2018 (10) TMI 202 - AT - Insolvency and Bankruptcy

Corporate insolvency process - Adjudicating Authority refused to extend the period of scheme for further five years which was prepared by BIFR under the provisions of Sick Industrial Companies (Special Provisions), Act, 1985 - Held that - In absence of any provision to review the scheme already sanctioned under sub-section (1) of Section 31 of the I&B Code, the Adjudicating Authority held that the scheme having already approved and as the company failed to turn its net worth positive within the period of sanctioned scheme, it will be presumed that the corporate applicant has violated the sanctioned scheme, which will result in liquidation proceedings. Having heard the learned counsel for the parties, we also agree with the finding of the Adjudicating Authority that if the scheme sanctioned under sub-section (4) of Section 18 of SICA Act, 1985 is treated to be a scheme sanctioned under sub-section (1) of Section 31 of the I&B Code, which otherwise we do not accept, in such case also in absence of any provision of review of the scheme sanctioned under sub-section (1) of Section 31 of the I&B Code, no relief can be granted to the appellant.

Summary

Issues:
1. Appeal against refusal to extend the scheme period by the Adjudicating Authority.
2. Interpretation of provisions of Sick Industrial Companies (Special Provisions) Act, 1985 and Insolvency and Bankruptcy Code, 2016.
3. Applicability of the scheme sanctioned under the SICA Repeal Act, 2003 in light of the I&B Code.
4. Review of the scheme under the I&B Code and consequences of failure to meet scheme obligations.

Analysis:
The appeal was filed by 'M/s. Hada Textile Industries Ltd.' against the decision of the Adjudicating Authority refusing to extend the scheme period prepared by BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985. The appellant sought an extension to implement the scheme and prevent recovery proceedings by the Government of West Bengal. The BIFR had earlier sanctioned a scheme with a cutoff date of December 31, 2002, which expired due to the company's inability to turn its net worth positive. The appellant submitted a modified draft rehabilitation scheme (MDRS) for extension, citing the provisions of the SICA Repeal Act, 2003, which saved the approved scheme from abatement.

The Ministry of Corporate Affairs amended the SICA Repeal Act, 2003, in line with the I&B Code, deeming sanctioned schemes as resolution plans under the I&B Code. The Adjudicating Authority held that the scheme could be dealt with under the I&B Code's provisions, and failure to meet obligations would lead to liquidation proceedings. The Tribunal concurred with the Authority's finding that no relief could be granted to the appellant due to the absence of provisions for reviewing schemes sanctioned under the I&B Code. The appeal was dismissed, emphasizing the lack of merit and no cost implications.

In conclusion, the judgment delves into the interplay between the provisions of the SICA Repeal Act, 2003, and the I&B Code, highlighting the implications of failing to adhere to sanctioned schemes and the limitations on seeking relief under the I&B Code. The decision underscores the importance of compliance with scheme obligations and the legal consequences of non-compliance in the context of insolvency and bankruptcy proceedings.