National Spot Exchange Limited vs Union of India & Ors.

Constitution of India – Article 246, 254; Seventh Schedule – Federal Structure Doctrine – Maharashtra Protection of Investors and Depositors Act, 1999 (MPID Act) – Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) – Recovery of Debts and Bankruptcy Act, 1993 (RDB Act) – Prevention of Money Laundering Act, 2002 (PMLA) – Conflict between the laws made by the Parliament and the law made by the State Legislature – Overlapping of legislative fields – Whether the MPID Act covers or relates to the same subject matter as covered under the Central Legislations i.e., SARFAESI Act and RDB Act as also PMLA:

Held: State of Maharashtra was within its legislative competence to enact the MPID Act, the subject matter of which in pith and substance was relatable to Entries 1, 30 and 32 of the State List (List II) of the Seventh Schedule of the Constitution of India – The subject matter of PMLA is traceable to the Entry-13 of Union List (List-I) of Seventh Schedule – Further, both SARFAESI and RDB Act have been enacted with regard to the matter pertaining to “Banking,” which subject matter is relatable to the Entry 45 “Banking” falling in the Union List (List-I) of Seventh Schedule – Considering the pith and substance of the State and the Central Legislations in question, the Central Legislations i.e., SARFAESI Act or RDB Act cannot be permitted to prevail over the State Legislation i.e., MPID Act, merely because the Central Legislations are enacted by the Parliament – Since all these Acts have separate field of operations, provisions of SARFAESI Act or RDB Act cannot be permitted to override the provisions of MPID Act, a validly enacted State Legislation for the subject matter falling in List-II- State List, otherwise it would tantamount to violation of federal structure doctrine envisaged in the Constitution – MPID Act would prevail in the State of Maharashtra in respect of the specific subject matter for which the said Act was enacted, in view of Clause (3) of Article

246. [Paras 34-37, 40, 41]

Maharashtra Protection of Investors and Depositors Act, 1999 (MPID Act) – s.4, 4(2), 5, 7 – Insolvency and Bankruptcy Code, 2016 – ss.14, 238 – If there is any inconsistency between the MPID Act and the IBC:

Held: No – A conjoint reading of ss.4, 5 and 7, MPID Act makes it clear that though s.4(2) states about the attached properties being vested in the Competent Authority appointed by the Government, such vesting would be subject to the orders passed by the Designated Court – There is no inconsistency between the MPID Act and the IBC – In absence of any inconsistency having been brought on record, between the provisions contained in the MPID Act and in the IBC, s.238 of IBC, which gives overriding effect to the IBC over the other Acts for the time being in force, cannot be said to have been attracted – Constitution of India – Article 254. [Paras 50, 51] Constitution of India – Article 246(1), (2), (3); Seventh Schedule-List-I, II and III – Distribution of legislative powers between the Union and State Legislature – Principle of Federal Supremacy:

Held: A three-fold distribution of legislative power between the Union and the States made in the three Lists in the Seventh Schedule r/w Article 246, exhibits the Principle of Federal supremacy – Thus, in case of inevitable conflict between Union and State powers, the Union power as enumerated in List-I shall prevail over the State power as enumerated in Lists-II and III, and in case of overlapping between Lists II and III, the latter shall prevail. [Para 26] Constitution of India – Article 142 – Powers under – Plea of the intervenors that exercising powers u/Article 142, this Court appointed the Supreme Court Committee conferring upon the committee wide powers for the execution of the decrees/orders/awards, which virtually superseded the statutory provisions contained in the Acts like SARFAESI Act, RDB Act, PMLA, IBC, etc. – Scope of powers u/Article 142, discussed. [Paras 13, 14, 19]

Maharashtra Protection of Investors and Depositors Act, 1999 (MPID Act) – s.4 – Insolvency and Bankruptcy Code, 2016 – s.14 – Constitution of India – Article 254; Seventh Schedule – List I-III:

Held: MPID Act has been validly enacted by the Government of Maharashtra for the matters falling in List-II- State List, and therefore would prevail in the State of Maharashtra – The MPID Act having been enacted for the matters relatable to the Entries-1,

30 and 32 in List-II-State List, and the IBC having been enacted for the matters relatable to the Entry-9 in List-III- Concurrent List, the provisions of Article 254 would not be attracted – The issue of repugnancy or conflict as contemplated in Article 254 would arise only when the State Legislation and the Central Legislation, both, are relatable to the Entries contained in List-III-Concurrent List of Seventh Schedule – In the instant case, there is also no overlap or inconsistency between the provisions contained in the IBC and MPID Act – s.14 of IBC has the connotation which is very much different from s.4 of MPID Act – s.14 of IBC is consequent upon the order passed by the Adjudicating Authority declaring Moratorium – However, so far as the attachment of properties u/s.4 of the MPID Act is concerned, it is beyond the realm of the Debtor-Creditor relationship as contemplated in the IBC. [Para 47, 48] Maharashtra Protection of Investors and Depositors Act, 1999 (MPID Act) – Object:

Held: MPID Act was enacted by the State of Maharashtra to protect the interest of depositors of the Financial Establishments – It was enacted in the public interest to curb the unscrupulous activities of the Financial Establishments, who had defaulted to return the deposits of the public in the State of Maharashtra. [Paras 24, 47]

Prevention of Money Laundering Act, 2002 – Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Recovery of Debts and Bankruptcy Act, 1993 – Object – Discussed. [Paras 21-23]