TMI Blog2018 (6) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... B Code’, it being against the provisions of the existing laws and being in violative of sub-section (2) of sub-clause (e) of Section 30 of the ‘I&B Code’ is fit to be set aside. The allegations, as made above, that the Scheme is against the provisions of the existing law, have not been disputed by the Respondents. Though, we find that the impugned Scheme dated 20th October, 2016 is illegal but in absence of our jurisdiction to exercise of powers under Section 61 of the ‘I&B Code’, being barred by limitation, it will not be desirable to set aside the impugned illegal Scheme dated 20th October, 2016. But we hold the same illegal. In absence of any provision to get the Scheme executed through any Court of Competent jurisdiction, the relevant provision(s) having been repealed, the Appellant may raise the question, if the Respondents move before any court of Law for implementation the Scheme - Company Appeal (AT) (Insolvency) No. 160 of 2017 And Company Appeal (AT) (Insolvency) No. 258 of 2017 - - - Dated:- 28-5-2018 - MR. S. J. MUKHOPADHAYA AND MR. BANSI LAL BHAT, JJ. For The Appellant : Mr. Puneet Raj, Advocate, Mr. Sanjeve Deora, Chartered Accountant, Mr. Pulkit Deora a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SICA Repeal Act, 2003 . 5. The main challenge has been made on the ground that the Board has not discussed the objections raised by the Appellant nor has taken into consideration that the Appellant is the Creditor of the 1st Respondent Company, which was required to take the responsibility and other liabilities which were not recorded in the books of Neycer. The Board failed to consider that it had itself, in respect of Modified Rehabilitation Scheme (MS) (08) of Neycer by order dated 6th October, 2008, directed the Spartek Ceramics India Limited to bring in funds in the form of an unsecured loan to Neycer in order to meet its liability towards the Appellant Company. 6. The questions arise for consideration in these appeals are: i. Whether the Central Government, in exercise of powers conferred under Section 242 of the I B Code , which pertains to removal of difficulties in giving effect to the provisions of the I B Code , can empower National Company Law Appellate Tribunal (hereinafter referred to as NCLAT ) to hear an appeal against the order passed by the Board by amending Eighth Schedule of the I B Code , not by a legislative Act, but by an executive order? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - ( a) XXXX ( b) any appeal preferred to the Appellate Authority or any reference made to the Board 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 immediately before the commencement of this Act shall stand abated: Provided that a company: - (i) in respect of which such appeal or reference or inquiry stand abated under this clause may make a reference under Part VI-A of the Companies Act, 1956 (1 of 1956) within one hundred and eighty days from the commencement of this Act in accordance with the provisions of the Companies Act, 1956; (ii) which had become a sick industrial company as defined in clause (46-AA) of Section 2 of the Companies Act, 1956 (1 of 1956), before the commencement of the Companies (Second Amendment) Act, 2002 (11 of 2003) may make a reference under Part VI-A of the Companies Act, 1956 within one hundred and eighty days from the commencement of the Companies (Second Amendment) Act, 2002 or within sixty days of final adoption of accounts after such commencement, whichever is earlier, and reference so made shall be dealt with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Eighth Schedule as quoted below: THE EIGHTH SCHEDULE ( See section 252) AMENDMENT TO SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) REPEAL ACT, 2003 ( 1 OF 2004) In section 4, for sub-clause (b), the following sub-clause shall be substituted, namely - ( 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 the Sick Industrial Companies (Special Provisions) Act,1985 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 commencement of the Insolvency and Bankruptcy Code, 2016 in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016: Provided further that no fees shall be payable for making such reference under Insolvency and Bankruptcy Code, 2016 by a company w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustrial Companies (Special Provisions) Act, 1985 shall stand abated. Further, it was provided that a company in respect of which such appeal or reference or inquiry stands abated under this clause may make a reference to the NCLT under the Code within one hundred and eighty days from the date of commencement of the Code; And, whereas, difficulties have arisen regarding review or monitoring of the schemes sanctioned under sub-section (4) or any scheme under implementation under 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) Repeal Act, 2003 and omission of sections 253 to 269 of the Companies Act, 2013; Now, therefore, in exercise of the powers conferred by the sub-section (1) of the section 242 of the insolvency and Bankruptcy Code, 2016 (31 of 2016), the Central Government hereby makes the following Order to remove the above said difficulties, namely: - 1. Short title and commencement. (1) This Order may be called the Insolvency and Bankruptcy Code (Removal of Difficulties) Order, 2017. 2. In the Insolvency and Bankru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 1st November, 2017, upheld the aforesaid provisions. 21. From the judgment of the Hon ble High Court of Delhi in Ashapura Minechem Ltd. (Supra) , we find that the Petitioner therein had not raised the question, as to whether by an executive order, an Act can be amended or not and whether the Central Government can delegate power to the NCLAT to hear an appeal under Section 61 of the I B Code . 22. The Hon ble High Court of Delhi while noticed Section 5(1)(d) of the SICA Repeal Act, 2003 , observed as follows: 19. Section 5(1)(d) of the Repeal Act, which incorporates the saving clause, provides that the repeal would not affect any order where schemes have already been sanctioned. Section 4(b) and Section 5(1)(d) have to be read harmoniously. The effect of Section 5(1)(d) is that any order made by the Board/BIFR sanctioning the schemes before the date of abatement, as notified under Section 4(b), such schemes would not get affected. Read in this manner, the two provisions draw a distinction between cases where draft schemes have been approved by the Board before enforcement of the Repeal Act and cases where inquiry or draft scheme was pending consideration befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hink that the petitioner is correct in contending that the Central Government could not have issued the Removal of Difficulties Order, to rectify and correct anomalies noticed while implementing the Code. 24. The Hon ble High Court of Delhi has referred the decision of the Constitutional Bench of the Hon ble Supreme Court in Madeva Upendra Sinai and others v. Union of India and others (1975) 3 SCC 765 , wherein, it has held as under: 36. This raises two questions: (1) Is this a difficulty within the contemplation of clause (7) of the Regulation? (2) Is the Central Government in the exercise of its power under that clause competent to supply of deficiency or casus omissus of this nature? 38. For a proper appreciation of the points involved, it is necessary to have a general idea of the nature and purpose of a removal of difficulty clause and the power conferred by it on the Government. 39. To keep pace with the rapidly increasing responsibilities of a welfare democratic State, the Legislature has to turn out a plethora of hurried legislation, the volume of which is often matched with its complexity. Under conditions of extreme pressure, with hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... published in the Official Gazette, make such provisions not inconsistent with the provisions of this Code as may appear to be necessary for removing the difficulty: Provided that no order shall be made under this section after the expiry of five years from the commencement of this Code. ( 2) Every order made under this section shall be laid, as soon as may be after it is made, before each House of Parliament. 27. The aforesaid provision shows that the Parliament, with a view to remove difficulties in giving effect to the provisions of the I B Code , has empowered the Central Government to make such provisions not inconsistent with the provisions of the I B Code as may appear to be necessary for removing the difficulties. 28. The question arises for consideration in this appeal is whether Notification S.O. 1683 (E) dated 24th May, 2017 issued by the Central Government in exercise of the powers conferred under section 242 relates to giving effect to the provisions of the I B Code or for removing any difficulty in giving effect to the provision of the I B Code ? In other words, whether Notification No. S.O. 1683 (E) dated 24th May, 2017 is consistent with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in no manner it can alter the scheme. The Executive can fill in the deficiency but cannot amend the substantive provision of the Act. It is a settled law that the legislature/Parliament can authorise an executive authority to modify either existing or future laws but not any of the essential feature. The executive authority cannot act beyond the powers delegated by the legislature. 34. Section 242 of the I B Code empowers the Central Government to remove the difficulties. The Central Government is empowered to make such provisions not inconsistent with the provisions of the I B Code , which is necessary for removing the difficulties in giving effect to the I B Code , and reads as follows: - 242. Power to remove difficulties. ─ ( 1) If any difficulty arises in giving effect to the provisions of this Code, the Central Government may, by order, published in the Official Gazette, make such provisions not inconsistent with the provisions of this Code as may appear to be necessary for removing the difficulty: Provided that no order shall be made under this section after the expiry of five years from the commencement of this Code. ( 2) Every order ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L COMPANIES (SPECIAL PROVISIONS) REPEAL ACT, 2003 ( 1 OF 2004) In section 4, for sub-clause (b), the following sub-clause shall be substituted, namely - ( 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 the Sick Industrial Companies (Special Provisions) Act,1985 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 commencement of the Insolvency and Bankruptcy Code, 2016 in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016: Provided further that no fees shall be payable for making such reference under Insolvency and Bankruptcy Code, 2016 by a company whose appeal or reference or inquiry stands abated under this clause. 39. Against an order of the Board made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme by treating the Scheme as a Resolution Plan approved by the Adjudicating Authority does not arise. 44. If the intention of the legislature/Parliament substituting subclause (b) of Section 4 (by Eighth Schedule) is looked into, we find that the executive instruction issued by the Central Government under Section 242 is contrary to the provisions of sub-clause (b) of Section 4 of the SICA Repeal Act, 2003 . 45. In view of the aforesaid discussion, we find that the grounds shown by the Central Government in Notification S.O. 1683(E) dated 24th May, 2017 for exercising powers conferred under Section 242 are in conflict with the amended sub-clause (b) of Section 4 of the SICA Repeal Act, 2003 . Powers of National Company Law Appellate Tribunal (NCALT) 46. The NCLAT has been constituted under Section 421 of the Companies Act, 2013, which reads as follows: 421. Appeal from orders of Tribunal. - ( 1) Any person aggrieved by an order of the Tribunal may prefer an appeal to the Appellate Tribunal. ( 2) No appeal shall lie to the Appellate Tribunal from an order made by the Tribunal with the consent of parties. ( 3) Every appeal under sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53B. Appeal to Appellate Tribunal . ─ ( 1) The Central Government or the State Government or a local authority or enterprise or any person, aggrieved by any direction, decision or order referred to in clause (a) of section 53A may prefer an appeal to the Appellate Tribunal. ( 2) Every appeal under sub-section (1) shall be filed within a period of sixty days from the date on which a copy of the direction or decision or order made by the Commission is received by the Central Government or the State Government or a local authority or enterprise or any person referred to in that sub-section and it shall be in such form and be accompanied by such fee as may be prescribed: Provided that the Appellate Tribunal may entertain an appeal after the expiry of the said period of sixty days if it is satisfied that there was sufficient cause for not filing it within that period. ( 3) On receipt of an appeal under sub-section (1), the Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the direction, decision or order appealed against. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Adjudicating Authority approving the Resolution Plan in the manner and the grounds laid down in sub-section (3) of Section 61, and reads as follows: 32. Appeal.─ Any appeal from an order approving the resolution plan shall be in the manner and on the grounds laid down in subsection (3) of section 61. 50. From the aforesaid provision, it is clear that the grounds to prefer appeal under Section 61 of the I B Code against an order of approval of plan passed by the Adjudicating Authority under Section 31, should be such as mentioned in sub-section (3) of Section 61. As per sub-section (2) of Section 61, the appeal is required to be filed within thirty days before the NCLAT. The Appellate Tribunal is empowered to condone the delay of another fifteen days after the expiry of the period of thirty days in preferring the appeal that too for sufficient cause. It has no power to condone the delay if appeal under Section 61 is preferred beyond fifteen days from the date of the expiry of the period of thirty days. Meaning thereby, no appeal under sub-section (1) of Section 61 can be entertained after forty-five days of knowledge of the order passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under Section 61 of the I B Code . 56. As per Section 411 of the Companies Act, 2013, the Chairperson shall be a person who is or has been a Judge of the Supreme Court or the Chief Justice of a High Court. Even though the post of the Chairman can be held by a sitting Judge of the Hon ble Supreme Court, the NCLAT has no jurisdiction to declare any of the decision of the Hon ble High Court passed under any jurisdiction including Article 226 of the Constitution of India as illegal. The NCLAT has also no jurisdiction to declare any Central Government Notification illegal nor can set aside the same either under Section 421 of the Companies Act, 2013 or under Section 61 of the I B Code or under Section 53(B) of the Competition Act, 2002. 57. To maintain the judicial decorum, though we have noticed the conflict in the order passed by the Hon ble High Court of Delhi and the Notification S.O. 1683(E) dated 24th May, 2017, we refrain from giving any specific declaration about the same. In spite of observations as made above, the next question requires consideration is that if otherwise the appeals are maintainable the impugned Scheme is legal or not. Merit of the appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essional shall examine each resolution plan received by him to confirm that each resolution plan- ( a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the repayment of other debts of the corporate debtor; ( b) provides for the repayment of the debts of operational creditors in such manner as may be specified by the Board which shall not be less than the amount to be paid to the operational creditors in the event of a liquidation of the corporate debtor under section 53; ( c) provides for the management of the affairs of the Corporate debtor after approval of the resolution plan; ( d) the implementation and supervision of the resolution plan; ( e) does not contravene any of the provisions of the law for the time being in force; ( f) conforms to such other requirements as may be specified by the Board. 61. Section 31 of the I B Code relates to approval of the Resolution Plan by the Adjudicating Authority and as quoted below: 31. Approval of resolution plan. ─ ( 1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the transfer of assets of demerged company to SBPL, which is against the existing provisions of law, power being vested with the Income Tax Authorities. 67. Thus, if the impugned approved Scheme dated 20th October, 2016, is treated to be an approved Resolution Plan under sub-section (1) of Section 31 of the I B Code , it being against the provisions of the existing laws and being in violative of sub-section (2) of sub-clause (e) of Section 30 of the I B Code is fit to be set aside. The allegations, as made above, that the Scheme is against the provisions of the existing law, have not been disputed by the Respondents. 68. Though, we find that the impugned Scheme dated 20th October, 2016 is illegal but in absence of our jurisdiction to exercise of powers under Section 61 of the I B Code , being barred by limitation, it will not be desirable to set aside the impugned illegal Scheme dated 20th October, 2016. But we hold the same illegal. 69. Further, in absence of any provision to get the Scheme executed through any Court of Competent jurisdiction, the relevant provision(s) having been repealed, the Appellant may raise the question, if the Respondents move before any c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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