REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3595 OF 2018

STATE BANK OF INDIA … APPELLANT

VERSUS

V. RAMAKRISHNAN & ANR. … RESPONDENTS

WITH

CIVIL APPEAL NO. 4553 OF 2018

J U D G M E N T

R.F. NARIMAN, J.

1. The present appeals revolve around whether Section 14 of the

Insolvency and Bankruptcy Code, 2016, which provides for a moratorium

for the limited period mentioned in the Code, on admission of an

insolvency petition, would apply to a personal guarantor of a corporate

debtor.

2. The factual backdrop of the present appeals is that the

Respondent No.1 is the Managing Director of the corporate debtor,

1

namely, the Respondent No.2 Company, and also the personal guarantor

in respect of credit facilities that had been availed from the Appellant.

The Guarantee Agreement entered into between the Appellant and the

Respondent No.1 is dated 22.02.2014.

3. As the Respondent No.2 Company did not pay its debts in time,

the account of Respondent No.2 was classified as a non-performing

asset on 26.07.2015. Consequent thereto, the Appellant issued a notice

dated 04.08.2015 under Section 13(2) of the SARFAESI Act demanding

an outstanding amount of Rs.61,13,28,785.48 from the Respondents

within the statutory period of 60 days. As no payment was forthcoming, a

possession notice under Section 13(4) of the SARFAESI Act was issued

on 18.11.2016.

4. As matters stood thus, an application was filed by Respondent

No.2, the corporate debtor, under Section 10 of the Code on 20.05.2017

to initiate the corporate insolvency resolution process against itself. On

19.06.2017, this petition filed under Section 10 was admitted, followed by

the moratorium that is imposed statutorily by Section 14 of the Code.

While the said proceedings were pending, an interim application was

filed by Respondent No.1 as personal guarantor to the corporate debtor,

2

in which Respondent No.1 took up the plea that Section 14 of the Code

would apply to the personal guarantor as well, as a result of which

proceedings against the personal guarantor and his property would have

to be stayed. The National Company Law Tribunal, by its order dated

18.09.2017, held that since under Section 31 of the Code, a Resolution

Plan made thereunder would bind the personal guarantor as well, and

since, after the creditor is proceeded against, the guarantor stands in the

shoes of the creditor, Section 14 would apply in favour of the personal

guarantor as well. The interim application filed by Respondent No.1 was

thus allowed, and the Appellant was restrained from moving against

Respondent No.1.

5. An appeal filed to the National Company Law Appellate Tribunal

resulted in the appeal being dismissed. By the impugned judgment dated

28.02.2018, the Appellate Tribunal relied upon Section 60(2) and (3) of

the Code as well as Section 31 of the Code to find that the moratorium

imposed under Section 14 would apply also to the personal guarantor.

The reasoning was that since the personal guarantor can also be

proceeded against, and forms part of a Resolution Plan which is binding

on him, he is very much part of the insolvency process against the

3

corporate debtor, and that, therefore, the moratorium imposed under

Section 14 should apply to the personal guarantor as well.

6. Shri Sanjay Kapur, learned counsel appearing on behalf of the

Appellant in C.A. No. 3595 of 2018, and Shri C.U. Singh, learned Senior

Advocate appearing on behalf of Appellant in C.A. No. 4553 of 2018,

both argued that the corporate debtor and personal guarantor are

separate entities and that a corporate debtor undergoing insolvency

proceedings under the Code would not mean that a personal guarantor

is also undergoing the same process. As the guarantor’s liability is

distinct and separate from that of the corporate debtor, a suit can be

maintained against the surety, though the principal debtor has not been

sued. For this purpose, they relied upon Section 128 of the Indian

Contract Act, 1872. They also relied heavily upon the reasoning

contained in a judgment by a Single Judge of the Bombay High Court in

M/s. Sicom Investments and Finance Ltd. v. Rajesh Kumar Drolia

and Anr.

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They then referred to Part III of the Code, and in particular, to

Sections 96 and 101. Although Part III of the Code has not been brought

into force, it is clear that if an insolvency resolution process is to be

carried out against a personal guarantor, it can be done only under Part

1

(2017) SCC Online Bom 9725 (decided on 28.11.2017).

4

III, which contains a separate moratorium provision, namely, Sections 96

and 101, both of which would attach only if a separate insolvency

process were carried out as against the personal guarantor. Shri Singh,

in particular, relied heavily upon the difference in language between

Section 14 and Section 101. According to the learned senior counsel,

Section 14, in all its sub-sections, speaks only of the corporate debtor.

When contrasted with Section 101, it becomes clear that Section 14

cannot possibly attach to a personal guarantor as well, as Section 101

does not speak of a ‘debtor’ but speaks ‘in relation to the debt’ and is not

only wider than Section 14, but would attach only if Part III proceedings

were to be instituted against the personal guarantor. They also relied

heavily upon the Amendment Ordinance dated 06.06.2018, by which

Section 14(3) of the Code was substituted, including a surety in a

contract of guarantee to a corporate debtor. They relied upon the

Insolvency Law Committee proceedings, which led to the aforesaid

amendment, stating that it had been recommended to clarify, by way of

an explanation, that all assets of such guarantors to the corporate debtor

shall be outside the scope of the moratorium imposed under the Code.

The very impugned judgment in the present proceedings was referred to

by the Insolvency Law Committee stating that such a broad interpretation

5

of Section 14 would curtail significant rights of the creditor. They relied

upon judgments which made it clear that clarificatory statutes, like this

amendment, would have retrospective operation and that, therefore, in

any case, the impugned judgment would have to be set aside.

7. Learned counsel appearing on behalf of the Respondents first

took shelter under Section 60(2) of the Code, as according to the learned

counsel, the said Section precludes the bank from proceeding against

the personal guarantor under SARFAESI or any other Act outside the

Code. He relied upon the reasoning of the Tribunal and took shelter

under Section 31, as did the Tribunal. He also relied upon a judgment of

the Allahabad High Court in Sanjeev Shriya v. State Bank of India and

Ors.,

2

which stated that as a proceeding relatable to the corporate debtor

is pending adjudication in two forums, it is not permissible to proceed

against the personal guarantor. A financial creditor cannot operate in a

manner that imperils the value of the property of the personal debtor. He

also relied strongly upon the Insolvency and Bankruptcy Code

(Amendment) Act, 2018 which came into effect on 23.11.2017, by which,

clause (e) of Section 2 was substituted so as to include within the sweep

of the Code, personal guarantors to corporate debtors. He then relied

2

(2018) 2 All LJ 769 (decided on 06.09.2017).

6

upon the Statement of Objects of the Amendment Act, 2018, which was,

inter alia, to extend the provisions of the Code to personal guarantors of

corporate debtors, to further strengthen the corporate insolvency

resolution process. He then relied upon certain statutory forms which are

contained in the Insolvency and Bankruptcy (Application to Adjudicating

Authority) Rules, 2016 and in particular, to Annexure VI(e) to Form 6.

Regulation 36(2) of the Insolvency and Bankruptcy Board of India

(Insolvency Resolution Process for Corporate Persons) Regulations,

2016 also provides, as did Annexure VI(e), that information as to

personal guarantees have to be given in relation to the debts of the

corporate debtor when an insolvency process is initiated against the

corporate debtor. All this would show that since the personal guarantor is

very much part of the overall process, the moratorium contained in

Section 14 of the Code should apply to the personal guarantor as well.

8. We appointed Shri K.V. Viswanathan, learned Senior Advocate, to

assist us as Amicus Curiae in this matter. We thank him for the valuable

assistance that he has rendered. He has pointed out that the whole idea

of the Insolvency Code was that the history of debt recovery had shown

that the earlier statutes were loaded heavily in favour of corporate

debtors and that, as a result, huge outstanding debts to banks and

7

financial institutions had not been repaid. In particular, he pointed out

Section 22 of the Sick Industrial Companies (Special Provisions) Act,

1985, and stated that as a result of the said Section applying to

guarantors as well, creditors could not proceed against guarantors as

well after the company had been declared sick under the said Act,

without permission from the Board for Industrial and Financial

Reconstruction. Now that the said Act has been repealed, and the fact

that several later enactments, including the Companies Act, 2013 had

omitted a provision akin to Section 22, would show that the enactment of

Section 14 of the Code was deliberate, and that the idea was that there

should be no stay of proceedings against the guarantor while the

corporate debtor is undergoing an insolvency proceeding. For this, he

cited various judgments. He also relied upon the Amendment Act, 2018

and stated that since the Act was to get over the appellate judgment in

particular, and since it was clarificatory, the position in law would be that

it would be retrospective, and would thus govern the case at hand.

9. Before dealing with the arguments of learned counsel on both

sides, it is important at this stage to set out some of the provisions of the

Code. One difficulty that we faced when hearing the matter was that

different provisions of the Code were brought into force on different

8

dates, as Section 1(3) indicates. Also, certain important provisions of the

Code have not yet been brought into force. This we will advert to a little

later in our judgment.

10.Section 2(e) of the Code, as originally enacted, reads as under:

“2. Application.— The provisions of this Code shall

apply to—

xxx xxx xxx

(e) partnership firms and individuals;

xxx xxx xxx”

By the Amendment Act, 2018, this Section was substituted as follows:

“2. Application.— The provisions of this Code shall

apply to—

xxx xxx xxx

(e) personal guarantors to corporate debtors;

xxx xxx xxx”

Though the original Section 2(e) did not come into force at all, the

substituted Section 2(e) has come into force w.e.f. 23.11.2017.

11.Section 3(7), (8) and (11) of the Code read as under:

“3. Definitions.— In this Code, unless the context

otherwise requires,—

(7) “corporate person” means a company as defined

in clause (20) of Section 2 of the Companies Act,

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2013 (18 of 2013), a limited liability partnership, as

defined in clause (n) of sub-section (1) of Section 2

of the Limited Liability Partnership Act, 2008 (6 of

2009), or any other person incorporated with limited

liability under any law for the time being in force but

shall not include any financial service provider;

(8) “corporate debtor” means a corporate person

who owes a debt to any person;”

xxx xxx xxx

“(11) “debt” means a liability or obligation in respect

of a claim which is due from any person and

includes a financial debt and operational debt;”

12.Section 5(8)(i) of the Code reads as follows:

“5. Definitions.— In this Part, unless the context

otherwise requires,—

xxx xxx xxx

(8) “financial debt” means a debt along with interest,

if any, which is disbursed against the consideration

for the time value of money and includes—

xxx xxx xxx

(i) the amount of any liability in respect of any of

the guarantee or indemnity for any of the items

referred to in sub-clauses (a) to (h) of this

clause;

xxx xxx xxx”

13.Section 5(22) of the Code read as follows:

“5. Definitions.— In this Part, unless the context

otherwise requires,—

xxx xxx xxx

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(22) “personal guarantor” means an individual who

is the surety in a contract of guarantee to a

corporate debtor;”

14.Sections 14, 31, 60, 95, 101, 238, 243, and 249 of the Code read

as under:

“14. Moratorium.— (1) Subject to provisions of sub-

sections (2) and (3), on the insolvency

commencement date, the Adjudicating Authority

shall by order declare moratorium for prohibiting all

of the following, namely—

(a) the institution of suits or continuation of

pending suits or proceedings against the

corporate debtor including execution of any

judgment, decree or order in any court of law,

tribunal, arbitration panel or other authority;

(b) transferring, encumbering, alienating or

disposing of by the corporate debtor any of its

assets or any legal right or beneficial interest

therein;

(c) any action to foreclose, recover or enforce

any security interest created by the corporate

debtor in respect of its property including any

action under the Securitisation and

Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 (54

of 2002);

(d) the recovery of any property by an owner or

lessor where such property is occupied by or in

the possession of the corporate debtor.

(2) The supply of essential goods or services to the

corporate debtor as may be specified shall not be

terminated or suspended or interrupted during

moratorium period.

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(3) The provisions of sub-section (1) shall not apply

to such transactions as may be notified by the

Central Government in consultation with any

financial sector regulator.

(4) The order of moratorium shall have effect from

the date of such order till the completion of the

corporate insolvency resolution process:

Provided that where at any time during the

corporate insolvency resolution process period, if

the Adjudicating Authority approves the resolution

plan under sub-section (1) of Section 31 or passes

an order for liquidation of corporate debtor under

Section 33, the moratorium shall cease to have

effect from the date of such approval or liquidation

order, as the case may be.”

xxx xxx xxx

“31. Approval of resolution plan.— (1) If the

Adjudicating Authority is satisfied that the resolution

plan as approved by the committee of creditors

under sub-section (4) of section 30 meets the

requirements as referred to in sub-section (2) of

Section 30, it shall by order approve the resolution

plan which shall be binding on the corporate debtor

and its employees, members, creditors, guarantors

and other stakeholders involved in the resolution

plan.

(2) Where the Adjudicating Authority is satisfied that

the resolution plan does not confirm to the

requirements referred to in sub-section (1), it may,

by an order, reject the resolution plan.

(3) After the order of approval under sub-section (1),

—

(a) the moratorium order passed by the

Adjudicating Authority under Section 14 shall

cease to have effect; and

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(b) the resolution professional shall forward all

records relating to the conduct of the corporate

insolvency resolution process and the

resolution plan to the Board to be recorded on

its database.”

xxx xxx xxx

“60. Adjudicating Authority for corporate

persons.— (1) The Adjudicating Authority, in

relation to insolvency resolution and liquidation for

corporate persons including corporate debtors and

personal guarantors thereof shall be the National

Company Law Tribunal having territorial jurisdiction

over the place where the registered office of the

corporate person is located.

(2) Without prejudice to sub-section (1) and

notwithstanding anything to the contrary contained

in this Code, where a corporate insolvency

resolution process or liquidation proceeding of a

corporate debtor is pending before a National

Company Law Tribunal, an application relating to the

insolvency resolution or bankruptcy of a personal

guarantor of such corporate debtor shall be filed

before such National Company Law Tribunal.

(3) An insolvency resolution process or bankruptcy

proceeding of a personal guarantor of the corporate

debtor pending in any court or tribunal shall stand

transferred to the Adjudicating Authority dealing with

insolvency resolution process or liquidation

proceeding of such corporate debtor.

(4) The National Company Law Tribunal shall be

vested with all the powers of the Debts Recovery

Tribunal as contemplated under Part III of this Code

for the purpose of sub-section (2).

(5) Notwithstanding anything to the contrary

contained in any other law for the time being in

13

force, the National Company Law Tribunal shall

have jurisdiction to entertain or dispose of—

(a) any application or proceeding by or against

the corporate debtor or corporate person;

(b) any claim made by or against the corporate

debtor or corporate person, including claims by

or against any of its subsidiaries situated in

India; and

(c) any question of priorities or any question of

law or facts, arising out of or in relation to the

insolvency resolution or liquidation proceedings

of the corporate debtor or corporate person

under this Code.

(6) Notwithstanding anything contained in the

Limitation Act, 1963 (36 of 1963) or in any other law

for the time being in force, in computing the period

of limitation specified for any suit or application by or

against a corporate debtor for which an order of

moratorium has been made under this Part, the

period during which such moratorium is in place

shall be excluded.”

xxx xxx xxx

“96. Interim-moratorium.— (1) When an

application is filed under Section 94 or Section 95—

(a) an interim-moratorium shall commence on

the date of the application in relation to all the

debts and shall cease to have effect on the date

of admission of such application; and

(b) during the interim-moratorium period—

(i) any legal action or proceeding pending in

respect of any debt shall be deemed to have

been stayed; and

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(ii) the creditors of the debtor shall not initiate

any legal action or proceedings in respect of

any debt.

(2) Where the application has been made in relation

to a firm, the interim-moratorium under sub-section

(1) shall operate against all the partners of the firm

as on the date of the application.

(3) The provisions of sub-section (1) shall not apply

to such transactions as may be notified by the

Central Government in consultation with any

financial sector regulator.”

xxx xxx xxx

“101. Moratorium.— (1) When the application is

admitted under Section 100, a moratorium shall

commence in relation to all the debts and shall

cease to have effect at the end of the period of one

hundred and eighty days beginning with the date of

admission of the application or on the date the

Adjudicating Authority passes an order on the

repayment plan under Section 114, whichever is

earlier.

(2) During the moratorium period—

(a) any pending legal action or proceeding in

respect of any debt shall be deemed to have

been stayed;

(b) the creditors shall not initiate any legal

action or legal proceedings in respect of any

debt; and

(c) the debtor shall not transfer, alienate,

encumber or dispose of any of his assets or his

legal rights or beneficial interest therein;

(3) Where an order admitting the application under

Section 96 has been made in relation to a firm, the

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moratorium under sub-section (1) shall operate

against all the partners of the firm.

(4) The provisions of this section shall not apply to

such transactions as may be notified by the Central

Government in consultation with any financial sector

regulator.”

xxx xxx xxx

“238. Provisions of this Code to override other

laws.— The provisions of this Code shall have

effect, notwithstanding anything inconsistent

therewith contained in any other law for the time

being in force or any instrument having effect by

virtue of any such law.”

xxx xxx xxx

“243. Repeal of certain enactments and savings.

— (1) The Presidency-Towns Insolvency Act, 1909

(3 of 1909) and the Provincial Insolvency Act, 1920

(5 of 1920) are hereby repealed.

(2) Notwithstanding the repeal under sub-sections

(1),—

(i) all proceedings pending under and relating to

the Presidency-Towns Insolvency Act, 1909,

and the Provincial Insolvency Act, 1920

immediately before the commencement of this

Code shall continue to be governed under the

aforementioned Acts and be heard and

disposed of by the concerned courts or

tribunals, as if the aforementioned Acts have

not been repealed;

(ii) any order, rule, notification, regulation,

appointment, conveyance, mortgage, deed,

document or agreement made, fee directed,

resolution passed, direction given, proceeding

taken, instrument executed or issued, or thing

done under or in pursuance of any repealed

16

enactment shall, if in force at the

commencement of this Code, continue to be in

force, and shall have effect as if the

aforementioned Acts have not been repealed;

(iii) anything done or any action taken or

purported to have been done or taken, including

any rule, notification, inspection, order or notice

made or issued or any appointment or

declaration made or any operation undertaken

or any direction given or any proceeding taken

or any penalty, punishment, forfeiture or fine

imposed under the repealed enactments shall

be deemed valid;

(iv) any principle or rule of law, or established

jurisdiction, form or course of pleading, practice

or procedure or existing usage, custom,

privilege, restriction or exemption shall not be

affected, notwithstanding that the same

respectively may have been in any manner

affirmed or recognised or derived by, in, or from,

the repealed enactments;

(v) any prosecution instituted under the

repealed enactments and pending immediately

before the commencement of this Code before

any court or tribunal shall, subject to the

provisions of this Code, continue to be heard

and disposed of by the concerned court or

tribunal;

(vi) any person appointed to any office under or

by virtue of any repealed enactment shall

continue to hold such office until such time as

may be prescribed; and

(vii) any jurisdiction, custom, liability, right, title,

privilege, restriction, exemption, usage,

practice, procedure or other matter or thing not

in existence or in force shall not be revised or

restored.

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(3) The mention of particular matters in sub-section

(2) shall not be held to prejudice the general

application of Section 6 of the General Clauses Act,

1897 (10 of 1897) with regard to the effect of repeal

of the repealed enactments or provisions of the

enactments mentioned in the Schedule.”

xxx xxx xxx

“249. Amendments of Act, 51 of 1993.— The

Recovery of Debts Due to Banks and Financial

Institutions Act, 1993 shall be amended in the

manner specified in the Fifth Schedule.”

15.The first important thing that needs to be noticed is that, as has

been stated earlier in this judgment, Part III of the Code has not yet been

brought into force. This part is entitled “Insolvency Resolution and

Bankruptcy for Individuals and Partnership Firms”. The repealing

provision, namely Section 243, which repeals the Presidency Towns

Insolvency Act, 1909 and the Provincial Insolvency Act, 1920, has also

not been brought into force. Section 249, which amends the Recovery of

Debts Due to Banks and Financial Institutions Act, 1993, so that the Debt

Recovery Tribunals under that Act can exercise the jurisdiction of the

Adjudicating Authority conferred by the Code, has also not been brought

into force.

16.Under Part II of the Code, which deals with “Insolvency Resolution

and Liquidation for Corporate Persons”, a financial creditor or a corporate

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debtor may make an application to initiate this process. Once initiated,

the Adjudicating Authority, after admission of such an application, shall by

order, declare a moratorium for the purposes referred to in Section 14

(See Section 13 of the Code).

17.Section 14 refers to four matters that may be prohibited once the

moratorium comes into effect. In each of the matters referred to, be it

institution or continuation of proceedings, the transferring, encumbering

or alienating of assets, action to recover security interest, or recovery of

property by an owner which is in possession of the corporate debtor,

what is conspicuous by its absence is any mention of the personal

guarantor. Indeed, the corporate debtor and the corporate debtor alone is

referred to in the said Section. A plain reading of the said Section,

therefore, leads to the conclusion that the moratorium referred to in

Section 14 can have no manner of application to personal guarantors of

a corporate debtor.

18.However, Sections 2(e) and Section 60 are strongly relied upon by

learned counsel for the Respondents as, according to them, the Code

will apply to personal guarantors of corporate debtors, and by Section

19

60, proceedings against such personal guarantors will show that such

moratorium extends to the guarantor as well.

19.We are afraid that such arguments have to be turned down on a

careful reading of the Sections relied upon. Section 60 of the Code, in

sub-section (1) thereof, refers to insolvency resolution and liquidation for

both corporate debtors and personal guarantors, the Adjudicating

Authority for which shall be the National Company Law Tribunal, having

territorial jurisdiction over the place where the registered office of the

corporate person is located. This sub-section is only important in that it

locates the Tribunal which has territorial jurisdiction in insolvency

resolution processes against corporate debtors. So far as personal

guarantors are concerned, we have seen that Part III has not been

brought into force, and neither has Section 243, which repeals the

Presidency-Towns Insolvency Act, 1909 and the Provincial Insolvency

Act, 1920. The net result of this is that so far as individual personal

guarantors are concerned, they will continue to be proceeded against

under the aforesaid two Insolvency Acts and not under the Code. Indeed,

by a Press Release dated 28.08.2017, the Government of India, through

the Ministry of Finance, cautioned that Section 243 of the Code, which

provides for the repeal of said enactments, has not been notified till date,

20

and further, that the provisions relating to insolvency resolution and

bankruptcy for individuals and partnerships as contained in Part III of the

Code are yet to be notified. Hence, it was advised that stakeholders who

intend to pursue their insolvency cases may approach the appropriate

authority/court under the existing enactments, instead of approaching the

Debt Recovery Tribunals.

20.It is for this reason that sub-section (2) of Section 60 speaks of an

application relating to the “bankruptcy” of a personal guarantor of a

corporate debtor and states that any such bankruptcy proceedings shall

be filed only before the National Company Law Tribunal. The argument

of the learned counsel on behalf of the Respondents that “bankruptcy”

would include SARFAESI proceedings must be turned down as

“bankruptcy” has reference only to the two Insolvency Acts referred to

above. Thus, SARFAESI proceedings against the guarantor can continue

under the SARFAESI Act. Similarly, sub-section (3) speaks of a

bankruptcy proceeding of a personal guarantor of the corporate debtor

pending in any Court or Tribunal, which shall stand transferred to the

Adjudicating Authority dealing with the insolvency resolution process or

liquidation proceedings of such corporate debtor. An “Adjudicating

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Authority”, defined under Section 5(1) of the Code, means the National

Company Law Tribunal constituted under the Companies Act, 2013.

21.The scheme of Section 60(2) and (3) is thus clear – the moment

there is a proceeding against the corporate debtor pending under the

2016 Code, any bankruptcy proceeding against the individual personal

guarantor will, if already initiated before the proceeding against the

corporate debtor, be transferred to the National Company Law Tribunal

or, if initiated after such proceedings had been commenced against the

corporate debtor, be filed only in the National Company Law Tribunal.

However, the Tribunal is to decide such proceedings only in accordance

with the Presidency-Towns Insolvency Act, 1909 or the Provincial

Insolvency Act, 1920, as the case may be. It is clear that sub-section (4),

which states that the Tribunal shall be vested with all the powers of the

Debt Recovery Tribunal, as contemplated under Part III of this Code, for

the purposes of sub-section (2), would not take effect, as the Debt

Recovery Tribunal has not yet been empowered to hear bankruptcy

proceedings against individuals under Section 179 of the Code, as the

said Section has not yet been brought into force. Also, we have seen that

Section 249, dealing with the consequential amendment of the Recovery

of Debts Act to empower Debt Recovery Tribunals to try such

22

proceedings, has also not been brought into force. It is thus clear that

Section 2(e), which was brought into force on 23.11.2017 would, when it

refers to the application of the Code to a personal guarantor of a

corporate debtor, apply only for the limited purpose contained in Section

60(2) and (3), as stated hereinabove. This is what is meant by

strengthening the Corporate Insolvency Resolution Process in the

Statement of Objects of the Amendment Act, 2018.

22.Section 31 of the Act was also strongly relied upon by the

Respondents. This Section only states that once a Resolution Plan, as

approved by the Committee of Creditors, takes effect, it shall be binding

on the corporate debtor as well as the guarantor. This is for the reason

that otherwise, under Section 133 of the Indian Contract Act, 1872, any

change made to the debt owed by the corporate debtor, without the

surety’s consent, would relieve the guarantor from payment. Section

31(1), in fact, makes it clear that the guarantor cannot escape payment

as the Resolution Plan, which has been approved, may well include

provisions as to payments to be made by such guarantor. This is perhaps

the reason that Annexure VI(e) to Form 6 contained in the Rules and

Regulation 36(2) referred to above, require information as to personal

guarantees that have been given in relation to the debts of the corporate

23

debtor. Far from supporting the stand of the Respondents, it is clear that

in point of fact, Section 31 is one more factor in favour of a personal

guarantor having to pay for debts due without any moratorium applying

to save him.

23.We are also of the opinion that Sections 96 and 101, when

contrasted with Section 14, would show that Section 14 cannot possibly

apply to a personal guarantor. When an application is filed under Part III,

an interim-moratorium or a moratorium is applicable in respect of any

debt due. First and foremost, this is a separate moratorium, applicable

separately in the case of personal guarantors against whom insolvency

resolution processes may be initiated under Part III. Secondly, the

protection of the moratorium under these Sections is far greater than that

of Section 14 in that pending legal proceedings in respect of the debt and

not the debtor are stayed. The difference in language between Sections

14 and 101 is for a reason. Section 14 refers only to debts due by

corporate debtors, who are limited liability companies, and it is clear that

in the vast majority of cases, personal guarantees are given by Directors

who are in management of the companies. The object of the Code is not

to allow such guarantors to escape from an independent and co-

extensive liability to pay off the entire outstanding debt, which is why

24

Section 14 is not applied to them. However, insofar as firms and

individuals are concerned, guarantees are given in respect of individual

debts by persons who have unlimited liability to pay them. And such

guarantors may be complete strangers to the debtor – often it could be a

personal friend. It is for this reason that the moratorium mentioned in

Section 101 would cover such persons, as such moratorium is in relation

to the debt and not the debtor. We may hasten to add that it is open to us

to mark the difference in language between Sections 14 and 96 and 101,

even though Sections 96 and 101 have not yet been brought into force.

This is for the reason, as has been held in State of Kerala and Ors. v.

Mar Appraem Kuri Co. Ltd. and Anr., (2012) 7 SCC 106, that a law

‘made’ by the Legislature is a law on the statute book even though it may

not have been brought into force. The said judgment states:

“79. The proviso to Article 254(2) provides that a

law made by the State Legislature with the President's

assent shall not prevent Parliament from making at

any time any law with respect to the same matter

including a law adding to, amending, varying or

repealing the law so made by a State Legislature.

Thus, Parliament need not wait for the law made by

the State Legislature with the President's assent to be

brought into force as it can repeal, amend, vary or add

to the assented State law no sooner it is made or

enacted. We see no justification for inhibiting

Parliament from repealing, amending or varying any

State legislation, which has received the President's

25

assent, overriding within the State's territory, an earlier

parliamentary enactment in the concurrent sphere,

before it is brought into force. Parliament can repeal,

amend, or vary such State law no sooner it is assented

to by the President and that it need not wait till such

assented-to State law is brought into force. This view

finds support in the judgment of this Court in Tulloch

[AIR 1964 SC 1284 : (1964) 4 SCR 461] .

80. Lastly, the definitions of the expressions “laws in

force” in Article 13(3)(b) and Article 372(3) Explanation

I and “existing law” in Article 366(10) show that the

laws in force include laws passed or made by a

legislature before the commencement of the

Constitution and not repealed, notwithstanding that

any such law may not be in operation at all. Thus, the

definition of the expression “laws in force” in Article

13(3)(b) and Article 372(3) Explanation I and the

definition of the expression “existing law” in Article

366(10) demolish the argument of the State of Kerala

that a law has not been made for the purposes of

Article 254, unless it is enforced. The expression

“existing law” finds place in Article 254. In Edward

Mills Co. Ltd. v. State of Ajmer [AIR 1955 SC 25], this

Court has held that there is no difference between an

“existing law” and a “law in force”.

81. Applying the tests enumerated hereinabove, we

hold that the Kerala Chitties Act, 1975 became void on

the making of the Chit Funds Act, 1982 on 19-8-1982,

[when it received the assent of the President and got

published in the Official Gazette] as the Central 1982

Act intended to cover the entire field with regard to the

conduct of the chits and further that the State Finance

Act 7 of 2002, introducing Section 4(1)(a) into the

State 1975 Act, was void as the State Legislature was

denuded of its authority to enact the said Finance Act

7 of 2002, except under Article 254(2), after the

26

(Central) Chit Funds Act, 1982 occupied the entire field

as envisaged in Article 254(1) of the Constitution.”

24.Thus, for the purpose of interpretation, it is certainly open for us to

contrast Section 14 with Sections 96 and 101, as Sections 96 and 101

are laws made by the Legislature, even though they have not yet been

brought into force.

25.As argued by Shri Viswanathan, the historical background of the

Code now needs to be looked at. Section 22 of the Sick Industrial

Companies (Special Provisions) Act, 1985 reads as follows:

“22. Suspension of legal proceedings, contracts,

etc.—(1) Where in respect of an industrial company,

an inquiry under Section 16 is pending or any

scheme referred to under Section 17 is under

preparation or consideration or a sanctioned

scheme is under implementation or where an appeal

under Section 25 relating to an industrial company is

pending, then, notwithstanding anything contained

in the Companies Act, 1956 (1 of 1956), or any other

law or the memorandum and articles of association

of the industrial company or any other instrument

having effect under the said Act or other law, no

proceedings for the winding up of the industrial

company or for execution, distress or the like

against any of the properties of the industrial

company or for the appointment of a receiver in

respect thereof [and no suit for the recovery of

money or for the enforcement of any security

against the industrial company or of any guarantee

in respect of any loans or advance granted to the

27

industrial company] shall lie or be proceeded with

further, except with the consent of the Board or, as

the case may be, the Appellate Authority.

(2) Where the management of the sick industrial

company is taken over or changed [in pursuance of

any scheme sanctioned under Section 18]

notwithstanding anything contained in the

Companies Act, 1956 (1 of 1956), or any other law

or in the memorandum and articles of association of

such company or any instrument having effect under

the said Act or other law—

(a) it shall not be lawful for the shareholders of

such company or any other person to nominate

or appoint any person to be a director of the

company;

(b) no resolution passed at any meeting of the

shareholders of such company shall be given

effect to unless approved by the Board.

(3) [Where an inquiry under Section 16 is pending or

any scheme referred to in Section 17 is under

preparation or during the period] of consideration of

any scheme under Section 18 or where any such

scheme is sanctioned thereunder, for due

implementation of the scheme, the Board may by

order declare with respect to the sick industrial

company concerned that the operation of all or any

of the contracts, assurances of property,

agreements, settlements, awards, standing orders

or other instruments in force, to which such sick

industrial company is a party or which may be

applicable to such sick industrial company

immediately before the date of such order, shall

remain suspended or that all or any of the rights,

privileges, obligations and liabilities accruing or

arising thereunder before the said date, shall remain

suspended or shall be enforceable with such

adaptations and in such manner as may be

specified by the Board:

28

Provided that such declaration shall not be made for

a period exceeding two years which may be

extended by one year at a time so, however, that the

total period shall not exceed seven years in the

aggregate.

(4) Any declaration made under sub-section (3) with

respect to a sick industrial company shall have

effect notwithstanding anything contained in the

Companies Act, 1956 (1 of 1956), or any other law,

the memorandum and articles of association of the

company or any instrument having effect under the

said Act or other law or any agreement or any

decree or order of a court, tribunal, officer or other

authority or of any submission, settlement or

standing order and accordingly,—

(a) any remedy for the enforcement of any right,

privilege, obligation and liability suspended or

modified by such declaration, and all

proceedings relating thereto pending before any

court, tribunal, officer or other authority shall

remain stayed or be continued subject to such

declaration; and

(b) on the declaration ceasing to have effect—

(i) any right, privilege, obligation or liability so

remaining suspended or modified, shall

become revived and enforceable as if the

declaration had never been made; and

(ii) any proceeding so remaining stayed shall

be proceeded with subject to the provisions

of any law which may then be in force, from

the stage which had been reached when the

proceedings became stayed.

(5) In computing the period of limitation for the

enforcement of any right, privilege, obligation or

liability, the period during which it or the remedy for

the enforcement thereof remains suspended under

this section shall be excluded.

29

It will be clear from a reading of sub-section (1) thereof that suits for the

enforcement of any guarantee in respect of loans or advances granted to

the industrial company, shall not lie or be proceeded with further, except

with the consent of the Board or Appellate Authority. It may be noted that

the Sick Industrial Companies (Special Provisions) Act, 1985 was

repealed on 01.12.2016. By a notification dated 30.11.2016, Section 14

of the Code was brought into force w.e.f. 01.12.2016. In Madras

Petrochem Ltd. and Anr. v. Board for Industrial and Financial

Reconstruction and Ors., (2016) 4 SCC 1, this Court found:

“40. An interesting pointer to the direction Parliament

has taken after enactment of the Securitisation and

Reconstruction of Financial Assets and Enforcement

of Security Interest Act, 2002 is also of some

relevance in this context. The Eradi Committee

Report relating to insolvency and winding up of

companies dated 31-7-2000, observed that out of

3068 cases referred to BIFR from 1987 to 2000 all

but 1062 cases have been disposed of. Out of the

cases disposed of, 264 cases were revived, 375

cases were under negotiation for revival process,

741 cases were recommended for winding up, and

626 cases were dismissed as not maintainable.

These facts and figures speak for themselves and

place a big question mark on the utility of the Sick

Industrial Companies (Special Provisions) Act, 1985.

The Committee further pointed out that effectiveness

of the Sick Industrial Companies (Special

Provisions) Act, 1985 as has been pointed out

earlier, has been severely undermined by reason of

the enormous delays involved in the disposal of

30

cases by BIFR. (See Paras 5.8, 5.9 and 5.15 of the

Report.) Consequently, the Committee

recommended that the Sick Industrial Companies

(Special Provisions) Act, 1985 be repealed and the

provisions thereunder for revival and rehabilitation

should be telescoped into the structure of the

Companies Act, 1956 itself.

41. Pursuant to the Eradi Committee Report, the

Companies Act was amended in 2002 by providing

for the constitution of a National Company Law

Tribunal as a substitute for the Company Law

Board, the High Court, BIFR and AAIFR. The Eradi

Committee Report was further given effect to by

inserting Sections 424-A to 424-H into the

Companies Act, 1956 which, with a few changes,

mirrored the provisions of Sections 15 to 21 of the

Sick Industrial Companies (Special Provisions) Act,

1985. Interestingly, the Companies Amendment Act,

2002 omitted a provision similar to Section 22(1) of

the Sick Industrial Companies (Special Provisions)

Act, 1985. Consequently, creditors were given liberty

to file suits or initiate other proceedings for recovery

of dues despite pendency of proceedings for the

revival or rehabilitation of sick companies before the

National Company Law Tribunal.

xxx xxx xxx

43. Close on the heels of the amendment made to

the Companies Act came the Sick Industrial

Companies (Special Provisions) Repeal Act, 2003.

This particular Act was meant to repeal the Sick

Industrial Companies (Special Provisions) Act, 1985

consequent to some of its provisions being

telescoped into the Companies Act. Thus, the

Companies Amendment Act, 2002 and the SICA

Repeal Act formed part of one legislative scheme,

and neither has yet been brought into force. In fact,

even the Companies Act, 2013, which repeals the

31

Companies Act, 1956, contains Chapter 19

consisting of Sections 253 to 269 dealing with

revival and rehabilitation of sick companies along

the lines of Sections 424-A to 424-H of the amended

Companies Act, 1956. Conspicuous by its absence

is a provision akin to Section 22(1) of the Sick

Industrial Companies (Special Provisions) Act, 1985

in the 2013 Act. However, this Chapter is also yet to

be brought into force. These statutory provisions,

though not yet brought into force, are also an

important pointer to the fact that Section 22(1) of the

Sick Industrial Companies (Special Provisions) Act,

1985 has been statutorily sought to be excluded,

Parliament veering around from wanting to protect

sick industrial companies and rehabilitate them to

giving credence to the public interest contained in

the recovery of public monies owing to banks and

financial institutions. These provisions also show

that the aforesaid construction of the provisions of

the Securitisation and Reconstruction of Financial

Assets and Enforcement of Security Interest Act,

2002 vis-à-vis the Sick Industrial Companies

(Special Provisions) Act, 1985, leans in favour of

creditors being able to realise their debts outside the

court process over sick industrial companies being

revived or rehabilitated. In fact, another interesting

document is the Report on Trend and Progress of

Banking in India 2011-2012 for the year ended 30-6-

2012 submitted by Reserve Bank of India to the

Central Government in terms of Section 36(2) of the

Banking Regulation Act, 1949. In Table IV.14 the

Report provides statistics regarding trends in non-

performing assets bank-wise, group-wise. As per the

said Table, the opening balance of non-performing

assets in public sector banks for the year 2011-2012

was Rs 746 billion but the closing balance for 2011-

2012 was Rs 1172 billion only. The total amount

recovered through the Securitisation and

Reconstruction of Financial Assets and Enforcement

of Security Interest Act, 2002 during 2011-2012

32

registered a decline compared to the previous year,

but, even then, the amounts recovered under the

said Act constituted 70% of the total amount

recovered. The amounts recovered under the

Recovery of Debts Due to Banks and Financial

Institutions Act, 1993 constituted only 28%. All this

would go to show that the amounts that public

sector banks and financial institutions have to

recover are in staggering figures and at long last at

least one statutory measure has proved to be of

some efficacy. This Court would be loathe to give

such an interpretation as would thwart the recovery

process under the Securitisation and Reconstruction

of Financial Assets and Enforcement of Security

Interest Act, 2002 which Act alone seems to have

worked to some extent at least.

44. It will, thus, be seen that notwithstanding the non

obstante clauses in Sections 22(1) and (4), read

with Section 32, Section 22 of the Sick Industrial

Companies (Special Provisions) Act, 1985 will have

to give way to the measures taken under the

Securitisation and Reconstruction of Financial

Assets and Enforcement of Security Interest Act,

2002, more particularly referred to in Section 13 of

the said Act, and that this being the case, the sale

notices issued both in 2003 and 2013 could

continue without in any manner being thwarted by

Section 22 of the Sick Industrial Companies (Special

Provisions) Act, 1985.”

(emphasis supplied)

It is thus clear that for this reason also, it is obvious that Parliament,

when it enacted Section 14, had this history in mind and specifically did

not provide for any moratorium along the lines of Section 22 of the Sick

33

Industrial Companies (Special Provisions) Act, 1985 in Section 14 of the

Code.

26. The reasoning of the Bombay High Court in the judgment of M/s.

Sicom Investments and Finance Ltd. (supra) commends itself to us.

The reasoning of the Allahabad High Court, on the other hand, does not.

27.We now come to the argument that the amendment of 2018,

which makes it clear that Section 14(3), is now substituted to read that

the provisions of sub-section (1) of Section 14 shall not apply to a surety

in a contract of guarantee for corporate debtor. The amended Section

reads as follows:

“14. Moratorium.—

xxx xxx xxx

(3) The provisions of sub-section (1) shall not apply

to—

(a) such transactions as may be notified by the

Central Government in consultation with any

financial sector regulator;

(b) a surety in a contract of guarantee to a

corporate debtor.”

28.The Insolvency Law Committee, appointed by the Ministry of

Corporate Affairs, by its Report dated 26.03.2018, made certain key

recommendations, one of which was:

34

“(iv) to clear the confusion regarding treatment of

assets of guarantors of the corporate debtor vis-à-

vis the moratorium on the assets of the corporate

debtor, it has been recommended to clarify by way

of an explanation that all assets of such guarantors

to the corporate debtor shall be outside scope of

moratorium imposed under the Code;”

The Committee insofar as the moratorium under Section 14 is

concerned, went on to find:

“5.5 Section 14 provides for a moratorium or a stay

on institution or continuation of proceeding, suits,

etc. against the corporate debtor and its assets.

There have been contradicting views on the scope

of moratorium regarding its application to third

parties affected by the debt of the corporate debtor,

like guarantors or sureties. While some courts have

taken the view that Section 14 may be interpreted

literally to mean that it only restricts actions against

the assets of the corporate debtor, a few others

have taken an interpretation that the stay applies on

enforcement of guarantee as well, if a CIRP is going

on against the corporate debtor.”

xxx xxx xxx

“5.7 The Allahabad High Court subsequently took a

differing view in Sanjeev Shriya v. State Bank of

India, 2017 (9) ADJ 723, by applying moratorium to

enforcement of guarantee against personal

guarantor to the debt. The rationale being that if a

CRIP is going on against the corporate debtor, then

the debt owed by the corporate debtor is not final till

the resolution plan is approved, and thus the liability

of the surety would also be unclear. The Court took

the view that until debt of the corporate debtor is

crystallised, the guarantor’s liability may not be

35

triggered. The Committee deliberated and noted that

this would meant that surety’s liabilities are put on

hold if a CIRP is going on against the corporate

debtor, and such an interpretation may lead to the

contracts of guarantee being infructuous, and not

serving the purpose for which they have been

entered into.

5.8 In State Bank of India v. V. Ramakrishnan and

Veeson Energy Systems, NCLAT, New Delhi,

Company Appeal (AT) (Insolvency) No. 213/2017

[Date of decision – 28 February, 2018], the NCLAT

took a broad interpretation of Section 14 and held

that it would bar proceedings or actions against

sureties. While doing so, it did not refer to any of the

above judgments but instead held that proceedings

against guarantors would affect the CIRP and may

thus be barred by moratorium. The Committee felt

that such a broad interpretation of the moratorium

may curtail significant rights of the creditor which are

intrinsic to a contract of guarantee.”

5.9 A contract of guarantee is between the creditor,

the principal debtor and the surety, where under the

creditor has a remedy in relation to his debt against

both the principal debtor and the surety [National

Project Construction Corporation Limited v. Sandhu

and Co., AIR 1990 P&H 300]. The surety here may

be a corporate or a natural person and the liability of

such person goes as far the liability of the principal

debtor. As per section 128 of the Indian Contract

Act, 1872, the liability of the surety is co-extensive

with that of the principal debtor and the creditor may

go against either the principal debtor, or the surety,

or both, in no particular sequence [Chokalinga

Chettiar v. Dandayunthapani Chattiar, AIR 1928

Mad 1262]. Though this may be limited by the terms

of the contract of guarantee, the general principle of

such contracts is that the liability of the principal

debtor and the surety is co-extensive and is joint

36

and several [Bank of Bihar v. Damodar Prasad, AIR

1969 SC 297]. The Committee noted that this

characteristic of such contracts i.e. of having remedy

against both the surety and the corporate debtor,

without the obligation to exhaust the remedy against

one of the parties before proceeding against the

other, is of utmost important for the creditor and is

the hallmark of a guarantee contract, and the

availability of such remedy is in most cases the

basis on which the loan may have been extended.

5.10 The Committee further noted that a literal

interpretation of Section 14 is prudent, and a

broader interpretation may not be necessary in the

above context. The assets of the surety are

separate from those of the corporate debtor, and

proceedings against the corporate debtor may not

be seriously impacted by the actions against assets

of third parties like sureties. Additionally,

enforcement of guarantee may not have a

significant impact on the debt of the corporate

debtor as the right of the creditor against the

principal debtor is merely shifted to the surety, to the

extent of payment by the surety. Thus, contractual

principles of guarantee require being respected

even during a moratorium and an alternate

interpretation may not have been the intention of the

Code, as is clear from a plain reading of Section 14.

5.11 Further, since many guarantees for loans of

corporates are given by its promoters in the form of

personal guarantees, if there is a stay on actions

against their assets during a CIRP, such promoters

(who are also corporate applicants) may file

frivolous applications to merely take advantage of

the stay and guard their assets. In the judgments

analysed in this relation, many have been filed by

the corporate applicant under Section 10 of the

Code and this may corroborate the above

apprehension of abuse of the moratorium provision.

37

The Committee concluded that Section 14 does not

intend to bar actions against assets of guarantors to

the debts of the corporate debtor and recommended

that an explanation to clarify this may be inserted in

Section 14 of the Code. The scope of the

moratorium may be restricted to the assets of the

corporate debtor only.”

29.The Report of the said Committee makes it clear that the object of

the amendment was to clarify and set at rest what the Committee

thought was an overbroad interpretation of Section 14. That such

clarificatory amendment is retrospective in nature, would be clear from

the following judgments:

(i)CIT v. Shelly Products, (2003) 5 SCC 461:

“38. It was submitted that after 1-4-1989, in case the

assessment is annulled the assessee is entitled to

refund only of the amount, if any, of the tax paid in

excess of the tax chargeable on the total income

returned by the assessee. But before the

amendment came into effect the position in law was

quite different and that is why the legislature thought

it proper to amend the section and insert the

proviso. On the other hand learned counsel for the

Revenue submitted that the proviso is merely

declaratory and does not change the legal position

as it existed before the amendment. It was

submitted that this Court in CIT v. Chittor Electric

Supply Corpn [(1995) 2 SCC 430 : (1995) 212 ITR

404] has held that proviso (a) to Section 240 is

declaratory and, therefore, proviso (b) should also

be held to be declaratory. In our view that is not the

correct position in law. Where the proviso consists of

38

two parts, one part may be declaratory but the other

part may not be so. Therefore, merely because one

part of the proviso has been held to be declaratory it

does not follow that the second part of the proviso is

also declaratory. However, the view that we have

taken supports the stand of the Revenue that

proviso (b) to Section 240 is also declaratory. We

have held that even under the unamended Section

240 of the Act, the assessee was only entitled to the

refund of tax paid in excess of the tax chargeable on

the total income returned by the assessee. We have

held so without taking the aid of the amended

provision. It, therefore, follows that proviso (b) to

Section 240 is also declaratory. It seeks to clarify the

law so as to remove doubts leading to the courts

giving conflicting decisions, and in several cases

directing the Revenue to refund the entire amount of

income tax paid by the assessee where the

Revenue was not in a position to frame a fresh

assessment. Being clarificatory in nature it must be

held to be retrospective, in the facts and

circumstances of the case. It is well settled that the

legislature may pass a declaratory Act to set aside

what the legislature deems to have been a judicial

error in the interpretation of statute. It only seeks to

clear the meaning of a provision of the principal Act

and make explicit that which was already implicit.”

(ii)CIT v. Vatika Township, (2015) 1 SCC 1:

“32. Let us sharpen the discussion a little more. We

may note that under certain circumstances, a

particular amendment can be treated as clarificatory

or declaratory in nature. Such statutory provisions

are labelled as “declaratory statutes”. The

circumstances under which provisions can be

termed as “declaratory statutes” are explained by

Justice G.P. Singh [Principles of Statutory

39

Interpretation, (13

th

Edn., Lexis Nexis Butterworths

Wadhwa, Nagpur, 2012)] in the following manner:

“Declaratory statutes

The presumption against retrospective

operation is not applicable to declaratory

statutes. As stated in CRAIES [W.F. Craies,

Craies on Statute Law (7th Edn., Sweet and

Maxwell Ltd., 1971)] and approved by the

Supreme Court [in Central Bank of India v.

Workmen, AIR 1960 SC 12, para 29]: ‘For

modern purposes a declaratory Act may be

defined as an Act to remove doubts existing as

to the common law, or the meaning or effect of

any statute. Such Acts are usually held to be

retrospective. The usual reason for passing a

declaratory Act is to set aside what Parliament

deems to have been a judicial error, whether in

the statement of the common law or in the

interpretation of statutes. Usually, if not

invariably, such an Act contains a Preamble,

and also the word “declared” as well as the

word “enacted”.’ But the use of the words ‘it is

declared’ is not conclusive that the Act is

declaratory for these words may, at times, be

used to introduced new rules of law and the Act

in the latter case will only be amending the law

and will not necessarily be retrospective. In

determining, therefore, the nature of the Act,

regard must be had to the substance rather

than to the form. If a new Act is ‘to explain’ an

earlier Act, it would be without object unless

construed retrospective. An explanatory Act is

generally passed to supply an obvious omission

or to clear up doubts as to the meaning of the

previous Act. It is well settled that if a statute is

curative or merely declaratory of the previous

law retrospective operation is generally

40

intended. The language ‘shall be deemed

always to have meant’ is declaratory, and is in

plain terms retrospective. In the absence of

clear words indicating that the amending Act is

declaratory, it would not be so construed when

the pre-amended provision was clear and

unambiguous. An amending Act may be purely

clarificatory to clear a meaning of a provision of

the principal Act which was already implicit. A

clarificatory amendment of this nature will have

retrospective effect and, therefore, if the

principal Act was existing law which the

Constitution came into force, the amending Act

also will be part of the existing law.”

The above summing up is factually based on the

judgments of this Court as well as English

decisions.”

30.For all these reasons, we are of the view that the impugned

judgment of the Tribunal has to be set aside. The appeals are

accordingly allowed.

……………………………..J.

(R.F. Nariman)

……………………………..J.

(Indu Malhotra)

New Delhi;

August 14, 2018.

41