Rehabilitation scheme under sick company law binds implementation, but cannot force an unsecured creditor to waive or reduce debt without consent.

A sanctioned rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985 binds creditors for implementation, and Section 22 suspends enforcement during the rehabilitation period, but it does not itself authorise compulsory reduction of an unsecured creditor's contractual debt. The absence of a requirement to secure unsecured creditors' consent is not the same as a power to force acceptance of a scaled-down settlement. Section 18(8) gives the scheme binding effect, yet that effect does not extend to rewriting debt obligations without consent or express statutory authority. The Companies Act, 1956 voting mechanism was treated as inapplicable to the BIFR process.

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Issues: Whether, after a rehabilitation scheme is sanctioned under the Sick Industrial Companies (Special Provisions) Act, 1985, an unsecured creditor can decline the scaled-down settlement offered under the scheme and wait until rehabilitation is complete to recover the full dues.

Analysis: The sanctioned scheme and Section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985 were considered together with Section 22, which suspends enforcement remedies during the implementation period. The Court held that the Act does not authorise compulsory reduction of an unsecured creditor's debt merely because a revival scheme has been sanctioned. The absence of a requirement to obtain consent from unsecured creditors is different from a power to force them to accept a reduction in dues. Section 18(8) makes the scheme binding, but that binding effect does not extend to rewriting the underlying contract without consent where no provision expressly permits such coercive scaling down. Reference to Section 391 of the Companies Act, 1956 was found inapposite because the BIFR process does not involve a creditor-class meeting and vote under that provision.

Conclusion: The petitioner, as an unsecured creditor, was entitled to refuse the scaled-down options in the scheme and to await completion of rehabilitation before enforcing its claim.

Ratio Decidendi: A sanctioned rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985 binds creditors as to implementation, but it does not authorise compulsory waiver or reduction of an unsecured creditor's contractual debt in the absence of consent or express statutory power.

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