A non-obstante clause must also be distinguished from the phrase ‘without prejudice’. A provision enacted ‘without prejudice’ to another provision has not the effect of affecting the operation of the other provision and any action taken under it must not be inconsistent with such other provision.
In this the Court has stated that Regulation 30A of Insolvency and Bankruptcy Code 2016 is not mandatory instead it is directory for the simple reason that it will be based on the facts of a given case, an application for withdrawal shall be allowed in exceptional cases even after issue of invitation of interest under Regulation 36A.
This given case of Kondoli Tea Co. Ltd. dealt with a concept which at that time, that is 1886 was new to India and the idea of separate legal entity was introduced for the first time in India. This fundamental feature of separate legal entity of a company was duly required to be introduced in the Indian Company Law.
The Hon’ble Supreme Court in this case differentiated between a ‘party’ to an arbitration agreement and a nominee of a party. It rejected the contention that an arbitration clause may bound a non-signatory by virtue of its ‘conduct’.
In this case it was held that as per the company’s articles of association, it may pass a special resolution to reduce its share capital or any premium account in any way and subject to any incident authorized and consent required by law.
The court interpreted this case by using the principle of statutory interpretation of harmonious construction. It is a cardinal rule of construction that is used when in a statue two provisions are in conflict with each other, that both of them should stand together, they are interpreted so that the effect can be given to both.
The corporate veil must be lifted if it is in the interest of justice. It is the outmost duty of courts to provide justice and it is up to the judiciary to decide whether it is the need of the hour or not.
In this case the veil of corporate entity was used to give effect to an illegal transaction by dividing it into two separate transactions. It was held that the lessee privately and unauthorizedly cannot sell its rights for consideration and profits from rights belong to State as it is an illegal transfer.
The Supreme Court’s judgment in the present case involves restricting the NCLT from providing for a halt to the resolution process, but this is an economically ineffective move as the NCLT and NCALT’s provision to halt the resolution process will give banks and corporate creditors the opportunity to minimize their losses on default loans. The Supreme Court’s decision is based on the needs of the general public and made from the point of view of policy makers.
In this through upholding the substantive validity of the provision in the SICA and Insolvency and Bankruptcy Code, 2016, the Supreme Court has given a major sigh of relief to the aggrieved bondholders.
