Rehabilitation scheme consent rules under SICA referred for larger Bench review of unsecured creditors' rights.

A prima facie conflict was identified on whether a sanctioned rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985 can reduce unsecured creditors' dues without their consent. The order compared earlier decisions on the respective scope of Sections 18, 19 and 22, and noted apparent inconsistency in the treatment of rehabilitation measures, creditor consent and the binding effect of a sanctioned scheme. On that basis, the Court held that the extent of BIFR's power under Section 18 and the binding effect on unsecured creditors required reconsideration by a larger Bench.

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Issues: Whether a prima facie case was made out to refer for consideration by a larger Bench the correctness of the view that, under a sanctioned rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985, unsecured creditors cannot be compelled to accept a reduction in their dues without consent.

Analysis: The order examined the earlier Division Bench view against other decisions dealing with the respective spheres of Sections 18, 19 and 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. It noted that some earlier rulings had treated rehabilitation measures, creditor consent, and the binding effect of a sanctioned scheme differently, and observed that the impugned view appeared prima facie inconsistent with those decisions. On that basis, the Court formed a prima facie opinion that the scope of Section 18 and the binding effect of a scheme on unsecured creditors required reconsideration by a larger Bench.

Conclusion: The matter was referred to a larger Bench for authoritative determination on the questions framed, including the extent of BIFR's power under Section 18 and whether a rehabilitation scheme reducing unsecured debt binds such creditors without their consent.

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