Defence of dispute in Insolvency and Bankruptcy Code, 2016

Existence of dispute

Necessity of Court or Arbitration Proceedings in defence:

Relevant provisions of the Code insofar as operational creditors and their corporate debtors are concerned.

“3. Definitions. In this Code, unless the context otherwise requires,— xxx xxx xxx (12) “default” means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not repaid by the debtor or the corporate debtor, as the case may be;

5. Definitions. In this Part, unless the context otherwise requires,— (6) “dispute” includes a suit or arbitration proceedings relating to—

(a) the existence of the amount of debt;

(b) the quality of goods or service; or

(c) the breach of a representation or warranty; xxx xxx xxx (20) “operational creditor” means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred;

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Interpretation of judgement

A judgement should not be read as a statute.

Judgement in the context:

Every judgment must be read as applicable to the particular facts proved or assumed to be proved, since the generality of the expressions, which may be found that they are not intended to be expositions of the whole law but governed or qualified by the particular facts of the case, in which such expressions are to be found. (per Lord Halsbury in Quinn v. Leathem, 1901 AC 495.)

Judgement as precedent:

In London Graving dock co. Ltd. vs. Horton (1951 AC 737 at p. 761), Lord Mac Dermot observed:

The matter cannot, of course, be settled merely by treating the ipsissima vertra of Willes, J. as though they were part of an Act of Parliament and applying the rules of interpretation appropriate thereto. This is not to detract from the great weight to be given to the language actually used by that most distinguished judge.

In Home Office vs. Dorset Yacht Co. (1970 (2) All ER 294) Lord Reid said:

Lord Atkin`s speech is not to be treated as if it was a statute definition it will require qualification in new circumstances.

Megarry, J. in (1971) 1 WLR 1062 observed:

One must not, of course, construe even a reserved judgment of Russell L. J. as if it were an Act of Parliament.

In Herrington v. British Railways Board (1972 (2) WLR 537) Lord Morris said:

There is always peril in treating the words of a speech or judgment as though they arewords in a legislative enactment, and it is to be remembered that judicial utterances aremade in the setting of the facts of a particular case. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper.

The following words of Lord Denning in the matter of applying precedents have become locus classicus:

Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cardozo, J. ) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive.

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Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path of justice clear of obstructions which could impede it.

Judgement be read in the context of facts:

Court should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclid`s theorems nor as provisions of the statute and that too taken out of the context. These observations must be read in the context in which they appear to have been stated. Judgments of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes.
Bharat Petroleum Corporation Ltd. v. N.R.Vairamani, AIR 2004 SC 4778.

Principles of Interpretation: Supplying the omission.

Considerations for supplying the omission:

The role of the courts in construing legislation is not confined to resolving ambiguities in statutory language. The court must be able to correct obvious drafting errors. In suitable cases, in discharging its interpretative function the court will add words, or omit words or substitute words.

In reaching above conclusion Lord Nicholls of Birkenhead referred to some notable instances about interpretation given in Professor Sir Rupert Cross’ admirable opuscule, Statutory Interpretation, 3rd ed. at page 103:

‘In omitting or inserting words the judge is not really engaged in a hypothetical reconstruction of the intentions of the drafter or the legislature, but is simply making as much sense as he can of the text of the statutory provision read in its appropriate context and within the limits of the judicial role.’

Interpretation to correct drafting mistake:

This power is confined to plain cases of drafting mistakes. The courts are ever mindful that their constitutional role in this field is interpretative. They must abstain from any course which might have the appearance of judicial legislation. A statute is expressed in language approved and enacted by the legislature. So the courts exercise considerable caution before adding or omitting or substituting words. Before interpreting a statute in this way the court must be abundantly sure of three matters:

the intended purpose of the statute or provision in question;
that by inadvertence the draftsman and Parliament failed to give effect to that purpose in the provision in question; and
the substance of the provision Parliament would have made, although not necessarily the precise words Parliament would have used, had the error in the Bill been noticed.

The third of these conditions is of crucial importance. Otherwise any attempt to determine the meaning of the enactment would cross the boundary between construction and legislation.

(see Lord Diplock in Jones v. Wrotham Park Settled Estates [1980] A.C. 74, 105.)

[Source: The Inco Europe Ltd v First Choice Distribution [2000] 1 W.L.R. 586; [2000] 2 All E.R. 109; [2000] 1 All E.R. (Coram) 674; [2000] 1 Lloyd’s Rep. 467; [2000] C.L.C. 1015; [2000] B.L.R. 259; (2000) 2 T.C.L.R. 487; 74 Con. L.R. 55; (2000) 97(12) L.S.G. 39; (2000) 144 S.J.L.B. 134; [2000] N.P.C. 22.]