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TMI Blog2018 (6) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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' (hereinafter referred to as "SICA Repeal Act, 2003") as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '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 repealed by the 'SICA Repeal Act, 2003'. The 'SICA Repeal Act, 2003' was enforced w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 binding and for the implementation of scheme under section 261 to 264 of the Companies Act, 2013; And, whereas, sections 253 to 269 of the Companies Act, 2013 have been omitted by Eleventh Schedule to the Insolvency and Bankruptcy Code, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 NCLAT to hear an appeal against an order passed by the 'Board' the Eighth Schedule of the 'I&B Code', having not been amended by a legislative Act, but by an executive order. 20. Learned counsel appearing on behalf of the Appellant- 'Principal Director of Income Tax (Admn. & TPS)' sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial 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 shall be amended in the manner specified in the Eighth Schedule." As per Section 252 of the Code, the Repeal Act was amended in the manner specified in the Eighth Schedule. The Eighth Schedule of the Code as originally enacted had amended Section 4(b) of the Repeal Act, and has been already reproduced above. Thus amende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 Government, in exercise of power conferred under Section 242 of the Code could have removed the difficulties which came to its notice upon enforcement of the Code and its implementation. Clause (b) to Section 4 of the Repeal Act, in fact, was substituted in terms of Eighth Schedule inserted by Section 252 of the Code." 26. At this stage, it is desirable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 of the NPA Act is not altered. It is not in dispute that the 2004 Order has been issued after the enactment of the NPA Act. After amending Act 30 of 2004, certain amendments have been made in Section 17(1) of the NPA Act. However, the 2004 Order dated 6-4-2004 does not, in any way, alter the scheme of the amended Act. It merely fills in the deficiency and, therefore, the 2004 Order will continue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 under Section 242 of the 'I&B Code' for removing the difficulties arisen due to 'SICA Repeal Act, 2003' or omission of provisions of the 'Companies Act, 2013', this Appellate Tribunal cannot act pursuant to impugned Notification S.O. 1683(E) dated 24th May, 2017 to entertain the appeal. The subject matter of Eighth Schedule and permissibility of its amendment. 38. The Eighth Schedule relates to amendment to the 'SICA Repeal Act, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect 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 in respect to cases, where appeal or reference stands abated. It does not mean that the Company cannot file application under Section 10 of the 'I&B Code' after 180 days. If the Company prefers any application under Section 10 beyond 180 days, it is required to pay the requisite fee. 43. If the legislature thought it fit that no appeal against the Scheme already framed or any proceeding before the Board or any proceeding of whatever nature pending before the Appellate Authority or the Board und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 hear and dispose of appeals against any direction issued or decision made or order passed by the Commission under sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39, section 43, section 43A, section 44, section 45 or section 46 of the Act; and (b) to adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the Appellate Tribunal in an appeal against any finding of the Commission or under section 42A or under sub- section (2) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od 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 persons. (iii) the debts owed to operational creditors of the corporate debtor have not been provided for in the resolution plan in the manner specified by the Board; (iv) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or (v) the resolution plan does not comply with any other criteria specified by the Board. (4) An appeal against a liquidation order passed under section 33 may be filed on grounds of material irregularity or fraud committed in relation to such a liquidation order." 49. Section 32 of the 'I&B Code' relates to 'grounds of appeal' agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 NCLAT has no jurisdiction to entertain an appeal under Section 61 beyond the period of forty-five days. 54. The NCLAT, having been empowered by the Parliament to hear the appeal under provisions of the Companies Act, 2013, 'I&B Code, 2016' and the Competition Act, 2003, the Central Government cannot empower the Appellate Tribunal to hear an appeal pursuant to Notification S.O. 1683(E) dated 24th May, 2017. 55. For the reasons aforesaid, we hold that both the appeals preferred by 'Pr. Director General of Income Tax (Admn. & TPS)' and 'GMB Ceramics India Ltd. & Ors.' against the Scheme framed by the Board are barred by limitation and otherwise not maintainable u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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), (d) and (f) or not. As per sub-section (2) (e) of Section 30, it is to be seen that the 'Resolution Plan' does not contravene any of the provisions of the law for the time being in force. The 'Committee of Creditors' are supposed to approve the 'Resolution Plan' by a vote of not less than seventy-five percent of in terms of sub-section (4) of Section 30. To understand the process of resolution, it is desirable to refer Section 30 which is quoted below: "30. Submission of resolution plan. ─ (1) A resolution applicant may submit a resolution plan to the resolution professional prepared on the basis of the information memorandum. (2) The resolution professional shall examine each resolution plan rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 Tax Act. 65. Learned Senior Counsel for the Appellant pointed out that the demerger Scheme has been passed at the cost of Government revenue which is against public interest. The demerger Scheme is in violation of the provision of sub-section (2) of Section 19 of SICA as per which consent of the Appellant was mandatory. Though the Appellant had filed its comments within sixty-days of the receipt of the draft Scheme and raised objections but the Board sanctioned the Scheme without considering the same. 66. The Respondent Company claimed unabsorbed losses to the extent of Rs. 77.12 Crores and possibility of further heavy loss of revenue due to exemption of capital gain tax on the transfer of assets of demerged company to SBPL, which is against the existing provisions of law, power being vested with the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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