained are opposed to natural justice 19; e) where it has been obtained by
fraud 20; f) where it sustains a claim founded on a breach of any law in force in [India]21. In
the present case, the Armorica judgment awarding Narnian Rupees 30 crores to IPL is
conclusive under § 13 as it hasn’t violated any of the grounds mentioned therein.

14
Alcon electronics pvt. Ltd. v. Celem [Link] Fos 34320 Roujan, (2017) 2 SCC 253.
15
CODE CIV. PROC., 1908 § 13.
16
CODE CIV. PROC., 1908 § 13(a).
17
CODE CIV. PROC., 1908 § 13(b).
18
CODE CIV. PROC., 1908 § 13(c).
19
CODE CIV. PROC., 1908 § 13(d).
20
CODE CIV. PROC., 1908 § 13(e).
21
CODE CIV. PROC., 1908 § 13(f).

16
[II.1.1.1] THAT THE ARMORICA JUDGMENT HAS BEEN PRONOUNCED BY THE COURT OF
COMPETENT JURISDICTION AND IS IN COMPLIANCE WITH THE INTERNATIONAL AND THE INDIAN
LAW.
8. The Madras High Court in the case of Ramanathan Chettiar v. Kalimuthu Pillai 22 has laid
down the circumstances when the foreign courts would have jurisdiction under § 13. The
circumstances mentioned are as follows: (a) where the person is a subject of the foreign
country in which the judgment has been obtained against him on prior occasions; (b) where
he is a resident in foreign country when the action is commenced; (c) where a person selects
the foreign Court as the forum for taking action in the capacity of a plaintiff, in which forum
he is sued later; (d) where the party on summons voluntarily appears; (e) where by an
agreement a person has contracted to submit himself to the forum in which the judgment is
obtained. Here, Le Tranquille can be considered as a person resident in foreign country when
the action was commenced as its main interest of the business lies in Armorica 23, therefore,
fulfilling condition (a). Further, Le Tranquille has submitted to the jurisdiction of the Court
of Armorica as he has appeared in the suit proceedings and pleaded on the merits of the
case24 by filing defense and also, it has not objected to the jurisdiction of the court at any
point in the proceedings. Also, there is a presumption that the foreign judgment was
pronounced by the Court of competent jurisdiction.25
9. Besides, the Armorica judgment is in compliance with the Narnian law as no law in force in
Narnia has been breached and it is also in conformity with the international laws. Therefore,
it stands the test of §s 13(c) and 13(f). Further, the said judgment is also valid in terms of §
13(e) as it has not been obtained by fraud. Also, “the principles of comity of nation which
means “the principle that one sovereign nation voluntarily adopts or enforces the laws of
another sovereign nation out of deference, mutuality, and respect 26”, demand to respect the
judgments of foreign country. Even in regard to an interlocutory order, Indian Courts have to
give due weight to such order unless it falls under any of the exceptions under § 13 CPC. 27”

22
Ramanathan Chettiar v. Kalimuthu Pillai, AIR 1914 Mad 556.
23
Moot Proposition, ¶ 9 and ¶ 11.
24
Chormal Balchand Firm v. Kasturi Chand, AIR 1938 Cal 511.
25
CODE CIV. PROC., 1908 § 14.
26
Comity of Nations, Legal Information Institute (Sep1,
2019), [Link]
27
Supra n 13.

17
 Following this, Armorica judgment should be enforceable in Narnia as it does not fall under
the exceptions in § 13.

[II.1.1.2] THAT THE ARMORICA JUDGMENT HAS BEEN GIVEN ON THE MERITS OF
THE CASE AND IT WAS IN CONFORMITY WITH THE PRINCIPLES OF NATURAL JUSTICE.
10. The Armorica judgment has been given after observing the principles of natural justice i.e.
the rule of audi alteram partem and therefore, it sustains the test of § 13(d) of CPC. It is
evident from the fact that Le Tranquille entered appearance in the proceedings and filed
written defence and later it was provided more than five opportunities for appearance in the
case.28 Further, the said judgment was rendered on the basis of the merits of the case and is
valid even if it was passed ex-parte. “Under § 13, even an ex parte judgment in favour of the
plaintiff may be deemed to be a judgment given on merits if some evidence is adduced on
behalf of the plaintiff and the judgment, however brief, is based on a consideration of that
evidence.29” Later, similar view-point was upheld by the SC in the case of International
Woollen Mills v. Standard Wool (U.K.) Ltd. 30 In this, it was held that “even where the
defendant chooses to remain ex parte and to keep out, it is possible for the Court to give a
decision on the merits of his case after a due consideration of the evidence adduced by the
plaintiff instead of dispensing with such consideration and giving a decree merely on account
of the default of appearance of the defendant. In the former case the judgment will be one on
the merits of the case, while in the latter the judgment will be one not on the merits of the
case.31” “Thus, it is obvious that the non-appearance of the defendant will not by itself
determine the nature of the judgment one way or the other. That appears to be the reason why
§ 13 does not refer to ex parte judgments falling under a separate category by themselves.32”
11. In the present case, the Armorica judgment was passed after duly considering the written
defence filed by the legal counsel of Le Tranquille, contending that the constituents of
GULLP were not identical to SIP and was developed through a separate and independent
research and development undertaken by Shifu and others, and after investigating into the

28
Moot Proposition ¶ 10.
29
Trilochan Choudhury v. Dayanidhi Patra, AIR 1961 Ori 158.
30
International Woollen Mills v. Standard Wool (UK) Ltd., AIR 2000 P H 182.
31
Id.
32
Supra n 13.

18
 evidence given by IPL.33 Hence, the judgment was passed on merits and is not prohibited on
the ground of § 13(b) of CPC.

[II.1.2] THAT IPL IS A CREDITOR OF LE TRANQUILLE AS THERE IS DEBT OWED TO

IT.
12. § 3(11) of IBC defines debt as “a liability or obligation in respect of a claim which is due
from any person and includes a financial debt and operational debt 34. § 3(10) of IBC defines
‘creditor’ as any person to whom a debt is owed and includes a financial creditor, an
operational creditor, a secured creditor, an unsecured creditor and a decree-holder. 35 Here,
IPL is a decree holder by virtue of the judgment awarding Narnian 30 crores to IPL passed
by the Court of Armorica on 1st November 2018 in a patent infringement suit. 36 Further, the
decree passed is conclusive under § 13 of CPC, therefore, it is a valid proof of debt and also
capable of being enforceable. Hence, Le Tranquille has a liability and obligation to pay
Narnian Rupees 30 crores to IPL and since debt is owed to IPL, therefore, IPL is a creditor of
Le Tranquille. Further, the judgment is a valid evidence under § 43 of the Indian Evidence
Act, 1872. § 43 of the Indian Evidence Act states “judgments, orders or decrees, other than
those mentioned in §s 40, 41 and 42, are irrelevant, unless the existence of such judgment,
order or decree, is a fact in issue, or is relevant under some other provision of this Act 37.
Here, the judgment is a fact in issue as the judgment itself is a determination of debt or debt
per se owed to IPL.

[II.1.3] NCLT’S ACTION OF NOT GIVING NOTICE TO IPL BEFORE ADMITTING THE
PETITION IS A VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE.
13. Rule 37 of the NCLT Rules, 2016 states that the Tribunal shall issue notice to the respondent
to show cause against the application or petition on a date of hearing to be specified in the
Notice.38 “The proceedings before the NCLT are adversarial in nature. Both the sides are,
therefore, entitled to a reasonable opportunity of hearing. There is no specific provision
under the code to provide hearing to corporate debtor in a petition under § 7 or 9 of the code.
§ 5(1) of the Code talks about “adjudicating authority” which refers to the “NCLT”
33
Moot Proposition ¶ 10.
34
INSOLVENCY AND BANKRUPTCY CODE, 2016 § 3 (11).
35
INSOLVENCY AND BANKRUPTCY CODE, 2016 § 3 (10).
36
Moot Proposition ¶ 10.
37
Indian Evidence Act, 1872 § 43.
38
National Company Law Tribunal Rules, 2016 (August 21, 2019, 09:30 PM),
[Link]

19
 constituted under § 408 of Companies Act 2013. Further, § 420(1) says that reasonable
opportunity of hearing shall be given to the parties before passing its orders 39” In Rajesh
Arora v. Sanjay Kumar Jaiswal40, the NCLAT set aside the order of NCLT for being violative
of principles of Natural Justice. Besides, in Maneka Gandhi v. Union of India 41, the SC has
laid down that the principles of Natural justice are a part of art. 14. Therefore, the order
passed by NCLT admitting Le Tranquille’s petition for CIRP is in violation of the principle
of natural justice i.e. audi alteram partem as it has been passed without giving an opportunity
of being heard to IPL despite the fact that IPL is a creditor of Le Tranquille.
14. Further, rule 43(b) of the said rules states that the NCLT before passing orders on the petition
or application, may require the parties or any one or more of them, to produce such further
documentary or other evidence as it may consider necessary for ascertaining any information
which, in the opinion of the Bench, is necessary for the purpose of enabling it to pass orders
in the petition or application.42 Therefore, even if under § 10 the NCLT is not bound to
ascertain the existence of default, it should have asked for other documents or evidences
under rule 43(b) so as to ascertain the default and Le Tranquille’s all the creditors. Hence, the
NCLT should have applied its subjective mind before admitting the petition.
15. Besides, under § 10, an application filed by corporate applicant must be supported by a
special resolution passed by the shareholders of the corporate debtor or the resolution passed
by at least three-fourth of the total number of partners of the corporate debtor. 43 Here, the
application made by Shifu, corporate applicant was only authorized by the three board of
directors.44 It has not been supported by the special resolution of the shareholders or the
resolution of the board of directors. Therefore, despite the fact that the petition of Le
Tranquille for CIRP does not meet the essentials of § 10 of IBC, NCLT has admitted its
petition and initiated insolvency resolution. Therefore, the NCLT’s order of admitting the
petition should be set aside.

[II.2] THAT THERE WAS MALICIOUS INITIATION OF CIRP.

39
Innoventive Industries v. ICICI Bank 2017 SCC OnLine NCLAT 70.
40
Rajesh Arora v. Sanjay Kumar Jaiswal, (AT)(Insolvency) No. 634 of 2018.
41
Maneka Gandhi v. Union of India, 1978 AIR 597.
42
National Company Law Tribunal Rules, 2016 (August 21, 2019, 09:30
PM),[Link]
43
INSOLVENCY AND BANKRUPTCY CODE, 2016 § 10 (3) (c).
44
Moot Proposition ¶ 13.

20
16. In the present case, IPL is one of the creditors of Le Tranquille by virtue of a judgment
dated 1st November 2018, given by the Court of Armorica against Le Tranquille 45. The total
dues owed by Le Tranquille to IPL are Narian Rupees 30 Crores, as a result of the latter’s
deliberate patent infringement of IPL’s patents in SIP. Further, Le Tranquille is not at all in
a state of “insolvency” as is evident from the way the entire proceedings were conducted
which establishes that the Company has sufficient money to pay off IPL’s debts, but is using
IBC proceedings to re-set the obligations against the law. Le Tranquille initiated the
voluntary CIRP with the ulterior motive of obtaining a moratorium to stop all proceedings
against the Company and at the same time do a full and final settlement of the debt, without
the participation of IPL in any manner as it hasn’t informed the NCLT about IPL being one
of its creditoRupees46 Therefore, Le Tranquille had filed the application for CIRP under § 10
with malafide intention to evade the lawful debts due to IPL.
17. In Anil Goel v. Amar Remedies Ltd.47, where the corporate debtor had fraudulently and after
suppressing the material fact that the company had been ordered for winding up by the
Bombay HC, had filed petition under § 10 of IBC for CIRP, the NCLT had rejected the
application with cost as malicious. Where operational creditor initiated CIRP with fraudulent
and malicious intent for any purpose other than resolution of insolvency or liquidation, then,
it is clearly covered under § 65 of IBC and the Adjudicating Authority should reject
application filed by operational creditor to initiate CIRP against corporate debtor. 48
Therefore, the CIRP of Le Tranquille should be set aside as the IBC provisions cannot be
allowed to be misused by corporate applicants, even assuming all the requirements of § 10 of
the IBC are satisfied. Therefore, if the entire proceedings are initiated with malafide intention
to evade the lawful dues, which the Hon'ble NCLT on several occasions has taken seriously
against the Corporate Applicant, the law does not oblige the Creditor or the NCLT to be a
party to such fraudulent activities.

[ISSUE III] THAT NCLT WAS WRONG IN ORDERING THE STAY OF THE
“ARMORICA EP” BY WAY OF AN INTERIM ORDER.

45
Moot Proposition ¶ 10.
46
Moot Proposition ¶ 14.
47
Anil Goel v. Amar Remedies Ltd, 2019 SCC OnLine NCLT 1.
48
Praveen Kumar Mundra v. CIL Securities Ltd., 2019 SCC OnLine NCLAT 334.

21
18. NCLT was wrong in ordering the stay of the Armorica EP as the Armorican court was
working within its jurisdiction [3.1] NCLT does not have power to pass such an order. [3.2]
NCLT does not have power to pass such an order. [3.3] Armorica EP is a conclusive
judgment.

[III.1] NCLT DOES NOT HAVE POWER TO PASS SUCH AN ORDER.

19. The National Company Law Appellate Tribunal has held that NCLT, the ‘adjudicating
authority’ under the Insolvency and Bankruptcy Code, was not a ‘court’ or a ‘tribunal’ and
hence cannot decide the legality of a foreign decree. 49 NCLAT Chairman Justice Sudhansu
Joshi Mukhopadhyaya authored that “we hold that the Adjudicating Authority not being a
Court or ‘Tribunal’ and ‘Insolvency Resolution Process’ not being a litigation, it has no
jurisdiction to decide whether a foreign decree is legal or illegal. Whatever findings the
Adjudicating Authority has given with regard to legality and propriety of foreign decree in
question being without jurisdiction is nullity in the eye of law”. The objective of IBC was
resolution of the corporate debt. It was not a litigation process for adjudicating competing
claims. Its purpose is maximization of value of assets of the ‘Corporate Debtor to
promote entrepreneurship, availability of credit and balance the interests of all stakeholders.
50
The adjudication of merits of foreign decree undertaken by NCLT was held to be not in
consonance with the spirit and objectives of IBC. Also, vesting the NCLT with the authority to
analyse the jurisdictional and procedural merit of foreign decrees will create another hurdle in
resolution of insolvency for creditors and corporate debtors. These hurdles and the long – drawn, time
consuming process of winding up were the mischiefs that were supposed to be remedied by the
enactment of the IBC. The NCLAT's decision reaffirms that the NCLT is a facilitator of the CIRP and
not a court of law at this stage. By putting a stay order on the enforceability of the judgment,
NCLT has gone into the legality and merits of the judgment which it can’t by the virtue of
NCLAT judgment as stated above.
20. National Company Law Tribunal (NCLT) is empowered to pass the ad-interim order under
Rule 11 of the National Company Law Tribunal Rules, 2016 before or after admitting any
application filed under §s 7, 9 or 10 of the Insolvency and Bankruptcy Code, 2016. 51 Rule 11
of NCLT Rules, 2016, authorize an NCLT to pass any such orders as may be necessary for
49
Usha Holdings Corp LLC v. Francorp Advisors, 2018 SCC OnLine NCLAT 548.
50
Binani Industries limited v. Bank of Baroda & Anr, 2018 SCC OnLine NCLAT 521.
51
NUI Pulp and Paper Industries Pvt. Ltd. v. Ms. Roxcel Trading GMBH, 2019 SCC Online NCLAT 642.

22
 meeting the ends of justice. Rule 11 of NCLT rules52 talks about the inherent powers of
NCLT, It states-
21. Inherent Power- Nothing in these rules shall be deemed to limit or otherwise affect the
inherent powers of the Tribunal to make such orders as may be necessary for meeting the
ends of justice or to prevent abuse of the process of the Tribunal. However by passing such
an order it has failed to meet justice on the following grounds-

22. INITIATION OF CIRP WAS BASED ON MALA FIDE INTENTION

Le Tranquille is not at all in a state of “insolvency” as is evident from the way the entire
proceedings were conducted which establishes that the Company has sufficient money to pay
off IPL’s debts, but is using IBC proceedings to re-set the obligations against the law. Same
has been discussed in detail in issue II.

23. VIOLATION OF § 21A C.P.C.-

§ [Link] of Bar on suit to set aside decree on objection as to place of suing- No suit shall
lie challenging the validity of a decree passed in a former suit between the same parties, or
between the parties under whom they or any of them claim, litigating under the same title, on
any ground based on an objection as to the place of suing.

24. Explanation- The expression "former suit" means a suit which has been decided prior to the
decision in the suit in which the validity of the decree is questioned, whether or not the
previously decided suit was instituted prior to the suit in which the validity of such decree is
questioned.
25. By even giving a plain reading to the text of § 21A of the CPC it can be concluded that
NCLT by even accepting the application filed by the Le Tranquille has violated the
provisions of the above mentioned §. It is clear from the facts of the present matter, that the
matter was well decided earlier by the court of Armorica and NCLT by passing such an
order has overstepped on its powers as the decree was passed under the judgment passed
between IPL and Le Tranquille on 1st November, 2018. And execution of which was to be
done by the end of the December of the same year.

52
National Company Law Tribunal Rules, 2016 (August 21, 2019, 09:30
PM),[Link]

23
26. VIOLATION OF § 420 OF COMPANIES ACT, 2013.
As per § 420 of the act 53, the tribunal shall give a reasonable opportunity to the parties
concerned and may pass such order as it may think fit. It is evident from the facts of the case
that NCLT failed to provide any such opportunity to IPL thus violating the provisions of §
420 of the company act. Furthermore, NCLT is only competent to amend any order passed
by it for the purpose of rectifying any mistake apparent from the record. The said § nowhere
talks about modifying the judgment given by any other competent court.54

27. Hence, it can be concluded that the order passed by the NCLT does not fulfill the desired
purpose and is in contravention of the same.

[III.2] THE INTERIM ORDER PASSED BY NCLT IS ARBITRARY.

28. The reason stated by the NCLT for ordering a stay on Armorica EP is that the courts of
Armorica does not have jurisdiction to entertain the matter, however such reasoning has no
merits as In August 2018 itself, and IPL brought a patent infringement suit against Le
Tranquille in Armorica.55 There was no challenge raised to the jurisdiction of the Court, Not
only that Le Tranquille entered appearance in the said suit proceedings and filed its written
defense by engaging a legal counsel as well. Later on, it was the Court of Armorica that
awarded a default judgment on 1st November 2018 in favor of IPL by holding that Le
Tranquille was liable to pay IPL Narnian Rupees 30 Crores. There was a real estate property,
where some business activities of Le Tranquille were being carried out. IPL filed for the
execution of the default judgment in Armorica on 22nd November 2018 and prayed for
attachment of the said real estate property. The real estate property over which Order of
Attachment in the name of which Armorica EP is passed is again situated in Armorica
itself.56
29. From the above stated facts it can be concluded that the Armorican courts did have
jurisdiction to pass the judgment keeping in mind the fact that patent infringement happened
in their country, judgment was given in Armorica, the property over which order of
Attachment is passed is situated in Armorica, and even IPL filed for the execution in

53
Companies Act, 2013 § 420.
54
APC Credit Rating Pvt. Ltd. v. ROC, NCT of Delhi & Haryana, 2018 SCC Online NCLAT 370.
55
Moot proposition ¶ 10.
56
Moot Proposition ¶ 11.

24
 Armorica itself. Hence, it can be concluded that “Cause of Action” arose in Armorica;
therefore courts of Armorica are the sole courts which have the power to decide the current
matter. There was no challenge raised to the jurisdiction of the courts on the first hand, it was
when Le Tranquille lost the judgment that they started questioning the jurisdiction, however
as proved above such a contention has no merits as Armorican courts thus have jurisdiction
in the current matter.
30. Arbitrariness as defined is 1. Depending on individual discretion; specif., determined by a
judge rather than by fixed rules, procedures, or law. 2. (Of a judicial decision) founded on
prejudice or preference rather than on reason or fact. 57This type of decision is often termed
arbitrary and capricious. A judgment can be called as arbitrary when it is not supported by
fair, solid, and substantial cause, and without reason given.58
31. An argument is advanced that since in the legal notice sent before filing of the suit, there is
reference to readiness and willingness and the plaintiff also led in evidence, nothing
precluded the court from entertaining the said application with which it cannot be accepted. 59
Le Tranquille has willfully even submitted their written arguments to Armorican Court. 60

[ISSUE IV] – THAT §S 10, 30(2) (B), 30(1) AND 65 OF THE INSOLVENCY AND
BANKRUPTCY CODE ARE CONSTITUTIONALLY INVALID.
32. It is humbly submitted that §s 10, 30(2) (b), 30(1) and 65 of the IBC are in violation of article
14 of the Constitution, hence, these §s are constitutionally invalid.

[IV.1] THAT § 10 OF IBC VIOLATES FUNDAMENTAL RIGHTS OF THE PERSONS.

33. Art 14 guarantees a right of hearing to the person. In Delhi Transport Corporation v. D.T.C.
Mazdoor Union 61, the SC held that the audi alteram partem rule, in essence, enforce the
equality clause in art 14 and it is applicable to quasi-judicial bodies. Similarly, in Maneka
Gandhi v. Union of India62, the SC opined that art 14 is an authority for the proposition that
the principles of natural justice are an integral part of the guarantee of equality assured by art
14, therefore, an order depriving a person of his right without affording him an opportunity
of being heard suffers from the vice of violation of natural justice. Here, § 10 is in violation
57
Henry Campbell Black, BLACK'S LAW DICTIONARY 237 (11 ed. Thomson Reuters West 2019).
58
Treloar v. Bigge, (1874) L. R. 9 Exch. 151.
59
Specific Relief Act, 1963 § 16 (c).
60
Moot proposition ¶ 10.
61
Supra n 4.
62
Supra n 41.

25
 of the principles of natural justice thus article 14 as it does not expressly gives the
opportunity of being heard to the creditors and it sometimes makes the NCLT to admit the
petition of a corporate debtor for CIRP even without affording an opportunity of being heard
to the creditors of such corporate debtor which sometimes leads to malicious initiation of
CIRP.
34. Further, under § 10, the NCLT is not bound to ascertain the existence of default before
admitting the petition for CIRP as it is bound under § 7. This has led to several malicious
initiations of CIRP by corporate debtors aimed at deceiving the creditors. Besides, there is
unintelligible differentia between § 10 and § 7 regarding this as there is no real difference
between ‘creditors’, ‘debtor’ and ‘nature of default’ under § 10 and the ‘creditors’, ‘debtor’
and the ‘nature of default’ under § 7. Therefore, the classification that under § 7, the NCLT is
mandatorily required to ascertain the default whereas under § 10, the NCLT can upon solely
relying on the documents provided by the corporate debtor admit the application for CIRP, is
arbitrary and discriminatory against the creditors falling under § 10 as sometimes the
corporate debtors give false documents or do not show some of their creditors. Hence, this
does not fall under art 14 and is constitutionally invalid.

[IV.2] § 30(2) (B) VIOLATES THE FUNDAMENTAL RIGHTS OF A PERSON.

35. Insolvency is a state where the liabilities of an individual or an organization exceeds its asset
and that entity is unable to raise enough cash to meet its obligations or debts as they become
due for payment. Technically insolvency could be a financial state when the value of total
assets of an individual or a group exceeds its liabilities. A person facing insolvency needs to
take corrective actions to rectify its situation to avoid possible bankruptcy. However, when
an individual is unable to pay off his liabilities and debts then he generally files for
bankruptcy. Here is asks for help from government to pay off his debts to his creditors.
Bankruptcy could of two types, namely, reorganization bankruptcy and liquidation
bankruptcy. Usually people tend to restructure the repayment plans to pay them easily under
reorganization bankruptcy. And under liquidation bankruptcy, the debtor tends to sell of
certain of their assets to pay off their debts for their creditors. One must follow a legal
procedure to declare that they are bankrupt and get aid from government to deal with their
creditors. To do this debtor must apply for bankruptcy in a relevant court. Or else one of his
creditors files an application in a relevant court to declare that entity or person as bankrupt.

26
 This can also be result of a special resolution passed by Register of Companies for the entity
to be declared bankrupt. Insolvency, in respect to the Company, is a situation when a
Company becomes incapable of recompensing its debts in the ordinary course of business, or
it becomes incapable of disbursing his debts as they become due. Any creditor can approach
before the tribunal (National Company Law Tribunal, NCLT) with the appropriate
application against such company. Bankruptcy is a concept which is like a voluntary
surrender. In this case, the company voluntarily goes to the Court and officially declares that
it is unable to pay any further debts. In the insolvency resolution process, the company is
considered as a going concern. The nature or standing of the creditors in resolution process is
different from the nature, standing of the same creditor in the liquidation process. Therefore,
if both the processes are different, then it is unfair to treat the creditors under resolution
process equally to the creditors under liquidation process as equals, because, equality before
the law, means that amongst equals should be equal and equally administered and that like
should be treated alike. In the corporate insolvency resolution process, the operational
creditor must be treated equally to a financial creditor. § 30(2) (b) takes into account the
priority concept mentioned in § 53. Since § 53 has provided for the minimum threshold
amount to the operational creditors who comprise the committee of creditors, it will take the
amount leaving a minimal amount to be given to the operational creditors despite the fact that
the debt to latter is more than the debt to the former and the corporate debtors will misuse
this provision as they would give minimum amount to the operational creditors. Therefore,
this § has provided a legal provision of avoiding the debts of operational creditors. This §
also perpetuates inequality. Ideally operational creditors should be treated equally with
financial creditors but 30(2) (b) having connection with 53 gives less dues to operational
creditors. Although it ensures that the operational creditors are paid some of their dues, but
this in no sense pacifies the right to equality granted by the Article 14 of the constitution.
Since, the Le Tranquille has a right to constitutional remedy under Article 32 of the
Constitution, so the constitutional validity of § 30(2) (b) of the IBC needs to be questioned.

[IV.3] SECTION 31(1) VIOLATES THE FUNDAMENTAL RIGHTS OF A PERSON

36. Corporate Insolvency Resolution Process is a recovery mechanism for creditors. If a

corporate becomes insolvent, a financial creditor, an operational creditor, or the corporate
itself may initiate CIRP. After making an application then CIRP is initiated. CIRP is the

27
 process through which it is determined whether the person who has defaulted is capable of
repayment or not (IRPs will evaluate the assets and liabilities to determine the repayment
capability). If a person is not capable of repaying the debt the company is restructured or
liquidated. In the whole Insolvency Resolution Process, the verification step is an important
stage which has been made for the benefit of the involved parties and the corporate itself. A
creditor of a corporate (financial or operational), or the company, can request to the NCLT
(National Company Law Tribunal) for the initiation of Corporate Insolvency Resolution
Process. It is used to admit that the company enters the CIRP (Corporate Insolvency
Resolution Process). The Section 31(1) of the IBC requires the NCLT to make an objective
decision for approving the resolution plan after it is satisfied that the resolution plan as
approved by the committee of creditors (with reference to sub-section 4 of section 30) meets
the requirements mentioned in Section 30 (2), after then the NCLT must make an objective
decision to approve the resolution plan which shall be binding on the corporate debtor and its
employees, creditors, guarantors and other stakeholders involved in the resolution plan. As
one can observe through the provisions of the mentioned sections, the decision before the
NCLT is of an objective nature. Due to the absence of a subjective decision making it leads
to discrimination of other creditors as they are sometimes given less dues even if there is a
chance that they could be given more. Therefore, the objective decision making under
Section 31(1) is arbitrary and discriminatory. This section doesn’t provide an ambit of
subjectivity and the objective decision making has led to discrimination, so there should be a
provision ensuring subjectivity in decision in order to have a balanced approach. According
to the Disparate Impact Theory which evolved in the United States of America through a
series of cases, one can challenge a practice which might seem nondiscriminatory on its face
but has a negative impact on the society. It evolved through the cases based on racial
discrimination in matters related to employment and service. The U.S. Supreme Court's
decision in Watson v. Fort Worth Bank and Trust 63 regarding the use of the disparate impact
theory in analysing subjective employment criteria seems to be favorable to employees
involved in these types of employment discrimination claims. By permitting employees to
use the disparate impact theory to attack the employer's use of subjective criteria for hiring,
promotion and other decisions, the employee is closer to benefitting from the congressional

63
Watson v. Fort Worth Bank & Trust, 487 U.S. 977 (1988).

28
 purpose of Title VII to provide equal employment opportunity to all 64. Therefore the
provision of Section 31(1) of the IBC imparts an unconscious discrimination in context of
Section 30 (2) (b) towards the other creditors which hinders with their right to equality in the
long run. Even the Supreme Court of USA has made an attempt to explain that it is
permissible to apply subjective decision making where objective decision-making leads to
discrimination in society, in various cases based on the disparate impact theory. In the case of
Ramalakshamamma v. Govt. of Andhra Pradesh65, it has been held that an opinion as to
whether it is one or the other is 'objective' and is open to examination by the High Court on a
motion for certiorari. Therefore, the hon’ble court allow for discussion of this matter.

[IV.4] § 65 OF INSOLVENCY AND BANKRUPTCY CODE IS UNCONSTITUTIONAL.

37. § 65 of I&B code is unconstitutional as it is arbitrary and unreasonable. Hence, the said
provision is in violation of Article 14 of the constitution. 66 Article 14 is provided as a
bulwark against any arbitrary or discriminatory state action and strikes out any arbitrary state
action, both administrative and legislative.
38. Major contentions raised during dealing cases involving § 65 can be classified broadly under
two heads. (1) The provision limiting to levy of penalty as opposed to rejection of the
petition for reasons contained therein. Maximum penalty that maybe imposed is Rupees 1
crore, which in most cases is very easy for such huge corporations to pay as a penalty and
then later on evade debts that were to be paid.
39. The doctrine of equality is attracted not only when equals are treated as unequals but also
when unequals are treated as equals and that Article 14 is offended both by finding difference
when there is none and by making no difference when there is one is unexceptionable. 67 In
the instant provision penalty is same for all types of corporate debtor irrespective of the fact
how big the corporation is. This becomes discriminatory here as for corporations who has
turnover over 100 crores, penalty of 1 crore is not a problem whereas a corporation which is
not as huge, things will be different. Hence, it can be concluded that § 65 of Insolvency and
Bankruptcy code is not in consonance with Article 14 of the constitution and therefore

64
Bennett Alexander, The Use of Disparate Impact Analysis in Subjective Criteria Employment Discrimination
Cases: All that Glitters Isn't Gold, National Black Law Journal
(Sep.1,2019), [Link]
65
Ramalakshamamma v. Govt. of Andhra Pradesh, AIR 1967 AP 280.
66
[Link] & Others v. Union Of India & Ors, 2006 SCC Online 212.
67
Mohd. Usman v. State of Andhra Pradesh, AIR 1971 SC 1801.

29
 unconstitutional. Furthermore, such a law is arbitrary as once such frivolous application is
accepted, CIRP is initiated, moratorium period is started and as per § 1468, once the
moratorium period begins, the creditors will not be able to take legal action against the
corporate debtor. Thus, this hampers the Right to access to justice under Article 14 and 21
too. 69

40. (2) § 65 defeats the very purpose of I&B code- the very purpose of the code is to prevent
litigation and the code aims to protect the interests of small investors and make the process of
doing business less cumbersome.70 Furthermore, Constitution of committee of creditors and
the system of voting on the basis of majority in value: The NCLT could not rule out the
probability that the corporate debtor might have created creditors with high value, who may
care least for the interest of retail investors, from whom money has been raised, and hence,
the so- called resolution plan may harm the interest of such investors later.

68
INSOLVENCY AND BANKRUPTCY CODE, 2016 § 14.
69
Anita Kushwaha v Pushap Sudan, (2016) 8 SCC 509.
70
The Report of the Bankruptcy Law Reforms Committee (August 19, 2019, 10:30 PM),
[Link]

30
 PRAYER

Therefore, in light of the facts of the case, issues raised, arguments advanced and authorities
cited, may this Hon’ble Court be pleased to adjudge that-

That the Writ Petition (Civil) No. 123 UMSC/2019 is not maintainable before this Hon’ble
Court.

That the Petition for CIRP filed by Le Tranquille Pvt. Ltd. is invalid; that the Armorican

Court’s default judgment is valid; that IPL is a creditor of Le Tranquille; and NCLT’s action of
not giving notice to IPL is wrong.

That NCLT was wrong in ordering the stay of Armorica EP.

That the sections 10, 30(2)(b), 30(1) and 65 of the Insolvency and Bankruptcy Code are not in
consonance with Article 14 and therefore constitutionally invalid.

And may pass any other order in favour of the appellants that it deems fit in the interest of

justice, equity and good conscience.

SD/-

Counsel for the Petitioner.

31