LALIT KUMAR JAIN v. UNION OF INDIA & ORS.

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A be literal in meaning is to see the skin and miss the soul. The judicial key to construction is the composite perception of the deha and the dehi of the provision”. This has been followed in Directorate of Enforcement v. Dipak Mahajan47. Recently too, this court has moved on to accept purposive interpretation of the statute as the correct approach to ascertain legislative intent. If the given words can reasonably bear a construction which effectuates the purpose or object then that construction is to be preferred. In this regard, the decision in Arcelor Mittal v. Satish Kumar Gupta48 and Swiss Ribbons (supra) were relied on.

52Copy pinpoint52. Mr. Dwivedi stated that the impugned notification does not modify any provisions of the Code. By enforcing certain provisions of the Code by its seven clauses‘‘only in so far as they relate to personal guarantors to corporate debtors”, the notification does not modify any legislative provision. It merely carries out the Parliamentary intention as expressed by the scheme, structure and purpose of the Code. Section D 1(3), Section 2, Section 3(23), Section 5(5)(a) and (22), Section 14(3), Section 31(1) and in particular, Section 60 and Section 179 are indicative of the fact that the scheme and structure of the Code involves a parliamentary hybridization and legislative fusion of the provisions of Part III, in so far as personal guarantors of corporate debtors are concerned. The object of this hybridization is to empower the NCLT to E deal with the insolvency resolution and bankruptcy process of the corporate debtor along with the corporate guarantor and personal guarantor of the corporate debtor. Parliament is conscious of the fact that personal guarantors to corporate debtors are generally promoters or close relatives of corporate debtors, and in many cases, the corporate’s F indebtedness was due to acts misfeasance and siphoning of funds done by personal guarantors. Apart from this, personal guarantors to corporate debtors have a contractually agreed debt alignment with such debtors. They are coextensively as well as jointly and severally responsible for the same debt. As Parliament created a legislative hybridization, Part III of the Code had to be enforced by the Central Government under Section G 1(3) with Parliamentary categorization through Section 2. The unifying of the forum for insolvency resolution/bankruptcy of the corporate debtor along with its personal guarantor is a Parliamentary dispensation and

47 (1994) 3 SCC 440. H 48 (2019) 2 SCC 1, at para 27-29.

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determination. Therefore, Section 1(3) empowers the Central Government A to appoint different dates for different provisions.

53Copy pinpoint53. Learned senior counsel highlighted Section 60(1), (2), (3) and (4) and urged that Parliament had merged the provisions of Part III with the process undertaken against the corporate debtors under Part II. The process of Part II and the provisions of Part III were legislatively fused B for the purpose of proceedings against personal guarantors along with the corporate debtors. He argued that Section 179, the corresponding provision in Part III, begins by deploying the phrase “subject to the provisions of Section 60”. Section 60(4) incorporates the provisions of Part III, in relation to proceedings before the NCLT against personal guarantors. Counsel cited Western Coalfield Ltd. v. Special Area C Development Authority49; Baleshwar Dayal v. Bank of India50, and Nagpur Improvement Trust v. Vasantrao51. It was submitted that other individuals and partnership firms do not figure in this Parliamentary hybridization/fusion. Sections 2(e) and 2(g) when read together, would indicate that personal guarantors are also individuals. Act 8 of 2018 has brought about a trifurcation of the categories which were comprehended in Section 2(e) as it stood before the amendment. Section 179 also indicates that personal guarantors are individuals and Part III is applicable to them. In fact, it is by operation of the provisions in Chapter III of Part III that personal guarantors get the benefit of interim moratorium [Section 96] and moratorium [Section 101]. Personal guarantors do not get moratorium under Section 14. In this regard, reliance is placed on V. Ramakrishnan (supra). It is contended that the hybridization achieved by the impugned notification does not create any anomaly or problem in enforcement.

54Copy pinpoint54. It was lastly contended that Section 78 is declaratory and states that Part III applies to individuals and partnership firms. It is made applicable to the various categories of individuals and partnership firms. Both Sections 2 and 78 carry the margin caption of “application”. Section 2 commences with”the provisions of this Code shall apply” to the six categories and Section 78 also declares that “Part III shall apply”to the mentioned categories. Section 2 embraces the whole Code including Section 78 and other provisions enforced by the impugned notification, 49 (1982) 1SCC 125, paras 3, 17, 18. 50 (2016) 1 SCC 444. paras 6-8. 51 (2002) 7SCC 657, para 31. H

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A which clearly appoints the date of enforcement for Section 2(e) and other provisions, and Chapter III of Part III. There is no vivisection or dissection involved in the impugned notification.

55Copy pinpoint55. Mr. K.V. Vishwanathan, learned senior counsel appearing for some respondents, argued that an overall reading of the provisions of the Code would show that personal guarantors to corporate debtors are a distinct class of individuals (by virtue of Section 2 (e) and Section 60); the classification is not achieved through the impugned notification, but by the amending Act of 2018, by Parliament. It is emphasized that the amendment ensured that the same forum (NCLT) deals with insolvency processes of corporate debtors, and also deals with similar issues relating to personal guarantors. The statute permits Part III application by NCLT in relation to personal guarantors. All that the impugned notification did was to operationalize these existing provisions of the Code. Learned senior counsel cited Brij Sundar Kapoor v. First Additional Judge 52 to refute the petitioners’ argument that the power under Section 1(3) D power is a one-time power. He also relied on Section 14 of the General Clauses Act, 1897, which states that any power conferred by any Act or Regulation can be exercised from time to time.53

56Copy pinpoint56. Mr. Vishwanathan cited Raghubir Sarup v. State of UP54 and urged that the legislature acts within its rights in enacting a law and E leaving it to the executive to apply it to different geographical areas at different times, depending upon various considerations. He also relied on Khargram Panchayat Samiti v. State of West Bengal55 and argued that the power to bring into force different provisions, or different parts of a statute, on different dates, having regard to the subject matter, is part of the incidental power conferred by Parliament under Section 1 (3) F of the Code.

57Copy pinpoint57. Mr. Ritin Rai, learned senior counsel appearing for some respondents, urged that there is an inter connectedness between corporate 52 1989 (1) SCC 561. 53 “14. Powers conferred to be exercisable from time to time—(1) Where, by any Central G Act or Regulation made after the commencement of this Act, any power is conferred, then unless a different intention appears that power may be exercised from time to time as occasion requires. (2) This section applies also to all Central Acts and Regulations made on or after the fourteenth day of January, 1887.” 54 AIR 1959 SC 909. 55 H 1987 (3) SCC 82.

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debtors and personal guarantors, which was recognized by the 2018 A amendment, evidenced by its Statement of Objects and Reasons. He stated that the power under Section 1(3) of the Code has been properly exercised. Mr. Rai submitted that like the impugned notification, another notification was issued on 01-05-201856 bringing into effect provisions of the Code in relation to a distinct class, i.e., financial service providers57. B This was achieved by bringing into force Sections 227 to 229 of the Code. It was submitted that the discretion conferred on the executive, to experiment, and bring into force a legislation in phases, is part of the general pattern of legislative practice and it recognizes that it is not always wise or possible to enforce provisions of a new law, together, at all places, in respect of all that it seeks to cover. C IV The Provisions of the Code and the Impugned Notification

58Copy pinpoint58. On 28th May, 2016, the Code was published in the official gazette after its passage in Parliament. It has been hailed as a major economic measure, aimed at aligning insolvency laws with international standards. Parliament’s previous attempts to ensure recovery of public D debt, (through the Recovery of Debts due to Banks or Financial Institutions Act, 1993, hereafter “RDBFI Act”) securitization (by the Securitization and Reconstruction and Enforcement of Security Interests Act, 2002 hereafter “SARFESI”) deal with certain facets of corporate insolvency. These did not result in the desired consequences. The aim of the Code is to a) promote entrepreneurship and availability of credit; b) E ensure the balanced interests of all stakeholders and c) promote time- bound resolution of insolvency in case of corporate persons, partnership firms and individuals. The relevant provisions of the code are extracted below: “1. Short title, extent and commencement - F (1) This Code may be called the Insolvency and Bankruptcy Code, 2016. (2) It extends to the whole of India: Provided that Part III of this Code shall not extend to the G State of Jammu and Kashmir. 58

56 SO 1817 (E). 57 Defined separately under Section 2 (17) of the Code. 58 Proviso omitted by the Jammu and Kashmir Reorganisation (Adaptation of Central Laws) Order, 2020 vide S.O. 1123(E), dated 18th March 2020 (w.e.f. 18-3-2020). H

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A (3) It shall come into force on such date1 as the Central Government may, by notification in the Official Gazette, appoint: Provided that different dates may be appointed for different provisions of this Code and any reference in any such provision B to the commencement of this Code shall be construed as a reference to the commencement of that provision.

2. Application. - The provisions of this Code shall apply to - (a) any company incorporated under the Companies Act, 2013 (18 of 2013) or under any previous company law; C (b) any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act; (c) any Limited Liability Partnership incorporated under the D Limited Liability Partnership Act, 2008 (6 of 2009); (d) such other body incorporated under any law for the time being in force, as the Central Government may, by notification, specify in this behalf; (e) personal guarantors to corporate debtors; E (f) partnership firms and proprietorship firms; and (g) individuals, other than persons referred to in clause (e).

3. Definitions – In this Code, unless the context otherwise requires, - F *** (7) “corporate person” means a company as defined in clause (20) of section 2 of the Companies Act, 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 G 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; H ***

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(10) “creditor” means any person to whom a debt is owed A and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder; (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; B *** (23) “person” includes— (a) an individual; (b) a Hindu Undivided Family; C (c) a company; (d) a trust; (e) a partnership; (f) a limited liability partnership; and D

(g) any other entity established under a statute, and includes a person resident outside India; ***

4. Application. – E (1) This Part shall apply to matters relating to the insolvency and liquidation of corporate debtors where the minimum amount of the default is one crore rupees.59 Provided that the Central Government may, by notification, F specify the minimum amount of default of higher value which shall not be more than one crore rupees.

5. Definitions. – In this part, unless the context otherwise requires – (1) “Adjudicating Authority”, for the purposes of this Part, G means National Company Law Tribunal constituted under section 408 of the Companies Act, 2013 (18 of 2013); ***

59 W.e.f. 01.12.2016 vide Notification No. SO3594(E) dated 30.11.2016. H

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A (5) “corporate applicant” means— (a) corporate debtor; or (b) a member or partner of the corporate debtor who is authorised to make an application for the corporate insolvency resolution process under the constitutional document of the corporate debtor; or (c) an individual who is in charge of managing the operations and resources of the corporate debtor; or (d) a person who has the control and supervision over the financial affairs of the corporate debtor; (5A) “corporate guarantor” means a corporate person who is the surety in a contract of guarantee to a corporate debtor; *** (22) “personal guarantor” means an individual who is the surety in a contract of guarantee to a corporate debtor”

59Copy pinpoint59. Section 13 (Declaration of moratorium and public announcement) provides that the Adjudicating Authority shall (a) declare a moratorium for the purposes referred to under Section 14, (b) cause a public announcement of the initiation of corporate insolvency resolution process and call for the submission of claims under section 15, and (c) appoint an interim resolution professional in the manner as laid down in Section 16. A public announcement is to be made immediately after the appointment of the interim resolution professional. Section 14 (Moratorium) provides that on the insolvency commencement date, the F Adjudicating Authority shall declare a moratorium prohibiting (a) the institution or continuation of suits or proceedings against the corporate debtor including execution of a judgment, decree, order, etc; (b) transferring, encumbering alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest; (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 Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; and (d) recovery of any property by an owner or lessor where such property is occupied by, or in the possession of the corporate debtor. Section 16 provides for the appointment and tenure of an interim resolution professional.

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60Copy pinpoint60. The highlight of the Code is the institutional framework it envisions. This framework consists of the regulator (Insolvency and Bankruptcy Board of India) insolvency professionals, information utilities and adjudicatory mechanisms (NCLT and National Company Law Appellate Tribunal-NCLAT). These institutions and structures are aimed at promoting corporate governance and also enable a time bound and formal resolution of insolvency. The major features of the Code include a two-step process -insolvency resolution for corporate debtors where the minimum amount of the default is 1,00,00,000/-. Two processes are proposed by the Code: a) Insolvency resolution process (Sections 6 to 32 of the Code) - In this, the creditors play a crucial role in evaluating and ultimately determining whether the debtor’s business can be continued and if so, what are the choices for its revival; and b) Liquidation [Sections 33-54 Code] - If revival fails or is not a feasible option, then creditors can resolve to wind up the company. Upon winding up, assets of the debtor are to be distributed. 61.The insolvency resolution process under Section 6 can be initiated by the financial creditor [Section 7 of the Code] or operational creditor [subject to issuing a demand notice to the corporate debtor stating the amount involved in the default, under Section 8, of the Code] against the corporate debtor in the NCLT. Voluntary insolvency proceedings may also be initiated by the defaulting company, its employees or shareholders [Section 10 of the Code]. Once the resolution process begins, for the entire period, a moratorium is ordered by the NCLT on the debtor’s operations. During this period, no judicial proceedings can be initiated. There can also be no enforcement of securities, sale or transfer of assets or termination of essential contracts against the debtor. The next step is appointment of an Interim Resolution Professional under Section16 of the Code. The resolution professional has to work under the broad guidelines of the committee of creditors (or “COC”- in terms of Section 21 of the Code). The CoC includes all the financial creditors of the corporate debtor, except all related parties and operational creditors. Further, Section 22 of the Code provides that the CoC has to appoint the resolution professional. This resolution professional can also be the interim resolution professional. A vote of 75% of the voting share shall determine the decisions of the committee to opt for either a revival or liquidation (Section 30). The decision of the CoC is binding not only on debtors, but also on all the other creditors. Different types of revival plans include fresh finance, sale of assets, haircuts (i.e. acceptance by creditors of H

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A amounts lower than what is due to them), change of management etc. The committee should approve the resolution plan forwarded by the creditor. Only upon approval does the resolution professional forward the plan to the adjudicating authority for final approval. The resolution plan has to be approved by the NCLT; while doing so, it can consider objections to the resolution plan by any party interested in voicing such B objections (i.e. operational creditors, financial creditors, etc). 62.Section 78(3) of the Code states that the adjudicating authority, for the purpose of Part III (that deals with insolvency Resolution and bankruptcy of individuals and partnership firms) would be the Debt Recovery Tribunal(DRT) that was established under the RDBFI Act. C The adjudicating authority for corporate insolvency (companies, LLPs and limited liability entities), on the other hand, is the NCLT. The appeal from the NCLT lies to the National Company Law Appellate Tribunal (NCLAT). The appeal from the DRT lies to the Debt Recovery Appellate Tribunal (DRAT). This court hears appeals from both the NCLAT and D the DRAT. 63.The provisions of the Code were brought into force through different notifications issued on different dates.The impugned notification issued in the Gazette of India Extraordinary, by the Ministry of Corporate Affairs, reads as follows: E “NOTIFICATION New Delhi. the 15th November, 2019 S.O. 4126(E).- ln exercise of the powers conferred by sub- section (3) of section I of the Insolvency and Bankruptcy F Code. 2016 (31 of 2016). the Central Government hereby appoints the 1st day of December,2019 as the date on which the following provisions of the said Code only in so far as they relate to personal guarantors to corporate debtors. shall come into force: (1) clause (e) of section 2; G (2) section 78 (except with regard to fresh start process) and section 79; (3) sections 94 to 187 (both inclusive); (4) clause (g) to clause (i) of sub-section (2) of section 239; H

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(5) clause (m) to clause (zc) of sub-section (2) of section 239; A (6) clause (zn) to clause (zs) of ’ sub-section (2) of section 240; and (7) Section 249. [F. No. 30/21/2018-Insolvency Section] B GYANESHWAR KUMAR SINGH, Jt. Secy.” V Analysis and conclusions

64. The principal ground of attack in all these proceedings has been that the executive government could not have selectively brought into force the Code, and applied some of its provisions to one sub-category of individuals, i.e., personal guarantors to corporate creditors. All the petitioners in unison argued that the impugned notification, in seeking to achieve that end, is ultra vires. This argument is premised on the nature and content of Section 1(3), which the petitioners characterize to be conditional legislation. Unlike delegated legislation, they say, conditional legislation is a limited power which can be exercised once, in respect of the subject matter or class of subject matters. As long as different dates are designated for bringing into force the enactment, or in relation to different areas, the executive acts within its powers. However, when it selectively does so, and segregates the subject matter of coverage of the enactment, it indulges in impermissible legislation. Reliance has been placed on several judgments of this court, with respect to the limits of such power- notably the decisions of the Privy Council in Burah, of the Federal Court in Narothamdas Jethabai; In Re Delhi Laws Act, 1912, Jatindranath Gupta, Hamdard Dawakhana, Sabanayagam and Vasu Dev Singh. F

65. In Burah, the question arose in the context of a law made by the Indian Legislature removing the district of Garo Hills from the jurisdiction of the civil and criminal courts and the law applied to them, and to vest the administration of civil and criminal justice within the same district in such officers as the Lieutenant-Governor of Bengal might G appoint for the purpose. By Section 9, the Lt. Governor was empowered from time to time, by notification in the Calcutta Gazette, to extend, mutatis mutandis, all or any of the provisions contained in the Act to the Jaintia, Naga and Khasi Hills and to fix the date of application thereof as well. By a notification, the Lt. Governor extended all the provisions, H

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A which was challenged by Burah, who was convicted of murder and sentenced to death. The High Court of Calcutta upheld his contention and held that Section 9 of the Act was ultra vires the powers of the Indian Legislature as it was a delegate of the Imperial Parliament and as such further delegation was not permissible. The Privy Council overturned that verdict, and held: B “Legislation which does not directly fix the period for its own commencement, but leaves that to be done by an external authority, may with quite as much reason he called incomplete; as that which does not itself immediately determine the whole area to which it is to be applied, but leaves this to be done by the same external authority. If it is an act of legislation on the part of the external authority so trusted to enlarge the area within which a law actually in operation is to be applied, it would seem à fortiori to be an act of legislation to bring the law originally into operation by fixing the time for its commencement…..” It was also observed that: “Their Lordships agree that the Governor-General in Council could not, by any form of enactment, create in India, and arm with general legislative authority, a new legislative Power, E not created or authorized by the Councils Act. Nothing of that kind has, in their Lordships’ opinion, been done or attempted in the present case.”

66. The next case cited was Jatindra Nath Gupta where the validity of Section 1(3) of the Bihar Maintenance of Public Order Act, F 1948 was challenged on the ground that it empowered the Provincial Government to extend the life of the Act for one year with such modification as it could deem fit. The Federal Court held that the power of extension with modification is not a valid delegation of legislative power because it is an essential legislative function which cannot be delegated. G The court observed, inter alia, that: “The proviso contains the power to extend the Act for a period of one year with modifications, if any. It is one power and not two severable powers. The fact that no modifications were made in the Act when the power was exercised cannot help in determining the true nature of the power. The power to extend H

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the operation of the Act beyond the period mentioned in the A Act prima facie is a legislative power. It is for the Legislature to state how long a particular legislation will be in operation. That cannot be left to the discretion of some other body. The power to modify an Act of a Legislature, without any limitation on the extent of the power of modification, is undoubtedly a B legislative power. It is not a power confined to apply the Act subject to any restriction, limitation or proviso (which is the aim as an exception) only. It seems to me therefore that the power contained in the proviso is legislative.”

67. In the case of In re Delhi Laws Act, 1912, a reference made under Article 143 of the Constitution, saw a polyvocal court and a plurality C of judicial opinion by the seven judge bench of this court. Three provisions were referred for the opinion of this court. Having regard to the majority view, it was held that essential legislative functions could not be delegated, and that the power to repeal an enactment, extended by the Central Government, to a part C state, could not be delegated. The majority’s D conclusion was that the power of repeal is legislative. The observations in some of the judgments are telling, and are reproduced below. Kania, CJ observed as follows: “53. It is common ground that no law creating such bodies has been passed by the Parliament so far. Article 246 E deals with the distribution of legislative powers between the Centre and the States but Part ‘C’ States are outside its operation. Therefore on any subject affecting Part ‘C’ States, Parliament is the sole and exclusive legislature until it passes an Act creating a legislature or a council in terms of Article

240. Proceeding on the footing that a power of legislation F does not carry with it the power of delegation (as claimed by the Attorney-General), the question is whether Section 2 of the Part ‘C’ States (Laws) Act is valid or not. By that section the Parliament has given power to the Central Government by notification to extend to any part of such State (Part ‘C’ G State), with such restrictions and modifications as it thinks fit, any enactment which is in force in Part A State at the date of the notification. The section although framed on the lines of the Delhi Laws Act and the Ajmer-Merwara Act is restricted in its scope as the executive Government is empowered to H

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A extend only an Act which is in force in any of the Part A States. For the reasons I have considered certain parts of the two sections covered by Questions 1 and 2 ultra vires, that part of Section 2 of the Part ‘C’ States (Laws) Act, 1950, which empowers the Central Government to extend laws passed by any legislature of Part A State, will also be ultra vires. To the B extent the Central Legislature or Parliament has passed Acts which are applicable to Part A States, there can be no objection to the Central Government extending, if necessary, the operation of those Acts to the Province of Delhi, because the Parliament is the competent legislature for that Province. To C the extent however the section permits the Central Government to extend laws made by any legislature of Part A State to the Province of Delhi, the section is ultra vires.” Mahajan, J had this to say: “The section does not declare any law but gives the Central D Government power to declare what the law shall be. The choice to select any enactment in force in any province at the date of such notification clearly shows that the legislature declared no principles or policies as regards the law to be made on any subject. It may be pointed out that under the Act E of 1935 different provinces had the exclusive power of laying down their policies in respect to subjects within their own legislative field. What policy was to be adopted for Delhi, whether that adopted in the province of Punjab or of Bombay, was left to the Central Government. Illustratively, the mischief of such law-making may be pointed out with reference to what happened in pursuance of this section in Ajmer-Merwara. The Bombay Agricultural Debtors’ Relief Act, 1947, has been extended under cover of this section to Ajmer-Merwara and under the power of modification by amending the definition of the word ‘debtor’ the whole policy of the Bombay Act has been altered. Under the Bombay Act a person is a debtor who is indebted and whose annual income from sources other than agricultural and manly labour does not exceed 33 per cent of his total annual income or does not exceed Rs 500, whichever is greater. In the modified statutes “debtor” means an agriculturist who owes a debt, and “agriculturist” means H

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a person who earns his livelihood by agriculture and whose income from such source exceeds 66 per cent of his total income. The outside limit of Rs 500 is removed. The exercise of this power amounts to making a new law by a body which was not in the contemplation of the Constitution and was not authorized to enact any laws. Shortly stated, the question is, could the Indian Legislature under the Act of 1935 enact that the executive could extend to Delhi laws that may be made hereinafter by a legislature in Timbuctoo or Soviet Russia with modifications. The answer would be in the negative because the policy of those laws could never be determined by the law making body entrusted with making laws for Delhi. The C Provincial Legislatures in India under the Constitution Act of 1935 qua Delhi constitutionally stood on no better footing than the legislatures of Timbuctoo and Soviet Russia though geographically and politically they were in a different situation. D ************

271. For reasons given for answering Questions 1 and 2 that the enactments mentioned therein are ultra vires the constitution in the particulars stated, this question is also answered similarly. It might, however, be observed that in this E case express power to repeal or amend laws already applicable in Part-C States has been conferred on the Central Government. Power to repeal or amend laws is a power which can only be exercised by an authority that has the power to enact laws. It is a power coordinate and coextensive with the power of the legislature itself. In bestowing on the Central F Government and clothing it with the same capacity as is possessed by the legislature itself the Parliament has acted unconstitutionally.” B.K. Mukherjea, J, held as follows: G “342. It will be noticed that the powers conferred by this section upon the Central Government are far in excess of those conferred by the other two legislative provisions, at least in accordance with the interpretation which I have attempted to put upon them. As has been stated already, it is quite an H

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A intelligible policy that so long as a proper legislative machinery is not set up in a particular area, the Parliament might empower an executive authority to introduce laws validly passed by a competent legislature and actually in force in other parts of the country to such area, with each modifications and restrictions as the authority thinks proper, the modifications being limited to local adjustments or changes of a minor character. But this presupposes that there is no existing law on that particular subject actually in force in that territory. If any such law exists and power is given to repeal or abrogate such laws either in whole or in part and substitute in place of the same other laws which are in force in other areas, it would certainly amount to an unwarrantable delegation of legislative powers. To repeal or abrogate an existing law is the exercise of an essential legislative power, and the policy behind such acts must be the policy of the legislature itself. If the legislature invests the executive with the power to determine as to which of the laws in force in a particular territory are useful or proper and if it is given to that authority to replace any of them by laws brought from other provinces with such modifications as it thinks proper, that would be to invest the executive with the determination of the entire legislative policy and not merely of carrying out a policy which the legislature has already laid down. Thus the power of extension, which is contemplated by Section 2 of Part-C States (Laws) Act, includes the power of introducing laws which may be in actual conflict with the laws validly established and already in operation in that territory….” F

68. It is apparent that the legislation which this court had to deal with had virtually granted what was described as a carte blanche in regard to whether to extend the provisions of any state Act, if so, which, the power of modification, as well as the power of repeal. The judges were agreed that within the broad remit of delegated legislative power, G as long as essential legislative powers were not delegated, the provisions would not be ultra vires. However, the power to extend laws that Parliament had not enacted (as it was competent to enact, in respect of Part C states) as well as the power to repeal, was held to be legislative in content. Therefore, the court held such power to be ultra vires. This H

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is evident from the following Opinion of the court, recorded as a result of the majority judgment: “OPINION OF THE COURT

357. The Court held by a majority that the provisions contained in Questions 1 and 2 are not ultra vires the legislatures which passed the Act containing those provisions. As regards the section mentioned on Question 3, the first part was held to be intra vires, but the second portion, which is in the following terms: “provision may be made in any enactment so extended, for the repeal or amendment of any corresponding law (other than a Central Act) which is for the time being applicable to that Part-C State”, is ultra vires the Indian Parliament which passed the Act.”

69. In Narottamdas Jethabhai (supra) three issues were involved; one of them concerned the question of empowering the executive to designate a court to exercise jurisdiction upto 25,000/-, i.e. Section 4 of the Bombay City Civil Courts Act60. The contention successfully raised before the High Court was that once the legislature had conferred jurisdiction upto a pecuniary limit of 10,000/- to the City Civil Court, delegating the power to increase that jurisdiction was ultra vires. The argument was repelled by a majority of judges (Mahajan, Fazal Ali and B.K. Mukherjea, JJ). Fazal Ali, J stated that “22. It is contended that this section is invalid, because the Provincial Legislature has thereby delegated its legislative powers to the Provincial Government which it cannot do. This contention does not appear to me to be sound. The section itself shows that the Provincial Legislature having exercised its judgment and determined that the New Court should be invested with jurisdiction to try suits and proceedings of a civil nature of a value not exceeding Rs. 25,000, left it to the Provincial Government G

60 “Subject to the exceptions specified in Section 3, the Provincial Government, may by notification in the Official Gazette, invest the City Civil Court with jurisdiction to receive, try and dispose of all suits and other proceedings of a civil nature, arising within the Greater Bombay and of such value not exceeding Rs. 25,000 as may be specified in the notification.” H

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A to determine when the Court should be invested with this larger jurisdiction, for which the limit had been fixed. It is clear that if and when the New Court has to be invested with the larger jurisdiction, that jurisdiction would be due to no other authority than the Provincial Legislature itself and the court would exercise that jurisdiction by virtue of the Act itself. As several of my learned colleagues have pointed out, the case of Queen v. Burah [3 A.C. 889.], the authority of which was not questioned before us, fully covers the contention raised, and the impugned provision is an instance of what the Privy Council has designated as conditional legislation, and does not really delegate any legislative power but merely prescribes as to how effect is to be given to what the Legislature has already decided. As the Privy Council has pointed out, legislation conditional on the use of particular powers or on the exercise of a limited discretion entrusted by the Legislature D to persons in whom it places confidence, is no uncommon thing, and in many instances it may be highly convenient and desirable.” Mahajan, J observed as follows: E “The fixation of the maximum limit of the court’s pecuniary jurisdiction is the result of exercise of legislative will, as without arriving at this judgment it would not have been able to determine the outside limit of the pecuniary jurisdiction of the new court. The policy of the legislature in regard to the pecuniary jurisdiction of the court that was being set up was settled by Sections 3 and 4 of the Act and it was to the effect that initially its pecuniary jurisdiction will be limited to Rs. 10,000 and that in future if circumstances make it desirable - and this was left to the determination of the Provincial Government - it could be given jurisdiction to hear cases up to the value of Rs. 25,000. It was also determined that the extension of the pecuniary jurisdiction of the new court will be subject to the provisions contained in the exceptions to Section 3. I am therefore of the opinion that the learned Chief Justice was not right in saying that the legislative mind was never H

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applied as to the conditions subject to which and as to the amount up to which the new court could have pecuniary jurisdiction. All that was left to the discretion of the Provincial Government was the determination of the circumstances under which the new court would be clothed with enhanced pecuniary jurisdiction. The vital matters of policy having been determined, the actual execution of that policy was left to the Provincial Government and to such conditional legislation no exception could be taken.” Again, the court upheld the exercise of executive discretion on the ground that there was proper legislative framework and guidance to the government, with respect to conferring jurisdiction upon the City C Civil Court, beyond the limit enacted by Section 3, and Section 4 was enacted to achieve that objective.

70. In Sardar Inder Singh, the validity of an ordinance which was extended by two notifications was involved. Section 4 of the original ordinance enacted that as long as it (the ordinance) was in force: D

“no tenant shall be liable to ejectment or dispossession from the whole or a part of his holding in such area on any ground whatsoever.” The validity of this ordinance, enacted originally in 1949 (and in force for two years), was extended twice, for two years each (by notifications dated June 14, 1951 and June 20, 1953). The Legislative Assembly of Rajasthan was constituted and came into being on March 29, 1952. Till then, the Rajpramukh was vested with legislative authority. On October 15, 1955, a new enactment, the Rajasthan Tenancy Act No. III of 1955 came into force, and the relationship between landlords and tenants was governed by it. Negativing the challenge to the extension of the ordinance, this court ruled, (after considering Burah, In re Delhi Laws Act and Jatindra Nath Gupta) that: “In the present case, the preamble to the Ordinance clearly recites the state of facts which necessitated the enactment of the law in question, and Section 3 fixed the duration of the Act as two years, on an understanding of the situation as it then existed. At the same time, it conferred a power on the Rajpramukh to extend the life of the Ordinance beyond that period, if the state of affairs then should require it. When H

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A such extension is decided by the Rajpramukh and notified, the law that will operate is the law which was enacted by the legislative authority in respect of “ place, person, laws, powers “, and it is clearly conditional and not delegated legislation as laid down in The Queen v. Burah ([1878] 5 I.A. 178), and must, in consequence, be held to be valid. It follows that we are unable to agree with the statement of the law in Jatindra Nath Gupta v. The, State of Bihar([1949] F.C.R. 595) that a power to extend the life of an enactment cannot validly be conferred on an outside authority. In this view, the question as to the permissible limits of delegation of legislative authority on which the judgments in In re The Delhi Laws Act, 1912 ([1951] S.C.R. 747), reveal a sharp conflict of opinion does not arise for consideration, and we reserve our opinion thereon. It is next contended that the notification dated June 20, 1953, D is bad, because after the Constitution came into force, the Rajpramukh derived his authority to legislate from Article 385, and that under that Article his authority ceased when the Legislature of the State was constituted, which was in the present case, on March 29, 1952. This argument proceeds on a misconception as to the true character of a notification issued under Section 3 of the Ordinance. It was not an independent piece of legislation such as could be enacted only by the then competent legislative (1).authority of the State, but merely an exercise of a power conferred by a statute which had been previously enacted by the appropriate legislative authority. The exercise of such a power is referable not to the legislative competence of the Rajpramukh but to Ordinance No- IX of 1949, and provided Section 3 is valid, the validity of the notification is co- extensive with that of the Ordinance. If the Ordinance did not come to an end by reason of the fact that the authority of the Rajpramukh to legislate came to an end-and that is not and cannot be disputed-neither did the power to issue a notification which is conferred therein. The true position is that it is in his character as the authority on whom power was conferred under Section 3 of the Ordinance that the Rajpramukh issued the impugned notification, and H

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not as the legislative authority of the State. This objection should accordingly be overruled.”

71. In Hamdard Dawakhana (supra), the validity of Section 3(d) of the Drug and Magic Remedies (Objectionable Advertisement) Act, 1954 was in issue. Section 16(1) of that Act conferred power on the government to frame rules, among others, by Section 16(2)(a) “to specify any disease or condition to which the provisions of Section 3 shall apply” and by Section 16(2)(b) “prescribe the manner in which advertisement of articles or things referred to in cl. (c) of sub-s. (1) of Section 14 may be sent confidentially.” The Central Government argued that Section 3(d), which empowered it to notify “any other disease or condition which may be specified in the rules made under this Act” was an instance of conditional legislation. The relevant discussion on conditional legislation, in the judgment, is extracted below: “The distinction between conditional legislation and delegated legislation is this that in the former the delegate’s power is that of determining when a legislative declared rule of conduct shall become effective; Hampton & Co. v. U.S. (1) and the latter involves delegation of rule making power which constitutionally may be exercised by the administrative agent. This means that the legislature having laid down the broad principles of its policy in the legislation can then leave the details to be supplied by the administrative authority. In other words by delegated legislation the delegate completes the legislation by supplying details within the limits prescribed by the statute and in the case of conditional legislation the power of legislation is exercised by the legislature conditionally leaving to the discretion of an external authority the time and manner -of carrying its legislation into effect as also the determination of the area to which it is to extend.” The court held that the impugned provision was impermissible delegation as it lacked legislative guidance as regards the exercise of executive power: “The question for decision then is, is the delegation constitutional in that the administrative authority has been supplied with proper guidance. In our view the words H

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A impugned are vague. Parliament has established no criteria, no standards and has not prescribed any principle on which a particular disease or condition is to be specified in the Schedule. It is not stated what facts or circumstances are to be taken into consideration to include a particular- condition or disease. The power of specifying diseases and conditions as given in s. 3(d) must therefore be held to be going beyond permissible boundaries of valid delegation. As a consequence the Schedule in the rules must be struck down.”

72. In Sabanayagam (supra) the vires of a notification issued under Section 36 of the Payment of Bonus Act, exempting the concerned statutory board from its coverage, was in issue. This court interpreted the notification as one operating from the date of its issue, thus resulting in the application of the Payment of Bonus Act for previous accounting years. As to the nature of the power (to exempt), this court, after considering various previous decisions, held that there are three broad categories of conditional legislation, and elaborated as follows: “In the first category when the Legislature has completed its task of enacting a Statute, the entire superstructure of the legislation is ready but its future applicability to a given area is left to the subjective satisfaction of the delegate who being satisfied about the conditions indicating the ripe time for applying the machinery of the said Act to a given area exercises that power as a delegate of the parent legislative body. Tulsipur Sugar Co. ‘s case (supra) is an illustration on this point. When the Act itself is complete and is enacted to be uniformly applied in future to all those who are to be covered by the sweep of the Act, the Legislature can be said to have completed its task. All that it leaves to the delegate is to apply the same uniformly to a given area indicated by the parent Legislature itself but at an appropriate time. This would be an act of pure and simple conditional legislation depending upon the subjective satisfaction of the delegate as to when the said Act enacted and completed by the parent Legislature is to be made effective. As the parent Legislature itself has laid down a binding course of conduct to be followed by all and sundry to be covered by the sweep of the legislation and as it has to act as a binding H

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rule of conduct within that sweep and on the basis of which all their future actions are to be controlled and guided, it can easily be visualised that of the parent Legislature while it enacted such law was not required to hear the parties likely to be affected by the operation of the Act, is delegate exercising an extremely limited and almost ministerial function as an agent of the principal Legislature applying the Act to the area at an appropriate time is also not supposed and required to hear all those who are likely to be affected in future by the binding code of conduct uniformly laid down to be followed by all within the sweep of the Act as enacted by the parent Legislature. C However, there may be second category of conditional legislations wherein the delegate has to decide whether and under what circumstances a completed Act of the parent legislation which has already come into force is to be partially withdraw from operation in a given area or in given cases so as not to be applicable to a given class of persons who are otherwise admittedly governed by the Act. When such a power by way of conditional legislation is to be exercised by the delegate a question may arise as to how the said power can be exercised. In such an eventuality if the satisfaction regarding the existence of condition precedent to the exercise of such power depends upon pure subjective satisfaction of the delegate and if such an exercise is not required to be based on the prima face proof of factual data for ad against such an exercise and if such an exercise to uniformly apply in future to a given common class of subjects to be governed by such an exercise and when such an exercise is not to be confined to individual cases only, then even in such category of cases while exercising conditional legislative powers the delegate may not be required to have an objective assessment after considering rival versions on the data placed before it for being taken into consideration by it in exercise of such power of conditional legislation. For example if a tariff is fixed under the Act and exemption power is conferred on the delegate whether to grant full exemption or partial exemption from the tariff rate it may involve such an exercise of conditional legislative function wherein the exercise has to H

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A be made by the delegate on its own subjective satisfaction and once that exercise is made whatever exemption is granted or partially granted or partially withdrawn from time to time would be binding on the entire class of persons similarly situated and who will be covered by the seep of such exemptions, partial or whole, and whether granted or withdrawn, wholly or partially, and in exercise of such a power there may be no occasion to hear the parties likely to be affected by such an exercise. For example from a settled tariff say if earlier 30% exemption is granted by the delegate and then reduced to 20% all those who are similarly situated and covered by the sweep of such exemption and its modification cannot be permitted to say in the absence of any statutory provision to that effect that they should be given a hearing before the granted exemption is wholly or partially withdrawn. D In the aforesaid first two categories of cases delegate who exercises conditional legislation acting on its pure subjective satisfaction regarding existence of conditions precedent for exercise of such power may not be required to hear parties likely to be affected by the exercise of such power. Where the delegate proceeds to fill p the details of the legislation for the future - which is part of the integrated action of policy-making for the future, it is part of the future policy and is legislative. But where he merely determines either subjectively or objectively - depending upon the “conditions” imposed in the statute permitting exercise of power by the delegate - there is no legislation involved in the real sense and therefore, in our opinion, applicability of principles of fair play, consultation or natural justice to the extent necessary cannot be said to be foreclosed. Of course, the fact that in such cases of `conditional legislation’ these principles are not foreclosed does not necessarily mean that they are always mandated. In G a case of purely ministerial function or in a case where no objective conditions are prescribed and the matter is left to the subjective satisfaction of the delegate (as in categories one and two explained above) no such principles of fair play, consultation or natural justice could be attracted. That is because the very nature of the administrative determination

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does not attract these formalities and not because the determination is legislative in character. There may also be situations where the persons affected are unidentifiable class of persons or where public interest or interests of State etc. preclude observations of such a procedure. (….)”

73. In another decision, Vasu Dev Singh, the court had to decide upon the validity of a notification issued by the Administrator of Chandigarh dated 7.11.2002, directing that the provision of the East Punjab Urban Rent Restriction Act, 1949, (which was extended by Parliament to Chandigarh by the East Punjab Urban Rent Restriction Act (Extension to Chandigarh) Act 1974) was not applicable to buildings and rented lands whose monthly rent exceeded 1500. The Administrator justified the notification as an instance of conditional legislation since the power under Section 3 enabled him to exempt provisions of the Act to classes of buildings.61 This court disagreed with the contention that the exemption was in the exercise of conditional legislative power: “16. We, at the outset, would like to express our disagreement with the contentions raised before us by the learned counsel appearing on behalf of the respondents that the impugned notification is in effect and substance a conditional legislation and not a delegated legislation. The distinction between conditional legislation and delegated legislation is clear and unambiguous. In a conditional legislation the delegatee has to apply the law to an area or to determine the time and manner of carrying it into effect or at such time, as it decides or to understand the rule of legislation, it would be a conditional legislation. The legislature in such a case makes the law, which is complete in all respects but the same is not brought into operation immediately. The enforcement of the law would depend upon the fulfilment of a condition and what is delegated to the executive is the authority to determine by exercising its own judgment as to whether such conditions have been fulfilled and/or the time has come when such legislation should be brought into force. The taking effect of a legislation, therefore, is made dependent upon the 61 “3. Exemptions.—The Central Government may direct that all or any of the provisions of this Act, shall not apply to any particular building or rented land or any class of buildings or rented lands.” H

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A determination of such fact or condition by the executive organ of the Government. Delegated legislation, however, involves delegation of rule-making power of legislation and authorises an executive authority to bring in force such an area by reason thereof. The discretion conferred on the executive by way of delegated legislation is much wider. Such power to make rules or regulations, however, must be exercised within the four corners of the Act. Delegated legislation, thus, is a device which has been fashioned by the legislature to be exercised in the manner laid down in the legislation itself. By reason of Section 3 of the Act, the Administrator, however, has been empowered to issue a notification whereby and whereunder, an exemption is granted for application of the Act itself.” After considering a large number of decisions, including those where this court had upheld exemptions issued by different states based on rent, this court concluded that there was insufficient justification for the impugned exemption notification, and that it was ultra vires the power conferred upon the Administrator: “150. Moreover, the notification has not been issued for a limited period. It will have, therefore, a permanent effect. Submission of Mr Nariman that having regard to the provisions of the General Clauses Act, the same can be modified, amended at any time and withdrawn, cannot be accepted for more than one reason. Firstly, the respondent proceeded on the basis that the said notification has been issued with a view to give effect to the National Policy i.e. amendments must be carried out until a new Rent Act is enacted. Whether the F Act would be enacted or not is a matter of surmises and conjectures. It would be again a matter of legislative policy which was not within the domain of the Administrator. Secondly, the Administrator in following the National Policy proceeded on the basis that the provisions of the Act must ultimately be G repealed. When steps are taken to repeal the Act either wholly or in part, the intention becomes clear i.e. the same is not meant to be given a temporary effect. When the repealed provisions are sought to be brought back to the statute-book, it has to be done by way of fresh legislation. (…) What can be

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done in future by another authority cannot be a ground for upholding an executive act.”

74. A close reading of the decisions cited on behalf of the petitioners would reveal that the power to extend laws has been upheld. As B.K. Mukherjea observed, in In re Delhi Laws Act, 1912 (supra): “it is quite an intelligible policy that so long as a proper legislative machinery is not set up in a particular area, the Parliament might empower an executive authority to introduce laws validly passed by a competent legislature and actually in force in other parts of the country to such area, with each modifications and restrictions as the authority thinks proper, the modifications being limited to local adjustments or changes of a minor character.” Lord Selborne, in Burah (supra)held such power to be unexceptionable, saying that “Legislation, conditional on the use of particular powers, or on the executive of a limited discretion, entrusted by the Legislature to persons in whom it places confidence is no uncommon thing; and, in many circumstances, it may be highly convenient” In Jitendra Nath Gupta (supra), what the Federal Court held objectionable was the conferment of power to extend provisions of an enactment, beyond its expressed duration or time: “It is for the Legislature to state how long a particular legislation will be in operation. That cannot be left to the discretion of some other body. The power to modify an Act of F a Legislature, without any limitation on the extent of the power of modification, is undoubtedly a legislative power.” The plurality of judgments, as well as opinions rendered in In Re Delhi Laws Act, 1912, makes that decision a somewhat complex reading. Yet, the final per curiam opinion of the court was that the power to G extend, modify or repeal enactments of Part C States, in respect of matters which the Parliament had not directly enacted, amounted to excessive legislation. Additionally, exception was taken to the power to repeal, being delegated, as it was an essential legislative power. H

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A 75. In Sardar Inder Singh (supra), the extension of rent restriction ordinances was in question; the court did not apply the rule in Jatindra Nath Gupta (supra), and ultimately held that the true position was that the Rajpramukh “in his character as the authority on whom power was conferred under Section 3 of the Ordinance that the Rajpramukh issued the impugned notification, and not as the legislative authority of the State.” In Hamdard Dawakhana (supra), the argument that Section 3 was conditional legislation was negatived and it was held to be an instance of excessive delegation, where Parliament did not indicate any guidance for inclusion of particular instances in the schedule, leaving it to the executive government to decide the issue, in what could be an arbitrary manner. Vasu Dev Singh (supra) was a case where the court held that the power to exclude from application of the enactment, based on the quantum of rent, was premised on the Administrator’s opinion that the legislation would be repealed, having regard to a National Policy. Moreover, the notification excluded the application of the Act in relation to premises based on rent and had a D permanent character. This court held that the notification was an instance of impermissible legislation by the executive. It is evident that the court ruled in Jitendra Nath Gupta, In re Delhi Laws Act and Vasu Dev Singh that the exercise of extending an enactment beyond the time of its designated application by the legislature; the power of extension, modification and repeal of laws made by other legislative bodies; and the limiting the application of an enactment based on a quantification (an amount of rent) were legislative exercises, beyond the powers conferred. They stricto sensu fall in the category of “general legislative authority, a new legislative Power, not created or authorized” by the parent legislation, (per Burah, supra). In Hamdard Dawakhana, the power to include new drugs, was held to be uncanalized, i.e. without any legislative guidance. The decision did not involve bringing into force provisions of an enactment, or exclusion, but inclusion within its fold, without any statutory guidance on new drugs. The case therefore involved delegated legislation.

G 76. It would now be useful to analyse some decisions cited by the respondents. In Bishwambhar Singh (supra) the power under Section 3(1) of the Orissa Estates Abolition (Amendment) Act, 1952 was involved. The provision enabled the state to declare that an estate had – in terms of notifications issued in that regard- vested in it, free from all encumbrances. This court negatived the challenge to that provision:

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“77. The long title of the Act and the two preambles which have been quoted above clearly indicate that the object and purpose of the Act is to abolish all the rights, title and interest in land of intermediaries by whatever name known. This is a clear enunciation of the policy which is sought to be implemented by the operative provisions of the Act. Whatever B discretion has been vested in the State Government under Section 3 or Section 4 must be exercised in the light of this policy and, therefore, it cannot be said to be an absolute or unfettered discretion, for sooner or later all estates must perforce be abolished. From the very nature of things a certain amount of discretionary latitude had to be given to the State C Government. It would have been a colossal task if the State Government had to take over all the estates at one and the same time. It would have broken down the entire administrative machinery. It could not be possible to collect sufficient staff to take over and discharge the responsibilities. It would be difficult to arrange for the requisite finance all at once. It was, therefore, imperative to confer some discretion on the State Government. It has not been suggested or shown that in practice any discrimination has been made.” In Basant Kumar Sarkar (supra), the power in question was Section 1(3) of the Employees State Insurance Act, which enabled the government to extend the enactment to establishments. This court negatived that the power was ultra vires: “4. The argument is that the power given to the Central Government to apply the provisions of the Act by notification, confers on the Central Government absolute discretion, the exercise of which is not guided by any legislative provision and is, therefore, invalid. The Act does not prescribeany considerations in the light of which the Central Government can proceed to act under Section 1(3) and such un-canalised power conferred onthe Central Government must be treated as invalid. We are not impressed by this argument. Section 1(3) is really not an illustration of delegated legislation at all; it is what can be properly described as conditional legislation. The Act has prescribed a self-contained Code in regard to the insurance of the employees covered by it; several H

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A remedial measures which the legislature thought it necessary to enforce in regard to such workmen have been specifically dealt with and appropriate provisions have been made to carry out the policy of the Act as laid down in its relevant sections. Section 3(1) of the Act purports to authorise the Central Government to establish a Corporation for the B administration of the scheme of Employees’ State Insurance by a notification. In other words, when the notification should be issued and in respect of what factories it should beissued, has been left to the discretion of the Central Government and thatis precisely what is usually done by conditional legislation. C [......]

5. […] In the very nature of things, it would have been impossible for the legislature to decide in what areas and in respect of which factories the Employees’ State Insurance Corporation should be established. It isobvious that a scheme D of this kind, though very beneficent, could not be introduced in the whole of the country all at once. Such beneficial measures which need careful experimentation have some times to be adopted by stages and in different phases…”

77. The next decision cited was Lachmi Narain (supra). Here, E the Central Government was empowered by Section 2 of the Part C States (Laws) (Act), 1950 to extend through a notification any enactment in Part A States. The Central Government had issued a Notification in 1951 to extend the provisions of the Bengal Finance (Sales Tax) Act to the then Part C State of Delhi. In 1957, a notification in exercise of this power under Section 2 was issued modifying the earlier notification resulting in withdrawal of certain benefits. In the background of these facts, a three-judge bench of this Court dealing with an argument on whether the power to extend with or without modifications any enactment was conditional or delegated legislation, made the following observations: “49. Before proceeding further, it will be proper to say a few words in regard to the argument that the power conferred by Section 2 of the Laws Act is a power of conditional legislation and not a power of ‘delegated’ legislation. In our opinion, no useful purpose will be served to pursue this line of argument because the distinction propounded between the two categories of legislative powers makes no difference, in

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principle. In either case, the person to whom the power is entrusted can do nothing beyond the limits which circumscribe the power; he has to act – to use the words of Lord Selbourne – “within the general scope of the affirmative words which give the power” and without violating any “express conditions or restrictions by which that power is limited”. There is no magic in a name. Whether you call it the power of “conditional legislation” as Privy Council called it in Burah’s case (supra), or ‘ancillary legislation’ as the Federal Court termed it in Choitram v. C. I. T., Bihar, or ‘subsidiary legislation’ as Kania, C. J. Styled it, or whether you camouflage it under the veiling name of ‘administrative or quasi-legislative power’ – as C Professor Cushman and other authorities have done it – necessary for bringing into operation and effect an enactment, the fact remains that it has a content, howsoever small and restricted, of the law-making power itself. There is ample authority in support of the proposition that the power D to extend and carry into operation an enactment with necessary modifications and adaptations is in truth and reality in the nature of a power of delegated legislation.” After these observations, this court held that the power of modification could not have been exercised by the Government in the manner that it did, and observed as follows: E

“60. The power given by Section 2 exhausts itself on extension of the enactment; it cannot be exercised repeatedly or subsequently to such extension. It can be exercised only one, simultaneously with the extension of the enactment. This is one dimension of the statutory limits which circumscribe the F power. The second is that the power cannot be used for the purpose other than that of extension. In the exercise of this power, only such “restrictions and modifications can be validly engrafted in the enactment sought to be extended, which are necessary to bring it into operation and effect in the Union G territory. “Modifications” which are not necessary for, or ancillary and subservient to the purpose of extension, are not permissible. And, only such “modifications” can be legitimately necessary for such purpose as are required to adjust, adapt and make the enactment suitable to the peculiar H

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A local conditions of the Union territory for carrying it into operation and effect. In the context of the section, the words “restrictions and modifications” do not cover such alterations as involve a change in any essential feature, of the enactment or the legislative policy built into it. This is the third dimension of the limits that circumscribe the power. B

61Copy pinpoint61. It is true that the word “such restrictions and modifications as it thinks fit” if construed literally and in isolation, appear to give unfettered power of amending and modifying the enactment sought to be extended. Such a wide construction must be eschewed lest the very validity of the section becomes vulnerable on account of the vice of excessive delegation. Moreover, such a construction would be repugnant to the context and the content of the section, read as a whole, and the statutory limits and conditions attaching to the exercise of the power. We must, therefore, confine the scope of the words “restrictions and modifications” to alterations of such a character which keep the inbuilt policy, essence and substance of the enactment sought to be extended, intact, and introduce only such peripheral or insubstantial changes which are appropriate and necessary to adapt and adjust it to the local conditions of the Union territory.” E

78. It would be useful at this stage to set out in tabular form, the various dates on which the provisions of the Code were brought into force. The chart is set out below:

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79. The above tabular chart reveals that the provisions relating to the Insolvency and Bankruptcy Board of India were brought into force at the earliest point of time, i.e., 05.08.2016. This was to enable the setting up of the regulatory body so that it could commence its task of examining the relevant issues and evolving standards to be embodied in H

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A rules and regulations. Thereafter, the notification dated 19.08.2016 brought into force Chapter VII) of Part-IV and some provisions of Part-V – relating to finance, acts, audit and miscellaneous provisions. These were the provisions ancillary to the working of the Board. The next to be brought into force were parts of Sections 196-197 and 223, again which dealt with the Board’s functions, its funds etc. as well as Sections 244, B 246-248 and 250-252. These were general provisions relating to the provisions that amended various other enactments in terms of the Schedules set out to the Code. The fourth notification dated 15.11.2016 brought into force those provisions relating to insolvency professional agencies and some other provisions which amended other enactments.

C 80. The notification of 30.11.2016 brought into force certain provisions that had the effect of operationalizing the enactment in respect of four distinct categories, i.e. companies incorporated under the Companies Act, companies governed by special Act, LLPs and other bodies incorporated under any law which the Central Government could by notification specify. These provisions triggered the application of the Code to corporate debtors as well as LLPs and other companies and corporations. Significantly, provisions with regard to voluntary liquidation or bankruptcy were excluded from application by this notification. Those provisions were brought into force by the eighth notification dated 01.04.2017, with effect from 15.05.2017. In the meanwhile, the notification dated 09.12.2016 with effect from 15.12.2016, operationalized Sections 33 to 44 which deal with the liquidation process.

81. It is quite evident that the method adopted by the Central Government to bring into force different provisions of the Act had a specific design: to fulfill the objectives underlying the Code, having regard to its priorities. Plainly, the Central Government was concerned with triggering the insolvency mechanism processes in relation to corporate persons at the earliest. Therefore, by the first three notifications, the necessary mechanism such as setting up of the regulatory body, provisions relating to its functions, powers and the operationalization of provisions relating to insolvency professionals and agencies were brought into force. These started the mechanism through which insolvency processes were to be carried out and regulated by law. In the next phase, the part of the Code dealing with one of its subjects, i.e., corporate persons [covered by Section 2(a) to 2(d) of the Code] was brought into force. The entire process for conduct of insolvency proceedings and provisions relating to H

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such corporate persons were brought into force. The other notifications brought into force certain consequential provisions, as well as provisions which give overriding effect to the Code (as also the provisions that amend or modify other laws). All these clearly show that the Central Government followed a stage-by-stage process of bringing into force the provisions of the Code, regard being had to the similarities or dissimilarities of the subject matter and those covered by the Code.

82. As discussed in a previous part of this judgment, insolvency proceedings relating to individuals is regulated by Part-III of the Code. Before the amendment of 2018, all individuals (personal guarantors to corporate debtors, partners of firms, partnership firms and other partners as well as individuals who were either partners or personal guarantors to corporate debtors) fell under one descriptive description under the unamended Section 2(e). The unamended Section 60 contemplated that the adjudicating authority in respect of personal guarantors was to be the NCLT. Yet, having regard to the fact that Section 2 brought all three categories of individuals within one umbrella class as it were, it would have been difficult for the Central Government to selectively bring into force the provisions of part –III only in respect of personal guarantors. It was here that the Central Government heeded the reports of expert bodies which recommended that personal guarantors to corporate debtors facing insolvency process should also be involved in proceedings by the same adjudicator and for this, necessary amendments were required. E Consequently, the 2018 Amendment Act altered Section 2(e) and subcategorized three categories of individuals, resulting in Sections 2(e), (f) and (g). Given that the earlier notification of 30.11.2016 had brought the Code into force in relation to entities covered under Section 2(a) to 2(d), the amendment Act of 2018 provided the necessary statutory backing for the Central Government to apply the Code, in such a manner as to achieve the objective of the amendment, i.e. to ensure that adjudicating body dealing with insolvency of corporate debtors also had before it the insolvency proceedings of personal guarantors to such corporate debtors.

83. The amendment of 2018 also altered Section 60 in that insolvency and bankruptcy processes relating to liquidation and bankruptcy in respect of three categories, i.e. corporate debtors, corporate guarantors of corporate debtors and personal guarantors to corporate debtors were to be considered by the same forum, i.e. NCLT.

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A 84. Section 2, i.e., (application provision of the Code, in relation to different entities), as originally enacted, did not contain a separate category of personal guarantors to corporate debtors. Instead, personal guarantors were part of a category or group of individuals, to whom the Code applied (i.e. individuals, proprietorship and partnership firms, per Section 2(e) which stated “partnership firms and individuals”). The Code B envisioned that the insolvency process outlined in provisions of Part III was to apply to them. The Statement of Objects and Reasons for the Amendment Bill of 2017, which eventually metamorphosized into the Amendment Act, stated that the Code provided for insolvency resolution for individuals and partnership firms C “which are proposed to be implemented in a phased manner on account of the wider impact of these provisions. In the first phase, the provisions would be extended to personal guarantors of corporate debtors to further strengthen the corporate insolvency resolution process and a clear enabling D provision for the purpose has been provided in the Bill.”

85. The amendment introduced Section 2(e) i.e. personal guarantors to corporate debtors, as a distinct category to whom the Code applied. Now, the amendment was brought into force retrospectively, on 23 November, 2017. Section 1 of the Amendment E Act states: “Section 1. (1) This Act may be called the Insolvency and Bankruptcy Code (Amendment) Act, 2018. (2) It shall be deemed to have come into force on the 23rd day of November, 2017.” F

86. In addition to amending Section 2, the same Amendment also amended Section 60(2). Interestingly, though “personal guarantor” was not defined, and fell within the larger rubric of “individual” under the Code, the adjudicating authority for insolvency process and liquidation of corporate persons including corporate debtors and personal guarantors was the NCLT- even under the unamended Code. The amendment of Section 60(2) added a few concepts. This is best understood on a juxtaposition of the unamended and the amended provisions: The unamended Section 60 (2) read as follows: “(2) Without prejudice to sub-section (1) and notwithstanding anything to the contrary contained in this

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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 proceeding of a personal guarantor of the corporate debtor shall be filed before the National Company Law B Tribunal.” The amended Section 60 (2) reads as follows: “(2) Without prejudice to sub-section (1) and notwithstanding anything to the contrary contained in this Code, where a corporate insolvency resolution process or C liquidation proceeding of a corporate debtor is pending before a National Company Law Tribunal, an application relating to the insolvency resolution or liquidation or bankruptcy of a corporate guarantor or personal guarantor, as the case may be, of such corporate debtor shall be filed before the National Company Law Tribunal” D

87. The amendment inserted the expression “or liquidation” before the words “or bankruptcy” and also inserted the expression “of a corporate guarantor… as the case may be, of” such corporate debtor. The interpretation of this expression has to be contextual. There is no question of liquidation of a personal guarantor, an individual. In E such cases, this court has ruled that the principle behind the maxim “reddendo singular singulis” applies. This court had, in Koteswar Vittal Kamath v. K. Rangappa Baliga& Co62 quoted Black’s Interpretation of Laws, to explain the meaning of that maxim: “Where a sentence in a statute contains several antecedents and several consequences, they are to be read distributively, that is to say, each phrase or expression is to be referred to its appropriate object.” Koteswar Vittal Kamath was concerned with the interpretation of the proviso to Article 304(b) of the Constitution of India which provided that: “Provided that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President.” 62 (1969) 1 SCC 255. H

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A The term “no Bill or amendment” was construed distributively. The Court held “In our opinion, the High Court did not correctly appreciate the position. The language of the proviso cannot be interpreted in the manner accepted by the High Court B without doing violence to the rules of construction. If both the words “introduced” or “moved” are held to refer to the Bill, it must necessarily be held that both those words will also refer to the word “amendment”. On the face of it, there can be no question of introducing an amendment. Amendments are moved and then, if accepted by the House, C incorporated in the Bill before it is passed. There is further an indication in the Constitution itself that wherever a reference is made to a Bill, the only step envisaged is introduction of the Bill. There is no reference to such a step as a Bill being moved. The Articles, of which notice may be taken in this connection, are Articles 109, 114, 117, 198 and 207. In all these articles, whatever prohibition is laid down relates to the introduction of a Bill in the Legislature. There is no reference at any stage to a Bill being moved in a House. The language thus used in the Constitution clearly points to the interpretation that, even in the proviso to Article 304, the word “introduced” refers to the Bill, while the word “moved” refers to the amendment.”

88. Recently, in Rajendra K. Bhutta v. Maharashtra Housing and Area Development Authority63, this principle and Koteshwar Vittal F Kamath were cited and applied. Therefore, it is held that when Section 60(2) alludes to insolvency resolution or bankruptcy, or liquidation of three categories, i.e. corporate debtors, corporate guarantors (to corporate debtors) and personal guarantors (to corporate debtors) they apply distributively, i.e. that insolvency resolution, or liquidation processes G apply to corporate debtors and their corporate guarantors, whereas insolvency resolution and bankruptcy processes apply to personal guarantors, (to corporate debtors) who cannot be subjected to liquidation.

89. The case law cited on behalf of the petitioners shows a certain pattern. In many cases (In re Delhi Laws Act, Jitendra Kumar Gupta) 63 H (2020) 13 SCC 208.

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this court had held that the power to extend the law, existing or future, A that had not been enacted by the competent legislature, and the power of repeal, as well as the power to extend the life of the law, were instances of excessive delegation of legislative power. In Narottamdas Jethabhai (supra), this court upheld the extension of pecuniary jurisdiction of city civil courts beyond the statutorily prescribed limit, because there was a B provision enabling it, and the executive confined the exercise of its power to extend the jurisdiction, within the limits enacted. Hamdard Dawakhana was an instance of grant of un-canalized power (without legislative guidance) of inclusion in the schedule to the Act, acts falling within its application; it was clearly a case of excessive delegation. In Lachmi Narain (supra), this court held that the power of modification C cannot be used at any time, but has to be resorted to initially by the executive, at the time a law is extended and applied. The observations in Bishwambhar Singh and Basant Kumar Sarkar (supra) reveal that the executive is tasked with implementing the Act in stages, as it “would have been impossible for the legislature to decide in what areas” D and in respect of what subject matters (in that case, factories and establishments) the provisions can apply. Crucially, it was held that “a scheme of this kind, though very beneficent, could not be introduced in the whole of the country all at once.”Further, held this court, such provisions may “need careful experimentation have some times to be adopted by stages and in different phases.” E

90. The theme of gradual implementation of law or legal principles, was also spoken about in Javed v. State of Haryana64 by this court, which held that there is no constitutional imperative that a law or policy should be implemented all at once: “16. A uniform policy may be devised by the Centre or by a F State. However, there is no constitutional requirement that any such policy must be implemented at one go. Policies are capable of being implemented in a phased manner. More so, when the policies have far-reaching implications and are dynamic in nature, their implementation in a phased manner G is welcome for it receives gradual willing acceptance and invites lesser resistance.”

64 (2003) 8 SCC 369. H

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A Similar observations were made in Pannalal Bansilal Pitti v. State of A.P.65 where the court held that imposition of a uniform law, in some areas, or subjects may be counterproductive and contrary to public purpose. Sabanayagam (supra) too emphasized discretion to extend an enactment, having regard to the time, area of operation, and its applicability when it was emphasized that such power is “limited B and almost ministerial function as an agent of the principal Legislature applying the Act to the area at an appropriate time”

91. The close proximity, or inter-relatedness of personal guarantors with corporate debtors, as opposed to individuals and partners in firms was noted by the report of the Working Group, which remarked that it: C “recognizes that dynamics, the interwoven connection between the corporate debtor and a guarantor (who has extended his personal guarantee for the corporate debtor) and the partnership firms engaged in business activities may be on distinct footing in reality, and would, therefore, require different treatment, because of economic considerations. Assets of the guarantor would be relevant for the resolution process of the corporate debtor. Between the financial creditor and the corporate debtor, mostly the guarantee would contain a covenant that as between the guarantor and the financial creditor, the guarantor is also a principal debtor, notwithstanding that he is guarantor to a corporate debtor.” (Emphasis supplied)

92. As noticed earlier, Section 60 had previously, under the original Code, designated the NCLT as the adjudicating authority in relation to two categories: corporate debtors and personal guarantors to corporate debtors. The 2018 amendment added another category: corporate guarantors to corporate debtors. The amendment seen in the background of the report, as indeed the scheme of the Code (i.e., Section 2 (e), Section 5 (22), Section 29A, and Section 60), clearly show that all matters that were likely to impact, or have a bearing on a corporate debtor’s insolvency process, were sought to be clubbed together and brought before the same forum. Section 5 (22) which is found in Part II (insolvency process provisions in respect of corporate debtors) as it was originally, defined personal guarantor to say that it”means an individual 65 H (1996) 2 SCC 498.

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who is the surety in a contract of guarantee to a corporate debtor.” A There are two more provisions relevant for the purpose of this judgment. They are Sections 234 and 235 of the Code; they read as follows: “234. (1) The Central Government may enter into an agreement with the Government of any country outside India for enforcing the provisions of this Code. B (2) The Central Government may, by notification in the Official Gazette, direct that the application of provisions of this Code in relation to assets or property of corporate debtor or debtor, including a personal guarantor of a corporate debtor, as the case may be, situated at any place in a country outside India C with which reciprocal arrangements have been made, shall be subject to such conditions as may be specified.

235. (1) Notwithstanding anything contained in this Code or any law for the time being in force if, in the course of insolvency resolution process, or liquidation or bankruptcy D proceedings, as the case may be, under this Code, the resolution professional, liquidator or bankruptcy trustee, as the case may be, is of the opinion that assets of the corporate debtor or debtor, including a personal guarantor of a corporate debtor, are situated in a country outside India with which reciprocal arrangements have been made under section E 234, he may make an application to the Adjudicating Authority that evidence or action relating to such assets is required in connection with such process or proceeding. (2) The Adjudicating Authority on receipt of an application under sub-section (1) and, on being satisfied that evidence F or action relating to assets under sub-section (1) is required in connection with insolvency resolution process or liquidation or bankruptcy proceeding, may issue a letter of request to a court or an authority of such country competent to deal with such request.” G

93. These two provisions also reveal that the scheme of the Code always contemplated that overseas assets of a corporate debtor or its personal guarantor could be dealt with in an identical manner during insolvency proceedings, including by issuing letters of request to courts or authorities in other countries for the purpose of dealing with such assets located within their jurisdiction. H

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A 94. The impugned notification operationalizes the Code so far as it relates to personal guarantors to corporate debtors: (1) Section 79 pertains to the definitional section for the purposes of insolvency resolution and bankruptcy for individuals before the Adjudicating Authority. B (2) Section 94 to 187 outline the entire structure regarding initiation of the resolution process for individuals before the Adjudicating Authority.

95. The impugned notification authorises the Central Government and the Board to frame rules and regulations on how to allow the pending actions against a personal guarantor to a corporate debtor before the Adjudicating Authority. The intent of the notification, facially, is to allow for pending proceedings to be adjudicated in terms of the Code. Section 243, which provides for the repeal of the personal insolvency laws has not as yet been notified. Section 60(2) prescribes that in the event of an ongoing resolution process or liquidation process against a corporate debtor, an application for resolution process or bankruptcy of the personal guarantor to the corporate debtor shall be filed with the concerned NCLT seized of the resolution process or liquidation. Therefore, the Adjudicating Authority for personal guarantors will be the NCLT, if a parallel resolution process or liquidation process is pending in respect of a corporate debtor for whom the guarantee is given. The same logic prevails, under Section 60(3), when any insolvency or bankruptcy proceeding pending against the personal guarantor in a court or tribunal and a resolution process or liquidation is initiated against the corporate debtor. Thus if A, an individual is the subject of a resolution process before the DRT and he has furnished F a personal guarantee for a debt owed by a company B, in the event a resolution process is initiated against B in an NCLT, the provision results in transferring the proceedings going on against A in the DRT to NCLT. 96.This court in V. Ramakrishnan (supra), noticed why an application under Section 60(2) could not be allowed. At that stage, neither G Part III of the Code nor Section 243 had not been notified. This meant that proceedings against personal guarantors stood outside the NCLT and the Code. The non-obstante provision under Section 238 gives the Code overriding effect over other prevailing enactments. This is perhaps the rationale for not notifying Section 243 as far as personal guarantors to corporate persons are concerned. Section 243(2) saves pending H

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proceedings under the Acts repealed (PIA and PTI Act) to be undertaken in accordance with those enactments. As of now, Section 243 has not been notified. In the event Section 243 is notified and those two Acts repealed, then, the present notification would not have had the effect of covering pending proceedings against individuals, such as personal guarantors in other forums, and would bring them under the provisions of the Code pertaining to insolvency and bankruptcy of personal guarantors. The impugned notification, as a consequence of the non obstante clause in Section 238, has the result that if any proceeding were to be initiated against personal guarantors it would be under the Code.

97. In the opinion of this court, there was sufficient legislative guidance for the Central Government, before the amendment of 2018 was made effective, to distinguish and classify personal guarantors separately from other individuals. This is evident from Sections 5(22), 60, 234, 235 and unamended Section 60. In V. Ramakrishnan (supra) this court noted the effect of various provisions of the Code, and how they applied to personal guarantors: “22. 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. F 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 G 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 28-8-2017, the Government of India, through the Ministry of Finance, cautioned that Section 243 of the Code, which provides for H

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A the repeal of the said enactments, has not been notified till date, 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 Debts Recovery Tribunals.

23. 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 S ARFAESI proceedings must be turned down as “bankruptcy” has reference only to the two Insolvency Acts D referred to above. Thus, S ARFAESI 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 Authority”, defined under Section 5(1) of the Code, means the National Company Law Tribunal constituted under the Companies Act, 2013.

24. The scheme of Sections 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 H

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states that the Tribunal shall be vested with all the powers of A the Debts Recovery Tribunal, as contemplated under Part III of this Code, for the purposes of sub-section (2), would not take effect, as the Debts Recovery Tribunal has not yet been empowered to hear bankruptcy proceedings against individuals under Section 179 of the Code, as the said Section B 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 Debts Recovery Tribunals to try such 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 C application of the Code to a personal guarantor of a corporate debtor, apply only for the limited purpose contained in Sections 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, D 2018.”

98. This court was clearly cognizant of the fact that the amendment, in so far as it inserted Section 2(e) and altered Section 60(2), was aimed at strengthening the corporate insolvency process. At the same time, since the Code was not made applicable to individuals (including personal guarantors), the court had no occasion to consider what would be the effect of exercise of power under Section 1(3) of the Code, bringing into force such provisions in relation to personal guarantors.

99. The argument that the insolvency processes, application of moratorium and other provisions are incongruous, and so on, in the opinion of this court, are insubstantial. The insolvency process in relation to corporate persons (a compendious term covering all juristic entities which have been described in Sections 2 [a] to [d] of the Code) is entirely different from those relating to individuals; the former is covered in the provisions of Part II and the latter, by Part III. Section 179, which defines what the Adjudicating authority is for individuals66 is “subject to” Section G

60. Section 60(2) is without prejudice to Section 60(1) and 66 “179. (1) Subject to the provisions of section 60, the Adjudicating Authority, in relation to insolvency matters of individuals and firms shall be the Debt Recovery Tribunal having territorial jurisdiction over the place where the individual debtor actually and voluntarily resides or carries on business or personally works for gain and can entertain an application under this Code regarding such person. H