Deemed approved resolution plan under insolvency law bars a section 9 petition for scheme non-implementation

A section 9 Insolvency and Bankruptcy Code application was held not maintainable where the underlying claim arose from a SICA-sanctioned rehabilitation scheme treated as a deemed approved resolution plan. Non-implementation or contravention of that scheme had to be pursued under the remedy for breach of a deemed approved resolution plan, not through initiation of CIRP by an operational creditor. The application was also held time-barred because it was filed well after the prescribed period counted from the commencement of the Code. The insolvency petition was rejected, with liberty reserved to pursue the appropriate statutory remedy.

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Issues: (i) Whether an application under section 9 of the Insolvency and Bankruptcy Code, 2016 was maintainable when the claim arose from a scheme sanctioned under the SICA regime and deemed to be an approved resolution plan. (ii) Whether the application was barred by limitation in view of the expiry of the statutory period from the commencement of the Insolvency and Bankruptcy Code, 2016.

Issue (i): Whether an application under section 9 of the Insolvency and Bankruptcy Code, 2016 was maintainable when the claim arose from a scheme sanctioned under the SICA regime and deemed to be an approved resolution plan.

Analysis: The sanctioned rehabilitation scheme under the SICA framework was treated as a deemed approved resolution plan under the Insolvency and Bankruptcy Code, 2016. On that footing, the proper remedy for alleged non-implementation or contravention of the sanctioned scheme lay in an application under section 33(3) of the Code, not in a section 9 proceeding. The matter was therefore not one for initiation of CIRP through an operational creditor's petition under section 9.

Conclusion: The section 9 application was not maintainable.

Issue (ii): Whether the application was barred by limitation in view of the expiry of the statutory period from the commencement of the Insolvency and Bankruptcy Code, 2016.

Analysis: The application was also held to be time-barred because it was filed after the expiry of 643 days from 01.12.2016, whereas the relevant proviso required action within 180 days from the commencement of the Code in cases falling within the deemed-approved-scheme framework. The period for invoking the remedy was therefore treated as having lapsed.

Conclusion: The application was barred by limitation.

Final Conclusion: The insolvency petition was rejected, with liberty reserved to pursue the remedy contemplated for contravention of the deemed approved resolution plan, and the connected interlocutory applications also became infructuous.

Ratio Decidendi: Where a sanctioned SICA scheme is deemed to be an approved resolution plan under the Insolvency and Bankruptcy Code, 2016, a section 9 petition is not maintainable for its non-implementation and the aggrieved party must proceed under section 33(3) within the prescribed time.

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