2017 (3) TMI 694 - HC - Insolvency and Bankruptcy

Restoration of the reference of the petitioner before the BIFR and other consequential reliefs - Held that - The writ petition was filed on 30.11.2016. In the meanwhile, a Gazette Notification No.2794 dated 28.11.2016 was issued, enforcing the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 w.e.f. 01.12.2016. With the enforcement of the said Repeal Act of 2003, the AAIFR and BIFR stand dissolved, and all proceedings of whatever nature pending before the AAIFR or BIFR under the SICA stand abated. Since AAIFR and BIFR stand dissolved and all proceedings stand abated w.e.f. 01.12.2016, this writ petition is infructuous and adjudication of the question of legality of the appellate order would be nothing but an exercise in futility. By reason of provisions of the 2003 Repeal Act, a Company in respect of which any appeal or reference or enquiry stand abated, might make reference to the National Company Law Tribunal under the Insolvency and Bankruptcy Code 2016, within 180 days from the commencement of the Insolvency and Bankruptcy Code 2016. If, as contended by the petitioner, there is any infirmity in the order impugned by reason of the same being based on the action taken by the IDBI under Section 13(4) of the SARFAESI Act, which action was according to the petitioner illegal, the petitioner should have challenged the action under Section 17 and 18 of the SARFAESI Act and obtained appropriate orders.

Summary

Issues:
Challenge to order abating reference of petitioner by AAIFR under SICA, Authorization of secured creditors by IDBI under SARFAESI Act, Appeal against order of AAIFR, Enforcement of Sick Industrial Companies (Special Provisions) Repeal Act, 2003.

Analysis:
1. The petitioner challenged an order by AAIFR upholding BIFR's decision to abate the reference. The petitioner, a textile manufacturing company, filed a reference under SICA due to losses. BIFR declared the petitioner sick and appointed IDBI to prepare a rehabilitation scheme. IDBI submitted a Draft Rehabilitation Scheme, which was rejected. IDBI initiated action under SARFAESI Act, claiming support of secured creditors. Petitioner alleged IDBI failed to prove support of 75% secured creditors as required by SARFAESI Act.

2. The petitioner contended that certain creditors did not give consent as per SARFAESI Act. BIFR abated the reference, stating IDBI held 100% secured debts. The petitioner appealed to AAIFR, arguing lack of authorization by secured creditors. AAIFR upheld BIFR's decision. The petitioner filed a writ petition challenging AAIFR's order, seeking restoration of the reference.

3. The writ petition was filed before the enforcement of Sick Industrial Companies Repeal Act, 2003, which dissolved AAIFR and BIFR. All proceedings under SICA stood abated. The court held the writ petition became infructuous due to the dissolution of AAIFR and BIFR. The petitioner was advised to refer to the National Company Law Tribunal under the Insolvency and Bankruptcy Code 2016 within 180 days.

4. The court dismissed the writ petition, stating that if there were issues with IDBI's actions under SARFAESI Act, the petitioner should have challenged them under Sections 17 and 18 of the SARFAESI Act. The court emphasized that challenging the abatement order under SICA was no longer relevant due to the dissolution of AAIFR and BIFR.