TaxTMI 
TaxTMI 
2018 (6) TMI 350
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....Admn. & TPS)" pursuant to Notification Nos. S.O.3568(E) and S.O.3569(E) both dated 25th November, 2016 issued by the Central Government in exercise of powers conferred under Section 242 of the 'Insolvency and Bankruptcy Code, 2016' (hereinafter referred to as "I&B Code") against the scheme of demerger dated 20th October, 2016 sanctioned by the 'Board for Industrial and Financial Reconstruction' (hereinafter referred to as "Board") under Section 18 of the 'Sick Industrial Companies (Special Provisions) Act, 1985' (hereinafter referred to as "SICA Act, 1985") on the ground that the Board, by flouting all norms of justice and violation of the principle of natural justice and provisions of 'SICA Act, 1985' which is prejudicial to the interest of revenue involving huge loss of income tax. 3. The Appellant is left with no other alternate remedy but to file the present appeal for removal of the grievances. 4. The other Company Appeal (AT) (Insolvency) No. 258 of 2017 has been preferred by the 'GBM Ceramics India Limited & Ors.' under Section 32 of the 'I&B Code' read with 3rd proviso to Section 4(b) of the 'Sick Industrial Companies (Special Provisions) Repeal Act, 2003' (hereinafte....
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....ed by the Central Government from time to time under 'I&B Code'. 8. The 'Board of Directors' of Sick Companies used to form opinion that a Company had become a Sick Industrial Company, the Board of Directors were empowered to make a reference under Section 15 of the 'SICA Act, 1985' to the 'Board' for determination of the measures which were required to be adopted with respect to the Company. After inquiry into the working of Sick Industrial Companies, the 'Board' was empowered under Section 17 to make suitable order under Section 17(3) of the 'SICA Act, 1985' for sanction of scheme. 9. Section 18 of the 'SICA Act, 1985' related to 'Preparation and sanction the Schemes' where an order is made under sub-section (3) of Section 17 in relation to any Sick Industrial Company. 10. Section 18 of the 'SICA Act, 1985' was self-contained and under sub-section (12) of Section 18 the Board was empowered to monitor periodically the implementation of the sanctioned scheme. 11. The person aggrieved against the Scheme had remedy to prefer the appeal under Section 25 against the order passed by the Board within forty-five days to the Appellate Authority. 12. The 'SICA Act, 1985' was ....
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....mpanies Act, 1956 (1 of 1956) and shall be dealt with in accordance with the provisions contained in Part VI-A of that Act;" However, the said sub-section was never enforced. 15. By another Notification No. S.O.3569(E) also dated 25th November, 2016, Section 4(b) of the 'SICA Repeal Act 2003', was amended/modified and read as under: "AFTER AMENDMENT OF SICA (REPEAL) ACT, 2003, W.E.F. 1ST NOVEMBER, 2016: 4. Consequential provisions - On the dissolution of the Appellate Authority and the Board - (a)XXXX (b)on such date as may be notified by the Central Government in this behalf, any appeal preferred to the Appellate Authority or any reference made or inquiry pending to or before the Board or any proceeding of whatever nature pending before the Appellate Authority or the Board under Sick Industrial Companies (special provisions) Act, 1985 (1 of 1986) shall stand abated: Provided that a company in respect of which such appeal or reference or inquiry stands abated under this clause may make reference to the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016 within one hundred and eighty days from the commenceme....
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....n the same date; And, whereas, section 252 of the said Code amended the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (1of 2004) in the manner specified in the Eighth Schedule to the said Code; And, whereas, the un-amended second proviso to clause (b) of section 4 of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 provides that any scheme sanctioned under subsection (4) or any scheme under implementation under sub-section (12) of section 18 of the repealed enactment i.e., the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) shall be deemed to be a scheme under implementation under section 424D of the Companies Act, 1956, (1 of 1956) and shall be dealt with in accordance with the provisions contained in Part VIA of the Companies Act, 1956; And, whereas, section 424D of the Companies Act, 1956 provided for review or monitoring of schemes that are sanctioned or are under implementation; And, whereas the Companies Act, 1956 has been repealed are re-enacted as the Companies Act, 2013 (18 of 2013) which, inter alia, provides for scheme of revival and rehabilitation, sanction of scheme, scheme to be bindi....
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....n 31 of the Insolvency and Bankruptcy Code, 2016 and the same shall be dealt with, in accordance with the provisions of Part II of the said code: Provided also that in case, the statutory period within which an appeal was allowed under the Sick Industrial Companies (Special Provisions) Act, 1985 against an order of the Board had not expired as on the date of notification of this Act, an appeal against any such deemed approved resolution plan may be preferred by any person before National Company Law Appellate Tribunal within ninety days from the date of publication of this order." 18. The Eighth Schedule of the 'I&B Code' relates to amendment to the 'SICA Repeal Act, 2003', in clause (b) of Section 4, after the second proviso, the further provisos have been inserted by the Central Government in exercise of powers conferred by Section 242 of the 'I&B Code' on the ground of removal of difficulties. 19. The appeals, having been preferred under such amended the Eighth Schedule of the 'I&B Code' made by the Central Government, questions have been raised as to whether the Central Government in exercise of powers conferred under section 242 of the 'I&B Code' can empower the....
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.... in exercise of power under Section 242 of the Code. It is submitted that Section 242 is a provision which merely confers the powers to 'remove difficulties' in the Code and cannot be extended to amend the extant provisions of the Repeal Act, or other enactments like Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Violation and Reconstruction of Financial Provision and Security Interest Act, 2002 and Companies Act, 2013. 49. We have considered the said contention limited and confined to the two provisions enacted vide S.O. No. 1683(E) but do not find any merit in the contention. As noticed above, the aforesaid notification has been issued by the Central Government in exercise of power conferred under sub-Section (1) of Section 242 and 252 of the Code. A perusal of the impugned notification, extracted above, and Section 252 of the Code extracted below, clearly shows that the Eighth Schedule is a part of the Code and Section 4(b) of the Repeal Act as amended was incorporated in the Code vide the Schedule. Section 252 of the Code reads: - "252. Amendments of Act 1 of 2004. - The Sick Industrial Companies (Special Provisions) Repeal Act, 2003 shal....
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.... India. In order to obviate the necessity of approaching the Legislature for removal of every difficulty, however trivial, encountered in the enforcement of a statute, by going through the timeconsuming amendatory process, the Legislature sometimes thinks it expedient to invest the Executive with a very limited power to make minor adaptations and peripheral adjustments in the statute, for making its implementation effective, without touching its substance. That is why the "removal of difficulty clause", once frowned upon and nick-named as "Henry VIII clause" in scornful commemoration of the absolutist ways in which that English King got the "difficulties" in enforcing his autocratic will removed through the instrumentality of a servile Parliament, now finds acceptance as a practical necessity, in several Indian statutes of post-independence era." 25. Taking into consideration the facts that the Petitioner of the said case has not challenged Section 252 of the 'I&B Code', which had the effect of amending in the manner as specified in the 'Eighth Schedule' of the 'I&B Code', the Hon'ble High Court held: "52. In view of the above discussion, it is held that the Central Gov....
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....l of every difficulty, howsoever trivial, encountered in the enforcement of a statute, by going through the time-consuming amendatory process, the legislature sometimes thinks it expedient to invest the executive with a very limited power to make minor adaptations and peripheral adjustments in the statute, for making its implementation effective, without touching its substance. That is why the 'removal of difficulty clause', once frowned upon and nicknamed as 'Henry VIII clause' in scornful commemoration of the absolutist ways in which that English King got the 'difficulties' in enforcing his autocratic will removed through the instrumentality of a servile Parliament, now finds acceptance as a practical necessity, in several Indian statutes of post-independence era." 32. In "Transcore V/s. Union of India and Another (Supra)" the Hon'ble Supreme Court further proceeded to observe that: "81. In view of the above judgment of this Court in Madeva Upendra Sinai [(1975) 3 SCC 765: 1975 SCC (Tax) 105] we are of the view that the 2004Order, in the present case, was issued with the object of supplying a deficiency, namely, levy of fees. By such levy of fees, the nature and scope....
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....sub-section (12) of section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) in view of the repeal of the Sick Industrial Companies (Special Provisions) Act, 1985, substitution of clause (b) of section 4 of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 and omission of sections 253 to 269 of the Companies Act, 2013" 36. From plain reading of the ground as shown in the impugned Notification S.O. 1683(E) dated 24th May, 2017, we find that the notification has been issued in view of difficulties arisen to give effect to review or monitoring of the schemes sanctioned under sub-section (4) or sub-section (12) of Section 18 of the 'SICA Act, 1985', in view of 'SICA Repeal Act, 2003' and omission of Sections 253 to 269 of the Companies Act, 2013. It does not relate to removal of any difficulty arises in giving effect to the provisions of the 'I&B Code', which is the only ground for which Central Government can exercise power conferred under Section 242. 37. In absence of any ground shown for removing any difficulty in giving effect to the provisions of the 'I&B Code' and as the Central Government cannot exercise powers conferred und....
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.... the Appellate Authority or any reference made or any inquiry pending before the Board or any other authority or any proceeding of whatever nature pending before the Appellate Authority or the Board, including the powers of the Board to give effect to the Scheme or to monitor periodically for its implementation under sub-section (4) read with sub-section (12) of Section 18 of the 'SICA Act, 1985' stood abated. However, by virtue of the amendment under the Eighth Schedule, the Company in respect of which such appeal or reference or inquiry stands abated, have been allowed to make reference to the NCLAT within 180 days of commence of 'I&B Code' and in accordance with the provisions of the 'I&B Code'. In such case, no fees is payable. 41. The aforesaid amendment to the 'SICA Repeal Act, 2003' made vide sub-clause (b) of Section 4 (Eighth Schedule) shows that in respect of the Scheme which has already been framed by the Board, even if the appeal is pending, cannot proceed as the appeal stands abated. 42. The time period of 180 days given therein is for making a reference to the National Company Law Tribunal to treat the application under 'I&B Code' without payment of fees, only i....
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....ppeal within that period. (4) On the receipt of an appeal under sub-section (1), the Appellate Tribunal shall, after giving the parties to the appeal a reasonable opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against. (5) The Appellate Tribunal shall send a copy of every order made by it to the Tribunal and the parties to appeal." 47. We have noticed that the legislature have constituted the NCLAT under Section 421 of the Companies Act, 2013. By 'I&B Code' the legislature have also empowered NCLAT to hear the appeal under Section 61. By amendment to the Competition Act, 2003, the legislature have also empowered the NCLAT to hear the appeal against an order(s) passed by the Competition Commission of India. Section 53A and 53B reads as follows: "53A. Appellate Tribunal.─(1) The National Company Law Appellate Tribunal constituted under section 410 of the companies Act, 2013 shall, on and from the commencement of Part XIV of Chapter VI of the Finance Act, 2017, be the Appellate Tribunal for the purpose of this Act and the said appellate Tribunal shall - (a) to....
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....icating Authority (National Company Law Tribunal), which reads as follows: - "61. Appeals and Appellate Authority. ─ (1) Notwithstanding anything to the contrary contained under the Companies Act 2013, any person aggrieved by the order of the Adjudicating Authority under this part may prefer an appeal to the National Company Law Appellate Tribunal. (2) Every appeal under sub-section (1) shall be filed within thirty days before the National Company Law Appellate Tribunal: Provided that the National Company Law Appellate Tribunal may allow an appeal to be filed after the expiry of the said period of thirty days if it is satisfied that there was sufficient cause for not filing the appeal but such period shall not exceed fifteen days. (3) An appeal against an order approving a resolution plan under section 31 may be filed on the following grounds, namely:- (i) the approved resolution plan is in contravention of the provisions of any law for the time being in force; (ii) there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period; Adjudicating Authority for corporate pers....
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....r passed by the Adjudicating Authority, including the order passed under section 31(1) of the 'I&B Code'. The Appellate Tribunal for sufficient cause can condone the delay but such period cannot exceed fifteen days. Therefore, no appeal can be entertained after forty-five days of knowledge of order. The Central Government, thereby cannot grant ninety days' period to prefer an appeal under section 61(1), which is contrary to Section 61(2) of the 'I&B Code'. 53. The 'difficulty' as contemplated under Section 242 of the 'I&B Code' has not been mentioned by the Central Government in the notification in question. The Central Government in exercise of its powers conferred under Section 242, is competent to make provision to remove the difficulty in giving effect to the provisions of the 'I&B Code', but it cannot be in conflict with nor can change the substantive provisions of the 'I&B Code'. The period of limitation as prescribed by Notification S.O. 1683(E) dated 24th May, 2017 being in conflict with the maximum period of limitation granted under sub-section (2) of Section 61 of the 'I&B Code' and beyond forty-five days, the NCLAT having not empowered to entertain the appeal. The NCL....
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....her there has been a material irregularity in exercising of the powers by the 'Insolvency Resolution Professional' during the 'Corporate Insolvency Resolution Process'? (iii) Whether the 'debts' owed to the 'Operational Creditors' have been provided for in the 'Resolution Plan'? (iv) Whether Insolvency Resolution Process costs have been provided for repayment in priority to all other debts? and; (v) Whether the 'Resolution Plan' complies with the criterias prescribed by the Insolvency and Bankruptcy Board of India? 59. The impugned Scheme was approved by the Board on 20th October, 2016 i.e. much prior to enforcement of the 'I&B Code', which came in force on 1st December, 2016. On 20th October, 2016, as the 'I&B Code' had not come in force and there was no Adjudicating Authority, the question of approval of the 'Resolution Plan' on 20th October, 2016 does not arise. 60. Section 30 of the 'I&B Code' relates to the submission of resolution plan. As per sub-section (2), the 'Resolution Professional' is required to be examined by the 'Resolution Professional' as to whether the 'Resolution Plan' conforms to the provisions mentioned in clause (a), (b), (c)....
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....he resolution plan. (3) After the order of approval under sub-section (1),- (a) the moratorium order passed by the Adjudicating Authority under section 14 shall cease to have effect; and (b) the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database." 62. From bare perusal of Section 31, it is clear that if the 'Resolution Plan' approved by the 'Committee of Creditors' meets the requirement as referred to in sub-section (2) of Section 30, it can be approved by the Adjudicating Authority. 63. As the impugned Scheme dated 20th October, 2016 has not been approved by the 'Committee of Creditors' in terms of sub-section (4) of Section 30 of the 'I&B Code', it cannot be treated to be approved 'Resolution Plan' under sub-section (1) of Section 31. If the 'Resolution Plan' does not conform to the requirements of sub-section (2) of Section 30, it is to be rejected. 64. The Appellant- Pr. Director General of Income Tax (Admn. & TPS) has pointed out that the 'Resolution Plan' contravenes the provisions of the Income ....