The NCLAT, Principal Bench New Delhi, noted that the notification issued by the Central Government, “The Insolvency and Bankruptcy Code, Removal of Difficulties Order, 2017” has been adjudged by the Hon’ble Supreme Court as a notification which traveled beyond the scope of the removal of difficulties provisions. Therefore, this notification cannot be given effect.
It was also observed that Section 242(1) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) empowers Central Government to issue an order in case of difficulties in giving effect to the provisions in the IBC. The power given is only confined to the extent of removing difficulties and giving effect to the provisions of IBC. The Tribunal noted that the said powers cannot be used to remove any difficulty in regards to reviewing or monitoring of schemes under the Sick Industrial Companies (Special Provisions) Act, 1985.
Brief Facts
One M/s J.K. Synthetics Pvt. Ltd. Was declared as a sick industrial unit. A memorandum of understanding was entered into between M/s J.K. Synthetics Pvt. Ltd and Respondent. Later, the rehabilitation scheme was approved and sanctioned by the Appellate Authority for Industrial & Financial Reconstruction.
The Appellant claimed to be a representative of the workmen union of M/s J.K. Synthetics Pvt. Ltd. And filed an application under Section 33 R/w Section 34 of the IBC. It was alleged that the Rehabilitation Scheme had been breached and the Corporate Debtor must be liquidated as he is unable to fulfil the obligations and duties towards various stakeholders including creditors.
The Adjudicating Authority dismissed the Application and held that the Rehabilitation Scheme cannot be termed as a Resolution Plan as described under Section 5(26) of IBC and thus, there can be no question of breach of the plan.
The present appeal has been filed against the said order.
Contentions of the Appellant
It was contended that the Rehabilitation Scheme can be construed as a Resolution Plan within the meaning of IBC. Further relying on the notification (The Insolvency and Bankruptcy Code, Removal of Difficulties Order) dated 24.05.2017, it was argued that the application under Section 33 R/w 34 could have been filed and ought not to have been dismissed.
Contentions of the Respondent
It was argued that the said notification was outside the scope of jurisdiction and illegal. Therefore, it cannot be relied on and the Rehabilitation Scheme cannot be construed as a Resolution Plan within the meaning of IBC.
Observations of the Tribunal
The primary issue to be ascertained was whether the Rehabilitation Scheme can be construed as a Resolution Plan within the meaning of IBC. The Appellant mainly relied on the Insolvency and Bankruptcy Code, Removal of Difficulties Order, 2017.
The Tribunal noted that the said notification has been adjudged by the Hon’ble Supreme Court as a notification which travelled beyond the scope of the removal of difficulties provisions.
Further Section 242(1) of the IBC empowers Central Government to issue an order in case of difficulties in giving effect to the provisions in the IBC. The power given is only confined to the extent of removing difficulties and giving effect to the provisions of IBC. The Tribunal noted that the said powers cannot be used to remove any difficulty in regards to reviewing or monitoring of schemes under the Sick Industrial Companies (Special Provisions) Act, 1985.
Decision of the Tribunal
Hence, based on the abovementioned reasons, the Appellate Authority did not find any cogent reason to interfere with the order of NCLT and accordingly, the Appeal was dismissed.
Coram: Hon’ble Justice Mr. Ashok Bhushan, Dr. Alok Srivastava (Technical Member), Mr. Barun Mitra (Technical Member)
Case No.: Company Appeal (AT) Insolvency No. 312 of 2022
Advocates for Appellant: Advs. Mr. Pankaj Jain, Mr. Sarthak Dugar
Advocates for Respondent: Advs. Mr. Arvind Kumar Gupta, Ms. Purti Gupta, Ms. Henna George, Ms. Shivani Sharma
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