2017 (12) TMI 654 - Tri - Insolvency and Bankruptcy

Corporate insolvency procedures - whether scheme sanctioned by the BIFR shall be deemed to be approved resolution plan under Sec. 31(l) of I & B Code? - Held that - It is pertinent to mention that part 2 of the I & B Code 2016 there is no such power which empowers adjudicating authority to review the already sanction scheme under sub-section (1) of Sec. 31 of the I & B Code. Since the petitioner has sought an extension of the sanctioned scheme, given the modification of MDRS already submitted before the BIFR. It is also to be pointed out that this power was earlier vested under sec. 262(6) of the Companies Act, 1956 and after that Companies Act, 2013. The said section has been omitted from I & B Code, and further I & B Code has not made any provision which empowers adjudicating authority to review the sanctioned scheme under the Code because there is no specific provision which authorises the Tribunal to review the scheme. So, we are not authorized to extend the term of scheme even though the matter is pending before the BIFR and under Sec.262(6) of the Companies Act Tribunal was empowered to do so but now coming into force of the I & B Code and without any statutory provision to the effect we cannot extend the term of sanctioned scheme. Since the scheme has already been approved and it is also on record that till-date, the company could not turn its net worth into positive within the period of sanctioned scheme, therefore, it will be presumed that corporate applicant has violated the term of the sanctioned scheme. Thus, liquidation proceedings shall follow, in accordance with the provisions of I & B Code, 2016.

Summary

Issues:
Extension of scheme period under Insolvency and Bankruptcy Code, 2016; Direction to prevent recovery proceedings by Commercial Taxes Dept.; Settlement of pending court cases; Relief regarding power supply by WBSEDCL without additional bank guarantee.

Analysis:
1. The petitioner sought an extension of the scheme period under the Insolvency and Bankruptcy Code, 2016, to implement the sanctioned scheme and improve the corporate applicant's net worth. Additionally, a direction was requested to prevent recovery proceedings by the Commercial Taxes Dept. for specific demands.

2. The case involved a sanctioned scheme by the Board for Industrial & Financial Reconstruction (BIFR) earlier, with a cut-off date of 31/12/2002. The BIFR appointed IFCI as the monitoring agency for the scheme's progress.

3. The BIFR, in an order dated 12/12/2013, noted the corporate applicant's inability to turn its net worth positive within the scheme period, leading to the scheme's expiration. The company was directed to submit a Modified Draft Rehabilitation Scheme (MDRS) for extension with detailed justifications.

4. The petitioner submitted the MDRS to the BIFR, as required, and emphasized the scheme's impending end in 2017 with the corporate applicant's net worth still negative as per audited accounts.

5. The impact of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003, and subsequent notifications dissolving the BIFR were crucial in the context of the scheme's continuation and binding nature.

6. The petitioner's attempt to seek relief under the Insolvency and Bankruptcy Code, 2016, post the BIFR's dissolution highlighted the complexities arising from the transition between legal frameworks.

7. Despite the petitioner's efforts to extend the sanctioned scheme, the absence of specific provisions in the Insolvency and Bankruptcy Code, 2016, to review or modify such schemes posed a challenge in granting the requested extension.

8. The inability of the corporate applicant to improve its net worth within the sanctioned scheme period indicated a potential violation, leading to the presumption of liquidation proceedings as per the Insolvency and Bankruptcy Code, 2016.