Tribunal allows insolvency petition despite prior BIFR proceedings: IRP appointed, CIRP initiated

The tribunal found the petition maintainable under Section 10 of the Insolvency & Bankruptcy Code (IBC) despite finalized Board for Industrial and Financial Reconstruction (BIFR) proceedings. It ruled that the Insolvency Resolution Process (IRP) should proceed for the entire debt, considering the prior actions under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The tribunal admitted the petition, appointed an Interim Resolution Professional (IRP), and initiated the Corporate Insolvency Resolution Process (CIRP), directing compliance with IBC provisions and treating the SICA-sanctioned scheme as an Approved Resolution Plan.

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Issues Involved:
1. Maintainability of the Petition under Section 10 of the Insolvency and Bankruptcy Code (IBC) when Board for Industrial and Financial Reconstruction (BIFR) proceedings were finalized.
2. Commencement of Insolvency Resolution Process (IRP) for the entire debt or only for the part not adjudicated by Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).

Issue-wise Detailed Analysis:

1. Maintainability of the Petition under Section 10 of IBC:
The petition was filed under Section 10 of the Insolvency & Bankruptcy Code (IBC) on Form No.6. The petitioner claimed a total debt default of Rs. 40 crores. The key question was whether the petition is maintainable given the finalization of BIFR proceedings for part of the outstanding debt. The tribunal considered the Modified Draft Rehabilitation Scheme (MDRS) filed by the petitioner and the history of the company's financial difficulties, including the erosion of net worth and the subsequent revival attempts under BIFR. The tribunal noted that due to non-compliance with certain sanctioned schemes, the BIFR had directed the submission of a fully tied-up MDRS incorporating dues from the Sales Tax Department and other liabilities. However, with the repeal of the SICA Act in 2016, the proceedings were transferred to the National Company Law Tribunal (NCLT). The tribunal concluded that the proceedings before BIFR stood abated but could continue under NCLT within 180 days, as clarified by the Insolvency & Bankruptcy Code (Removal of Difficulties) Order, 2017.

2. Commencement of Insolvency Resolution Process for Entire Debt or Part:
The tribunal examined whether the IRP should be initiated for the entire debt or confined to the part not adjudicated by SICA. The tribunal emphasized the similarities between SICA and IBC in terms of objectives and processes for the revival of stressed companies. It noted that measures already taken under SICA should not be ignored and can aid in the speedy resolution under IBC. The tribunal cited relevant case law, including Hyderabad Abrasives & Minerals Vs. Andhra Cements Ltd. and Madura Coats Limited Vs. Modi Rubber Limited, to support the view that proceedings under SICA should continue seamlessly under IBC. The tribunal concluded that the sanctioned SS-08 scheme should be considered as an Approved Resolution Plan (ARP) under IBC, and the IRP should proceed from the stage left by BIFR.

Findings:
The tribunal found that the debtor company had indeed defaulted on its debt obligations, warranting the admission of the petition under Section 10 of IBC. The tribunal appointed an Interim Resolution Professional (IRP) and declared the commencement of the Corporate Insolvency Resolution Process (CIRP). The tribunal directed that the scheme sanctioned under SICA be deemed an Approved Resolution Plan under Section 31(1) of IBC, with the IRP to ensure compliance with the provisions of the Code.

Conclusion:
The petition was admitted, and the commencement of the CIRP was declared effective from the receipt of the order. The IRP was directed to treat the scheme sanctioned under SICA as an Approved Resolution Plan and comply with the necessary provisions of IBC. The tribunal emphasized the continuity of the rehabilitation process from SICA to IBC, ensuring that previous efforts were not disregarded.

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