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TMI Blog2023 (8) TMI 709X X X X Extracts X X X X X X X X Extracts X X X X ..... id order dated 26.02.2013 passed by the BIFR modified the Rehabilitation Scheme (hereafter 'the Scheme'), which was approved by the BIFR under Section 18(5) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereafter 'SICA') by an order dated 13.02.2001. The Scheme was amended to the limited extent of including additional exemptions from payment of income tax under the Income Tax Act, 1961 (hereafter 'IT Act'). The controversy 4. The DGIT assails the impugned order, essentially, on two fronts. First, that further concessions, as contemplated in the order dated 26.02.2013, could not be granted as the Scheme had come to an end. According to the DGIT no further concessions could be considered or granted without extending the term of the Scheme. Second, that in terms of the order dated 26.02.2013, the Scheme was modified to require the Income Tax Department to consider the grant of further concessions as specified in the said order and there is no requirement to necessarily grant the same. 5. The DGIT preferred an appeal [Appeal No. 33/2016] against the impugned order before the Appellate Authority for Industrial and Financial Reconstruction (hereafter 'AAIFR') under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Ghanshyam Sarda v. Shiv Shankar Trading Company & Ors (2015) 1 SCC 298. in support of his contention. Factual context 9. Briefly stated the relevant facts necessary to address the aforesaid controversy are as under: 10. The Company filed a reference before the BIFR under Section 15(1) of SICA, which was registered as Case No. 53/1995. By an order dated 05.10.1995, the BIFR declared the Company as a Sick Industrial Company within the meaning of Section 3(1)(o) of SICA and appointed Central Bank of India as the operating agency to prepare a rehabilitation package for the Company. 11. The Draft Rehabilitation Scheme was prepared in January 1996, and was circulated. However, the promoters of the Company expressed their difficulty to contribute Rs.8 crores, which was envisaged as their contribution in the Draft Rehabilitation Scheme. The Draft Rehabilitation Scheme was subsequently revised and discussed at various hearings. 12. In the meantime, the Company made a proposal for settlement of dues to two of its financial creditors, Central Bank of India and Union Bank of India, which was approved. The revised Draft Rehabilitation Scheme was circulated contemplating one ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the reliefs and concessions to be provided by the Income Tax Department, Government of India, is reproduced below: "9.8 The Government of India (Income Tax Department) a) To consider to allow the company to carry forward its accumulated losses and unabsorbed depreciation beyond the period of eight years till the networth becomes positive. b) To consider to grant exemption under Section 41(i) of the Income Tax Act, 1961, in respect of waivers agreed to by banks. c) To consider to exempt the company from capital gains tax on the sale of Dharwad land and other surplus assets of the company. d) To consider to exempt the company from MAT, during the period of rehabilitation, from the year 2000-01 to the year 2006-07. e) To consider to withdraw the attachment order on the assets of the company u/s 281B of the Income Tax Act, 1961. f) To consider to waive penalty/interest on late payment of tax deducted at source on salaries, interest and payment to contractors. If the above reliefs are not sanctioned, the company will be required to pay capital gains tax on Rs. 460 lakhs, which is the projected income from the sale of surplus assets during the year 2001-02. The company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside the Scheme and revoked all reliefs and concessions. 19. Being aggrieved by the order dated 06.04.2010 passed by the BIFR, the Company had preferred an appeal [Appeal No. 122/2010 dated 10.08.2010] before the AAIFR. The Company was successful and by an order dated 30.12.2011, the AAIFR upheld the sale of the assets and set aside the BIFR's order dated 06.04.2010. The AAIFR observed that there was no specific order passed by the BIFR under Section 22A of SICA restraining sale of assets other than those assets, which were contemplated to be sold under the Scheme. Thus, the sale of assets could not be declared as null and void. However, the AAIFR also held that a company ought to have sought modification of the Scheme under Section 18(5) of SICA and that the proceeds of the sale of assets were required to be utilised for rehabilitation of the Company. The AAIFR also directed the BIFR to consider the Company's application [MA No. 151/BC/2009 dated 30.09.2009] seeking modification of the Scheme by way of additional reliefs and concessions from the Income Tax Department. 20. Additionally, the AAIFR directed the BIFR to consider how the sale proceeds of assets could be used whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication" a) To consider to allow the company to carry forward its accumulated losses and unabsorbed depreciation beyond the period of eight year till the networth becomes positive; u/s 281B of the Income Tax Act, 1961; "No modification" f) To consider to waive penalty / interest on the late payment of tax deducted at source on salaries, interest and payment to contractors." 24. Thereafter, the Company applied to the Income Tax Department for grant of the reliefs in terms of the order dated 26.02.2013. However, the said reliefs were not granted. In the meanwhile, the Company filed an application [MA No.358/2014 dated 01.08.2014] before the BIFR, inter alia, seeking extension of rehabilitation period as contemplated under the Scheme, up to 31.03.2015. The Company also sought directions from the BIFR for the Income Tax Department to comply with the order dated 26.02.2013, whereby the Scheme was modified. The Income Tax Department opposed the Company's application. 25. While the said application was pending, the Company filed another application [MJA No.21/2015 in Appeal No. 122/2010] before the AAIFR, inter alia, seeking that directions to be issued by the Income Tax Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Government in exercise of its powers under Section 242(1) of the Insolvency and Bankruptcy Code, 2016. He also referred to the decision of this court in Ashapura Minechem Ltd. v. Union of India & Ors. 31. In terms of the Insolvency and Bankruptcy Code (Removal of Difficulties) Order, 20172, two further provisos were inserted under Section 4(b) of the Repeal Act, which read as under: "Provided also that any scheme 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 shall be deemed to be an approved resolution plan under sub- section (1) of section 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the same does not imply that any person aggrieved by the rehabilitation scheme or any subsisting orders of the BIFR is without any remedy at all. It is settled law that there is no inherent or fundamental right of an appeal, the right to appeal is available only if the statute provides for the remedy of an appeal. However, the fact that there is no statutory appellate remedy does not preclude this Court from exercising powers under Articles 226 and 227 of the Constitution of India. The recourse of this Court under Articles 226 and 227 of the Constitution of India is not precluded or proscribed where the relevant statues do not provide a remedy of appeal. Although this Court while exercising its powers under Articles 226 and 227 of the Constitution of India does not undertake a full merits review - which may be available in cases where an appeal is provided by the statute - a party is not precluded from challenging the orders passed by the statutory authorities on the ground that they fall foul of the constitutional guarantees or are otherwise contrary to law. 38. Thus, we reject the contention that the present petition is not maintainable 39. The next question to be exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The measures as specified under Section 18 of SICA are not open ended but for the specified object of reviving the sick company. 43. The reliance placed by Mr Mehta on the decision of the Supreme Court in Ghanshyam Sarda v. Shiv Shankar Trading Company & Ors. is erroneous. There is no cavil with the proposition that once a company has been registered under SICA, the jurisdiction to decide whether its net worth has become positive and to deregister the same would rest with the BIFR. Merely because a sick company has made its net worth positive after it was registered with SICA did not exclude it from the jurisdiction of the BIFR. However, the said decision is not an authority for the proposition that once a rehabilitation scheme has been sanctioned envisaging revival of the company within the stipulated period; the said scheme would continue to be operative even after the specified period had long lapsed. 44. As noted above, the Company had, in fact, sought modification of the Scheme by seeking that its term be extended. An extension of the period of the Scheme would entail substantially altering not only the assumptions on which the scheme rests but also its parameters. In terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod, it shall be deemed that consent has been given. xxx xxx xxx (4) Where in respect of any scheme consent under sub-section (2) is not given by any person required by the scheme to provide financial assistance, the Board may adopt such other measures, including the winding up of the sick industrial company, as it may deem fit." 46. Clearly, no modification of the Scheme could be sanctioned requiring the Income Tax Department to give further concessions without the department consenting to grant such an extension. 47. Admittedly, the Company's application seeking modification of the scheme by extending the term remained pending with the BIFR. In terms of Section 18(5) of SICA, it was open for the BIFR to modify the Scheme and extend its term if it considered it apposite. However, no such modification could be sanctioned without the consent from the said concerned government, banks, institutions or authorities if the modification of the Scheme entailed any concession or financial assistance from such persons. 48. In view of the above, there is merit in the contention that the Scheme sanctioned by the BIFR had expired. The Scheme contemplated measures for exceeding the net w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." 51. Mr Mehta's contention that the expression, "to consider to allow the company to set off capital gains ...."must necessarily be read as "to allow the company to set off capital gains tax ....", is plainly erroneous and also militates against the Company's express stand before the BIFR. Mr Mehta had contended that there are decisions of this Court interpreting the expression "to consider to allow" in the manner as canvassed by him. However, it is not relevant to examine the same. As in the present case, it was the Company's stand before the BIFR that the additional concessions as proposed did not obligate the Income Tax Department to necessarily grant the same and it retained the discretion to do so. 52. Before concluding, it is also relevant to examine the additional tax concessions as sought by the Company. In terms of the Scheme, the promoters of the Company were required to make good any shortfall in the projections under the Scheme. It is stated that the promoters of the Company as a part of their contribution, gifted shares of some other companies to the Company. The sale of the said shares would result in capital gains and the Company sought to avoid payment of tax on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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