2023 (8) TMI 709 - HC - Insolvency and Bankruptcy

Seeking relief from Income Tax Dues - Benefit of Board for Industrial and Financial Reconstruction (BIFR) scheme denied - scheme came to an end - SICA was repealed - it is submitted that an appeal would now lie with the NCLAT in terms of the Insolvency and Bankruptcy Code (Removal of Difficulties) Order, 20172, issued by the Central Government in exercise of its powers under Section 242(1) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The contention that an appeal would lie against the order of BIFR to NCLAT after the repeal of SICA, is unmerited as the said provisos have been held to be ultra vires the Insolvency and Bankruptcy Code, 2016, by the NCLAT in PR. DIRECTOR GENERAL OF INCOME TAX (ADMN. AND TPS) AND GMB CERAMICS LTD. VERSUS M/S. SPARTEK CERAMICS INDIA LTD. ANR. 2018 (6) TMI 350 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI . Thus, the contention that an appeal would lie against the order of the BIFR before the NCLAT is rejected. It also cannot be accepted that the DGIT is remediless against an order passed by the BIFR solely for the reason that SICA, which provided for an appeal against a rehabilitation scheme or any orders passed by the BIFR, stands repealed - It is settled law that there is no inherent or fundamental right of an appeal, the right to appeal is available only if the statute provides for the remedy of an appeal. However, the fact that there is no statutory appellate remedy does not preclude this Court from exercising powers under Articles 226 and 227 of the Constitution of India. The recourse of this Court under Articles 226 and 227 of the Constitution of India is not precluded or proscribed where the relevant statues do not provide a remedy of appeal. Although this Court while exercising its powers under Articles 226 and 227 of the Constitution of India does not undertake a full merits review which may be available in cases where an appeal is provided by the statute a party is not precluded from challenging the orders passed by the statutory authorities on the ground that they fall foul of the constitutional guarantees or are otherwise contrary to law. The present petition is not maintainable. Whether the impugned order is contrary to law? - HELD THAT - Clearly, no modification of the Scheme could be sanctioned requiring the Income Tax Department to give further concessions without the department consenting to grant such an extension - Admittedly, the Company s application seeking modification of the scheme by extending the term remained pending with the BIFR. In terms of Section 18(5) of SICA, it was open for the BIFR to modify the Scheme and extend its term if it considered it apposite. However, no such modification could be sanctioned without the consent from the said concerned government, banks, institutions or authorities if the modification of the Scheme entailed any concession or financial assistance from such persons. There is merit in the contention that the Scheme sanctioned by the BIFR had expired. The Scheme contemplated measures for exceeding the net worth within the period specified in the Scheme and in the manner as stipulated therein viz by settlement with banks and workmen, repayment of statutory dues in instalments over a specified period of time, and infusion of funds by the promoters and sale of certain assets, and other measures - the measures mentioned in the Scheme were timebound measures and were required to be implemented within the given time frame stipulated, therein. Whether the BIFR s order dated 26.02.2013, whereby the Scheme was modified, necessarily required the Income Tax Department to grant further additional concessions? - HELD THAT - Plainly, the answer to this question is in the negative. This is for two reasons. First, that the obligation to extend further concessions could not be imposed on the Central Government (Income Tax Department) without its consent. The Income Tax Department had not consented for extending any further concession. And therefore, the order dated 26.02.2013 requiring the department to consider the grant of the further concessions, cannot be interpreted as making it obligatory on the department to grant such concessions. Second, it was the Company s stand before the BIFR that the modifications of the Scheme as proposed did not prejudice the Income Tax Department as it retained the discretion whether to grant such concessions. Also, the Scheme did not envisage the promoters contributing shares or other assets to make good the shortfall in the projections. The promoters were required to make the shortfall in liquid funds. Thus, the promoters had not complied with the Scheme which they now submit is binding on all other parties. It also appears that the entire exercise of gifting the shares to the Company and the Company selling the same was with the object of ensuring that the capital gains arise in the hands of the Company so as to enable the Company to claim further exemption. The impugned order cannot be sustained. The same is set aside. The Income Tax Department is not required to grant any further concessions contrary to the IT Act, to the Company.

Summary

Issues Involved:
1. Maintainability of the petition after the repeal of SICA.
2. Validity of the BIFR's order dated 26.02.2013 and its implications.
3. Whether the Income Tax Department is obligated to grant further concessions.

Summary:

1. Maintainability of the Petition:
The first issue addressed was whether the petition is maintainable after the repeal of SICA. The court rejected the contention that an appeal would lie to the NCLAT, as the relevant provisos have been held ultra vires by the NCLAT and upheld by the Supreme Court. The court concluded that the petition is maintainable under Articles 226 and 227 of the Constitution of India, as the repeal of SICA does not preclude judicial review of BIFR's orders.

2. Validity of the BIFR's Order and Scheme Duration:
The court examined whether the BIFR's order dated 26.02.2013, which modified the Scheme, was legally valid. It was determined that the Scheme had a specified term and measures that were time-bound. The court found merit in the contention that without extending or modifying the Scheme, no additional concessions could be included. The court noted that the BIFR could not impose obligations on the Income Tax Department without its consent, which was not granted.

3. Obligation to Grant Further Concessions:
The court addressed whether the BIFR's order necessarily required the Income Tax Department to grant further concessions. It concluded that the order only required the department to consider the grant of further concessions, not to necessarily grant them. The court emphasized that the Income Tax Department retained the discretion to grant or deny the additional concessions, and the company's interpretation that the department was obligated to grant them was incorrect.

Conclusion:
The court set aside the impugned order, stating that the Income Tax Department is not required to grant any further concessions contrary to the IT Act. The petition was disposed of accordingly.