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Introduction of Case
This case deals with Section 238 of Insolvency and Bankruptcy Code, 2016 which is also known as non-obstante clause. It is a Latin word which means notwithstanding anything contained that means this clause empowers the legislation in which it contains, to override the effects of any other legal provisions contrary to this section under the same law or any other laws. Under present case of Monnet Ispat, the petition was filed under Section 7 of the code.
Facts of Case
In the instant case, the National Company Law Tribunal (NCLT) by virtue of Section 5(1) of the Code is the AA has by its order dated 18th July 2017 admitted the petition under Section 7 of the Code filed by the State Bank of India against the Respondent Assessee and prohibited, inter alia, “the institution of suits or continuation of pending suits or proceedings” against the Respondent. This included the present appeal by the Income Tax Department (‘Department’) against the order of the Income Tax Appellate Tribunal (‘ITAT’) in respect of the tax liability of the Respondent-Assessee.
Mr. Asheesh Jain, learned Senior Standing counsel for the Revenue, points out that unlike some of the earlier insolvency statutes the Code does not envisage permission being sought from the NCLT for continuation of the continuation of pending proceedings against the Respondent in other fora. In the order dated 18th July 2017 is clear that the moratorium continues “till the completion of the corporate insolvency resolution process or until this Bench approves the resolution plan under sub-Section (1) of Section 31 or passes an order for liquidation of corporate debtor under Section 33, as the case may be.
Consequently, these appeals were disposed of with liberty to the Appellant-Department to revive them subject to the further orders of the NCLT.
Issues
- Whether the present appeal by the Income Tax Department (‘Department’) against the order of the Income Tax invoke section 238?
- Whether the Code does not envisage permission being sought from the NCLT for continuation of the continuation of pending proceedings against the Respondent in other statute?
Judgement of Case
It was held that Section 238 of the Insolvency and Bankruptcy Code, 2016, would override anything inconsistent contained in any other enactment, including the Income-Tax Act. That the High Court of Delhi, was, therefore, correct in law and accordingly, the Special Leave Petitions were dismissed.
Analysis
Under this case it was analysed that if there is anything which is inconsistent with the provision of the code even Tax law then it will be override by the court but in the case of individual it cannot override such situation which includes creditors.
Continuation of pending proceedings can be start after the expiry of interim order by the court.
“The non-obstante clause need not necessarily and always be co-extensive with the operating part so as to have the effect of cutting down the clear terms of an enactment. If the words of the enactment are clear and capable of only one interpretation on a plain and grammatical construction of words thereof a non-obstante clause cannot cut down the construction and restrict the scope of its operation. In such cases, the non-obstante clause has to be read as clarifying the whole position and must be understood to have been incorporated in the enactment by the Legislature by the way of abundant caution and not by the way of limiting the ambit and scope of the operative part of the enactment.”[1]
In Aswini Kumar Ghosh and Another v. Arabinda Bose and Another[2], it was observed as under:
“It should first be ascertained what the enacting part of the section provides on a fair construction of the words used according to their natural and ordinary meaning, and the non obstante clause is to be understood as operating to set aside as no longer valid anything contained in relevant existing law which is inconsistent with the new enactment.” It was further held that “Nor can we read the non obstante clause as specifically repealing only the particular provisions which the learned Judges below have been at pains to pick out from the Bar Council Act and the Original Side Rules of the Calcutta, and Bombay High Courts.
If, as we have pointed out, the enacting part of section covers all Advocates of the Supreme Court, the non obstante clause can reasonably be read as overriding “anything contained” in any relevant existing law which is inconsistent with the new enactment, although the draftsman appears to have had primarily in his mind a particular type of law as conflicting with the new Act. The enacting part of a statute must, where it is clear, be taken to control the non obstante clause where both cannot be read harmoniously; for, even apart from such clause, a later law abrogates earlier laws clearly inconsistent with it.[3]
“It is well-known that a non obstante clause is a legislative device which is usually employed to give overriding effect to certain provisions over some contrary provisions that may be found either in the same enactment or some other enactment, that is to say, to avoid the operation and effect of all contrary provisions.”[4]
A provision beginning with the words, ‘notwithstanding anything in this Constitution’ added in the Constitution by a Constitution Amendment Act cannot be construed as taking away the provision outside the lіmіtatіons on the amending power and it has to be harmoniously construed consistent with the founding principles and the basic features of the Constitution. But subject to this limitations, existing laws continued under such a provision cannot be held void on the ground that they infringe anything in the Constitution including Article 13 for the non-obstante clause will preclude any such attack.[5]
A non-obstante clause must also be distinguished from the phrase ‘without prejudice’. A provision enacted ‘without prejudice’ to another provision has not the effect of affecting the operation of the other provision and any action taken under it must not be inconsistent with such other provision. [6]
Conclusion
It is thus clear that non-obstante clause is employed to those cases in which the enactment is not clear because enactments those have clear words and intention of the legislature cannot be override through non-obstante clause. The non obstante clause came into existence to eliminate the delay in the cases which occur due to the unclear enactments on which the arguments are made by the party, such kind of enactments can be override so as to ensure speedy justice.
References:
[1] Dominion of Іndіa v. Shrіnbaі Іranі, supra, AІR 1954 SC 596, pp. 599, 600
[2] [1953] SCR 1
[3] Broomo’s Legal Maxims, 10th Edn., p.347
[4] In Union of India and Another. v. G.M. Kokil 1984 402 Suppl. SCR 196
[5] R.S. Raghunath v. State of Karnataka, AІR 1992 SC 81, p. 81 : Domіnіon of Іndіa v. Shrіnbaі Іranі, AІR 1954 SC
596, p.599
[6] Punjab Sіkh Motor Servіce, Moudhapara, Raіpur v. R.T.A., Raіpur, AІR 1966 SC 1318 : 1966 (2) SCR 221
