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TMI Blog2023 (8) TMI 709X X X X Extracts X X X X X X X X Extracts X X X X ..... 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reason that SICA, which provided for an appeal against a rehabilitation scheme or any orders passed by the BIFR, stands repealed - It is settled law that there is no inherent or fundamental right of an appeal, the right to appeal is available only if the statute provides for the remedy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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - HON BLE MR JUSTICE VIBHU BAKHRU AND HON BLE MR JUSTICE AMIT MAHAJAN Advocates who appeared in this case: For the Petitioner : Mr. Shlok Chandra, Sr. Standing Counsel, Ms. Priya Sarkar, Jr. Standing Counsel with Mr. Keshav Garg, Advocate. For the Respondents : Mr. Anunaya Mehta and Mr. Vinayak Thakur, Advocates. JUDGMENT VIBHU BAKHRU, J Introduction 1. The Principal Director General of Income Tax (Admn. TPS) [hereafter DGIT ] has filed the present petition impugning an ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 25 of SICA, is no longer available as a result of the legislative repeal of SICA; a challenge to the orders passed by BIFR would not be maintainable in any other forum as well. 7. Second, he submitted that in terms of the Insolvency and Bankruptcy (Removal of Difficulties) Order, 2017 [S.O. 1683(E) dated 24.05.2017] , the DGIT s remedy would be an appeal before the National Company Law Appellate Tribunal (hereafter NCLAT ) and it is not open for the DGIT to file a petition under Articles 226 and 227 of the Constitution of India. He also submitted that in terms of Section 5 of the Repeal Act, the repeal of SICA does not affect a rehabilitation scheme sanctioned by the BIFR. He referred to Ashapura Minechem Ltd. v. Union of India Ors. 2017 SCC OnLine Del 11784 in support of his contention that appeal against the order of BIFR would lie to NCLAT. 8. Third, he submitted that in terms of SICA, the BIFR would continue to have jurisdiction over a sick company, notwithstanding that its net worth has turned positive, till it is de-registered. He submitted that the order dated 26.02.2013 had the effect of modifying the Scheme which continues to be binding and the DG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operations at the units located at Hungarcutta, Nettana and Mumbai would be revived; (vi) the arrears of payment to various statutory dues aggregating ₹194.20 lacs (as on 31.03.2000), would be partly paid within a period of three months and the balance would be converted to long term debt to be repaid in 16 quarterly instalments along with interest at the rate of 12% per annum; (vii) the dues payable to excise dues aggregating ₹149.86 lacs would be paid in 12 quarterly installments along with interest at the rate of 20% per annum; (viii) arears of wages and salaries amounting to ₹76 lacs would be carried forward for a period of two years; (ix) the outstanding dues of SBICI, an unsecured creditor, would be settled at ₹45.32 lacs; (x) other unsecured and presenting creditors would be repaid aggregating to an amount of ₹605.37 lacs, which would be settled in 24 quarterly instalments carrying along with it, interest at varying rates ranging from Nil to 14% per annum; and (xi) the Company would sell the surplus machinery and land and mobilise ₹460 lacs. 14. The total dues as on 31.03.2000 were specified at ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out to Rs. 544.52 lakhs. The details are given in Annexures 12 and 13. 16. It is also relevant to mention that the terms and conditions as set out in the Scheme expressly provide that the Company would satisfy the monitoring agency regarding physical progress on the Scheme and that the expenditure as contemplated under the Scheme, is incurred. It is also important to note that Scheme also provided that if there was any shortfall in the Scheme, the same was required to be made by the Company and / or its promoters without seeking any further reliefs and concessions. Clause (c) of Article 11 of the Scheme is set out below: c) The company shall satisfy MA that the physical progress as well as expenditure incurred on the Scheme is achieved as per the original schedule. To this end, the company shall furnish to MA such information and data as may be required by it at intervals stipulated by it. Any financial shortfall arising out of the delayed implementation of the schedule or for any other reason shall be met by the company / promoters without any recourse to FI/Banks or seeking any further reliefs/concessions from them than what has already been provided for in the Scheme. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income Tax Department s unequivocal stand that it had granted all reliefs and concessions as envisaged in the Scheme. In this context, it was the Company s stand that the additional modification of the Scheme did not prejudice the income tax authorities as the question whether additional reliefs would be granted was at the discretion of the income tax authorities. 23. The BIFR allowed the Company s application and modified the Scheme in terms of Section 18(5) of SICA. A tabular statement indicating Clause 9.8 as included in the Scheme and the modified Clause as set out in the BIFR s order dated 26.02.2013 is set out below: CLAUSE ORIGINAL CLAUSE MODIFIED CLAUSE 9.8 RELIEFS AND CONCESSIONS RELIEFS AND CONCESSIONS GoI (Income-tax Dept.): GoI (Income-tax Dept.): a) To consider to allow the company to carry forward its accumulated losses and unabsorbed depreciation beyond the period of eight year till the networth becomes positive; No modificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2016 on the ground that the appeal in which the said application was filed, was already disposed of. 26. The Company filed a writ petition [W.P.(C) 968/2016] before this Court to agitate the relief as sought in its application, which was pending before the BIFR, as the BIFR was not functional, at the material time. The said petition was disposed of by this Court by an order dated 18.05.2016 as members of the BIFR were appointed and the BIFR, which was not functional for a brief period of time, had resumed functioning. This Court also directed the BIFR to consider the Company s application within a period of three months from the said date. 27. Thereafter, the BIFR listed the pending applications including MA No. 358/BC/2014, whereby the Company had sought the following relief: a) For extension of the rehabilitation period contained in the sanctioned scheme up to 31.03.2015 in terms of the provisions of Section 18(5) read with section 18(9) of SICA, 1985. b) For direction to Provident Fund ESIC Authorities to comply with the direction of the Hon ble Bench given at the hearing held on 30.09.2008 within 30 days and not demand the damages as SS-01 did not envisage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention 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 GMB Ceramics Limited v. Spartek Ceramics Limited India Ors. Company Appeal (AT) Insolvency No. 160/2017, decided on 28.05.2018. 33. The said view was accepted by the Supreme Court in M /s Spartek Ceramics India Ltd. v. Union of India Ors. Civil Appeal No.7291-7292/2018 along with other Appeals, decided on 25.10.2018. The relevant extract of the said order is set out below: 2) Having heard learned counsel in all the three appeals before us for some time, and having gone through the judgment dated 28.05.2018 passed by the National Company Law Appellate Tribunal (NCLAT), we are of the view that the judgment of the NCLAT holding that the appeal filed by the Central Government in that case not maintainable in view of the fact that the Notification dated 24.05.2017 travels beyond the scope of the removal of difficulties provision is correct. We are of the view that, having held that the appeal is not maintainable, the appellate Tribunal should not have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to law. It is difficult to accept the Company s contention that the Scheme would be operative notwithstanding that the term as indicated in the Scheme has expired. 40. Section 17 of SICA empowers the BIFR to pass appropriate orders if it is satisfied that a company in respect of which a reference is made, has become a sick industrial company. In such circumstances, the BIFR is required to decide whether it is practicable for the sick industrial company to make its net worth exceed the accumulated losses within a reasonable time. If the BIFR decides that it was so, it was required to make an order under Section 17(2) of SICA to afford the company such time and subject to such restrictions and conditions as may be specified, to make its net worth exceed its accumulated losses. However, if the BIFR is of the view that it was not practicable for a sick industrial company to make its net worth positive within a reasonable time and it was necessary to adopt measures as specified under Section 18 of SICA in relation to the said company, it was required to give directions for preparation of a scheme for providing for such measures. 41. In terms of Section 18(1) of SICA where an ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FR was empowered to review any sanctioned scheme or make any such modification as it deems fit by an order in writing as it deems fit. Section 18(5) of SICA is set out below: 18. Preparation and sanction of schemes. xxx xxx xxx (5) The Board may on the recommendations of the operating agency or otherwise, review any sanctioned scheme and make such modifications as it may deem fit or may by order in writing direct any operating agency specified in the order, having regard to such guidelines as may be specified in the order, to prepare a fresh scheme providing for such measures as the operating agency may consider necessary. 45. In terms of Section 19 of SICA, where a scheme entailed any sacrifice, concession or financial assistance from the Central Government, State Government, Banks, Public Financial Institutions, State Level Institutions or any other authority, the same was required to be circulated to the concerned government, bank, institution or authority and no such scheme could be sanctioned without their consent. In terms of Section 19(4) of SICA, where such person declined its consent, it was not permissible for the BIFR to sanction the scheme. The re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. 49. The measures mentioned in the Scheme were timebound measures and were required to be implemented within the given time frame stipulated, therein. In view of the above, there is merit in the DGIT s contention that without extension or modification of the Scheme, no additional concessions could be included in the Scheme. 50. The last question to be examined is 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. 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax on such gains. 53. In respect of the aforesaid it is important to note that 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 promoters could instead of gifting the shares to the Company, sell the same and contribute the funds realised for the Scheme. But this would result in the promoters being liable to pay the capital gains tax which it appears, they desired to avoid. 54. Neither the order dated 26.02.2013 nor the impugned order indicate that the BIFR had examined the transactions, which had led to the capital gains arising in the hands of the Company or the context in which additional concessions were sought. 55. In view of the above, the impugned order cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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