2017 (10) TMI 1444 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - proceedings before BIFR stood abated - similarity in the intension for incorporation of Sick Industries Companies (Special Provisions) Act 1985 and Insolvency and Bankruptcy Code 2016 - HELD THAT - Although the proceedings before the Hon'ble BIFR stood abated but due to filing an Application before the Hon'ble NCLT within a period of 180 days, those very proceedings shall continue. It is also vehemently pleaded that the new proceedings shall commence from that very stage from where it is transferred. A Notification in the form of Insolvency Bankruptcy Code (Removal of Difficulties) Order, 2017 had clarified that if an order has been passed by BIFR or AAIFR then for continuing the resolution process the scheme shall be incorporated from the stage where it was before the repeal of the SICA Act. Under the said repealed Act, the resolution plan had already been approved by OA, hence not required to submit another plan. Rather, an argument is that there is no requirement of even a submission of form no.6 and the Professional can submit resolution plan under section 30 of I B Code. out of abundant precaution Form NO.6 had been filed to be considered for granting permission to carry out the CIRP from the stage it was left before BIFR and other Authorities due to repeal of the SICA Act. The sanctioned SS- 08 scheme thus to be considered as Approved Resolution Plan (ARP). Considering the provisions of section 10 of The Code that the Debtor Company had in fact committed a default in not repaying the outstanding Debt to certain patties, the Petition under consideration deserves to be admitted - commencement of the Corporate Insolvency Resolution Process is hereby declared with effect from the receipt of this Order. The IRP is hereby directed that, the Scheme Sanctioned under SICA shall be deemed to be an Approved Resolution Plan as prescribed UIs, 31 (1) of the I B Code, 2016. However, rest of the compliances are to be made as per the provisions of the Code, some Of them specified hereinabove.

Summary

Issues Involved:
1. Maintainability of the Petition under Section 10 of the Insolvency and Bankruptcy Code (IBC) when Board for Industrial and Financial Reconstruction (BIFR) proceedings were finalized.
2. Commencement of Insolvency Resolution Process (IRP) for the entire debt or only for the part not adjudicated by Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).

Issue-wise Detailed Analysis:

1. Maintainability of the Petition under Section 10 of IBC:
The petition was filed under Section 10 of the Insolvency & Bankruptcy Code (IBC) on Form No.6. The petitioner claimed a total debt default of ?40 crores. The key question was whether the petition is maintainable given the finalization of BIFR proceedings for part of the outstanding debt. The tribunal considered the Modified Draft Rehabilitation Scheme (MDRS) filed by the petitioner and the history of the company's financial difficulties, including the erosion of net worth and the subsequent revival attempts under BIFR. The tribunal noted that due to non-compliance with certain sanctioned schemes, the BIFR had directed the submission of a fully tied-up MDRS incorporating dues from the Sales Tax Department and other liabilities. However, with the repeal of the SICA Act in 2016, the proceedings were transferred to the National Company Law Tribunal (NCLT). The tribunal concluded that the proceedings before BIFR stood abated but could continue under NCLT within 180 days, as clarified by the Insolvency & Bankruptcy Code (Removal of Difficulties) Order, 2017.

2. Commencement of Insolvency Resolution Process for Entire Debt or Part:
The tribunal examined whether the IRP should be initiated for the entire debt or confined to the part not adjudicated by SICA. The tribunal emphasized the similarities between SICA and IBC in terms of objectives and processes for the revival of stressed companies. It noted that measures already taken under SICA should not be ignored and can aid in the speedy resolution under IBC. The tribunal cited relevant case law, including Hyderabad Abrasives & Minerals Vs. Andhra Cements Ltd. and Madura Coats Limited Vs. Modi Rubber Limited, to support the view that proceedings under SICA should continue seamlessly under IBC. The tribunal concluded that the sanctioned SS-08 scheme should be considered as an Approved Resolution Plan (ARP) under IBC, and the IRP should proceed from the stage left by BIFR.

Findings:
The tribunal found that the debtor company had indeed defaulted on its debt obligations, warranting the admission of the petition under Section 10 of IBC. The tribunal appointed an Interim Resolution Professional (IRP) and declared the commencement of the Corporate Insolvency Resolution Process (CIRP). The tribunal directed that the scheme sanctioned under SICA be deemed an Approved Resolution Plan under Section 31(1) of IBC, with the IRP to ensure compliance with the provisions of the Code.

Conclusion:
The petition was admitted, and the commencement of the CIRP was declared effective from the receipt of the order. The IRP was directed to treat the scheme sanctioned under SICA as an Approved Resolution Plan and comply with the necessary provisions of IBC. The tribunal emphasized the continuity of the rehabilitation process from SICA to IBC, ensuring that previous efforts were not disregarded.