M.K. Shrawat, Member - (1.) This Petition is submitted on 29.05.2017 under section 10 of Insolvency & Bankruptcy Code (hereinafter The Code) on Form No.6 under Rule 7 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules 2016. According to the Petitioner, total Debt in default was to the tune of Rs.240 crores as stated in Part-Ill of Form No.6 under the column 3 titled as Total Debt raised and amount in Default'.
(2.) Before adjudicating the issue of admission of this Petition, it is worth to shortlist the legal points raised in the Miscellaneous Application as also argued before us as under :- a) Whether the Petition is 'Maintainable under section 10 of The Code when the Board for Industrial and Financial Reconstruction (BIFR) proceedings were finalised in respect of part of the outstanding Debt? b) Whether the Insolvency Resolution Process be commenced in respect of the entire Debt or confined to the part of the Debt which is not considered or adjudicated upon by the authorities of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) ?
(3.) To get the answer, first a Miscellaneous Application (177 of 2017) is to be addressed wherein it is informed that the 'Modified Draft Rehabilitation Scheme' (MDRS) filed by the Petitioner on the basis of an order of AAIFR be considered before appointing an Insolvency Professional. The backgrounds of the events were that the Company was promoted by one Mr. S.N. Shetty in the year 1982 to manufacture snack foods and Soya Oil. In the year 1990 there was a diversification in the business for setting up an alcohol based Glycol Plant near Pune. The Project was originally estimated at Rs.275 crores, however, completed at the cost of ?388 crores in 1993. The said Project was part-financed by Term Loan of Rs.218 crores. The completion of the Project had coincided with the de-control of Molasses and Alcohol prices. Due to the said reason the Project has become unviable, stated to be from inception. The manufacturing Plant worked intermittently and finally closed down in March 1996. The net worth got eroded. Due to erosion of the net worth of the Company an Application was moved before BIFR in the year 1997. In March 1998, the Company was declared as a 'sick Company' and the revival process had undertaken, A Draft Rehabilitation Scheme (DRS) was circulated by BIFR on 07.09.2007. A Scheme was sanctioned (SS-08) for revival by BIFR on 28.05.2008 calling the meeting of all the Creditors for taking consent of the majority of the Creditors. Certain promoters have infused substantial funds into the Company for payment towards Creditors and other stake holders. Pursuant to the said SS-08 Scheme the Company was granted several concessions for repayment of outstanding dues viz. Creditors, CBDT and other Agencies. Importantly it is highlighted that pursuant to the said SS-08 Scheme the Company had made payment to the tune of ?150.71 crores out of the total liability of Rs.152.84 crores. According to the Petitioner, about 98.61% payment was made against the total outstanding Debt. Progress report implementing the Scheme was submitted with IDBI (OA) and BIFR. 3.1 Our Attention has been drawn on an important fact that due to certain noncompliance of sanctioned Scheme SS-08, the concessions were not granted by few authorities. The two Government Authorities have not granted waiver of interest and penalty viz. Sales Tax Department of Maharashtra and PF Department. As a result, the sanction Scheme could not be totally complied with, hence in exercise of its power under section 18(12) of Sick Industrial Company Act, 1985 BIFR had passed an Order dated 31st October, 2013 directing to, "submit fully tied Up MORS incorporating the dues of Sales Tax Department and other Liabilities, to IDBI (MA) within six weeks." 3.2 The Sales Tax Department filed a Miscellaneous application seeking recovery under section 22(1) of Sick Industrial Company Act 1985. However, it was not entertained and disposed by BIFR on account of the fact that MDRS was under consideration at that time. In the like manner, the Application of PF Department had also been shelved by the Order of BIFR dated 31st October, 2013 as per the following directions:- " 3. Having considered the submissions made, material on record, the Bench issued the foliowings: (c) PF Department is restrained from taking any coercive against the company and its directors, till the next date of haring. t+*** (d) since the dues of the Sales Tax Department, Maharashtra will be part of MORS, therefore, permission for recovery at this stage is not appropriate, therefore, permission for recovery at this stage is not appropriate,..." 3.3 Thereafter, efforts have been made to resolve the issue with Sales Tax Department. Hence IDBI Operating Agency (OA) convened a joint meeting on 02-01-2014 for crystallization of dues of Sales Tax Department. On one hand the Company had made an offer of Rs.1,67,43,704/- on the other hand the Sales Tax Department offered a final amount of 3E1,69,69,504/-. The MDRS was again submitted for due consideration by BIFR. On 26.10.2016 the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) had given a direction as under :- " we dispose of this appeal with the direction to the BIFR that the MDRS filed by the appellant should be considered on merits without being influenced, in any manner, by the observations made in the impugned order." 3.4 Thereafter, changes in Law had occurred. On 25.11.2016 vide Notification No. S.O. 3568 (E), the SICA Act 1985 was repealed. According to SICA Repeal Act 2003 the proceedings pending before BIFR were transferred to NCLT. Importantly, vide one more Notification dated 24.05.2017, the Schemes sanctioned under section 18(4) of SICA Act and Scheme under implementation under section 18(12) of SICA Act were to be considered as 'approved Resolution Plan' under the Insolvency and Bankruptcy Code, 2016. At this juncture it is worth to reproduce a portion of Notification SO 3568 (E) and SO 3569 (E) brought into force the Sick Industrial Companies (Special Provisions) Repeal Act 2003 with effect from 01.12.2016 read with SO 1683 (E) dated 24.05.2017:- "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) Act, 1985, substitution of clause (b) of section 4 of the Slick 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 subsection (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 Bankruptcy Code, 2016, in the Eighth Schedule, relating to amendment to the Sick Industrial Companies (Special Provisions) Repeat Act, 2003, in section 4, in clause (b), after the second proviso, the following provisos shall be inserted, namely :- "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/';