Gmb Ceramics Ltd vs Spartek Ceramics India Ltd. & Ors

Pr. Director General of Income Tax (Admn. & TPS) ...Appellant

Vs.

M/s. Spartek Ceramics India Ltd. & Anr. ...Respondents

Present:- For Appellant:- Mr. Puneet Raj, Advocate.

For Respondents:- Mr. Neeraj Chaudhary and Mr. K.K.R. Das, Advocates for Respondent No.1. Mr. Vijay Joshi, Senior Panel Counsel for Government of India, Advocate for Respondent No.3.

Company Appeal (AT) (Insolvency) No. 258 of 2017

[Arising out of Order dated 20.10.2016 passed by the Board for Industrial and Financial Reconstruction in Case No. 63/2006]

IN THE MATTER OF:

GMB Ceramics Ltd. ...Appellant

Vs.

M/s. Spartek Ceramics India Ltd. & Ors. ...Respondents

Present:- For Appellant:- Mr. Sanjeve Deora, Chartered Accountant, Mr. Pulkit Deora and Mr. Abhishek Kumar, Advocates.

For Respondents:- Mr. Neeraj Chaudhry, Advocate for 1ST Respondent.

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 2

Mr. Sanjay Jain, ASG with Mr. Vijay Joshi, Ms. Sneh Suman and Mr. Kartik Rai, Advocates for Respondent No.3.

JUDGEMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

As in these appeals the Respondent Company (M/s. Spartek

Ceramics India Limited & Anr.) is common and common question of law

is involved, though they were heard separately are being disposed of by

this common judgment.

2. Company Appeal (AT) (Insolvency) No. 160 of 2017 has been

preferred by "Principal Director of Income Tax (Admn. & TPS)" pursuant

to Notification Nos. 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.

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 3

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 amended by the Eighth

Schedule to the 'I&B Code' and by the Insolvency and Bankruptcy Code

(Removal of Difficulties) Order, 2017. In this appeal, the Appellant has

challenged the same very scheme of demerger sanctioned by order dated

20th October, 2016 passed in Case No. 63 of 2006 by Board, for

restructuring of the 1st Respondent- 'Spartek Ceramics India Limited'. It

is stated that an appeal was preferred by the Appellant before the

'Appellate Authority for Industrial and Financial Reconstruction'

(hereinafter referred to as "AAIFR"), which stood abated in view of the

'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

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 4

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?

ii. Whether the provision to prefer the appeal within ninety-

days before the NCLAT, as made by the Central Government

Notification dated 25th May, 2017 is in conflict with Section

61(2) of the 'I&B Code', which provides thirty-days period to

prefer an appeal before the NCLAT? and

iii. Whether the impugned scheme of demerger approved by the

Board by order dated 20th October, 2016, passed in Case No.

63 of 2006 is legal or not?

7. To decide these issues, it is necessary to notice the relevant

provisions of one or other Act/ Code and Notifications issued by the

Central Government from time to time under 'I&B Code'.

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 5

8. The '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 with effect from 1st December,

2016. Consequently, the 'SICA Act, 1985' was repealed and ceased to be

operative and proceedings under the 'SICA Act, 1985' before the Board

abated.

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 6

13. 'SICA Repeal Act, 2003' was enacted by the Parliament in 2004,

but was not notified under Section 1(2), till Notification No. S.O. 3568(E)

dated 25th November, 2016 was issued.

14. Section 4(b) of the 'SICA Repeal Act, 2003', as originally enacted,

was as under:

"4. Consequential provisions. --On the dissolution

of the Appellate Authority and the Board, --

(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;

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 7

(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 in accordance with the provisions of the

Companies Act, 1956 (1 of 1956) :

Provided further that no fee shall be payable for

making such reference under Part VI-A of the

Companies Act, 1956 (1 of 1956) by a company

whose appeal or reference or inquiry stand abated

under this clause:

Provided also that any scheme sanctioned

under subsection (4) or any scheme under

implementation under subsection (12) of Section 18 of

the repealed enactment shall be deemed to be a

scheme sanctioned or under implementation under

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 8 Section 424-D of the Companies Act, 1956 (1 of 1956)

and shall be dealt with in accordance with the

provisions contained in Part VI-A of that Act;"

However, 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:

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 9

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]"

The aforesaid amendment was made prior to 1st December, 2016

i.e. the date on which the 'SICA Repeal Act, 2003' was enforced.

16. The 'I&B Code' was given effect from 1st December, 2016. By 'I&B

Code' different Acts were amended, including the 'SICA Repeal Act, 2003'

under Section 252 in the manner specified in the Eighth Schedule as

quoted below:

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 10

"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 whose appeal or reference or inquiry stands abated under this clause."

17. Thereafter, vide Notification No. S.O. 1683 (E) dated 24th May,

2017, two provisos were added to Section 4(b) of the 'SICA Repeal Act,

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 11

2003'. The said Notification, also referred to as 'The Removal of Difficulty

Order, 2017', which reads as under: -

"S.O. 1683(E).- Whereas, the Insolvency and

Bankruptcy Code, 2016 (31 of 2016 (hereinafter

referred to as the said Code) received the assent of

the President on 28th May, 2016 and was published

in the official Gazette on the same date;

And, whereas, section 252 of the said Code

amended the Sick Industrial Companies (Special

Provisions) Repeal Act, 2003 (1of 2004) in the

manner specified in the Eighth Schedule to the said

Code;

And, 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 sub-

section (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

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 12

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,

2016;

And, whereas, clause (b) of section 4 of the

Sick Industrial Companies (Special Provisions)

Repeal Act, 2003 has been substituted by the Eighth

Schedule to the Code, which provides that any

appeal preferred to the Appellate Authority or any

reference made or inquiry pending to or before the

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 13

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. 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

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 14

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)

Repeal 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:

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 15

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 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.

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 16

20. Learned counsel appearing on behalf of the Appellant- 'Principal

Director of Income Tax (Admn. & TPS)' submitted that the Notification

S.O. 1683(E) dated 24th May, 2017, whereby two provisos have been

inserted to Section 4(b) of the 'SICA Repeal Act, 2003' by the Central

Government was challenged before the Hon'ble High Court of Delhi in

"Ashapura Minechem Ltd. V/s. Union of India" in W.P.(C) 9674/2017.

The Division Bench of Hon'ble High Court of Delhi, by its judgment dated

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

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 17

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 before the Board. In the

latter case, the proceedings pending before the

Board abate and come to an end. In fact,

proceedings pending before the Appellate

Authority under SIC Act also abate."

23. The Hon'ble High Court, while dealing with the vires of the

Notification S.O. 1683 (E) dated 24th May, 2017, observed:

"48. Counsel for the petitioner has further

challenged the vires of the aforesaid Removal of

Difficulties Order 2017/Notification S.O. 1683(E)

dated 24th May, 2017 on the ground that the same

could not have been passed in exercise of power

under Section 242 of the Code. It is submitted that

Section 242 is a provision which merely confers the

powers to 'remove difficulties' in the Code and

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 18

cannot be extended to amend the extant provisions

of the Repeal Act, or other enactments like

Recovery of Debts Due to Banks and Financial

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."

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 19

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 amended clause (b) to Section 4 of the

Repeal Act was specifically incorporated and

included in the Eighth Schedule. In this manner,

Section 4 clause (b) of the Repeal Act became part

and parcel of the Code. Thus, the said order is not

ultra vires as what has been done, in effect, is

under the Code itself. This being the position, we

do not think 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

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 20

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 heavy demands on the time of the

Legislature and endurance and skill of the

draftsman, it is well nigh impossible to foresee all

the circumstances to deal with which a statute is

enacted or to anticipate all the difficulties that might

arise in its working due to peculiar local conditions

or even a local law. This is particularly true when

Parliament undertakes legislation which gives a

new dimension to socio-economic activities of the

State or extends the existing Indian laws to new

territories or areas freshly merged in the Union of

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 21

India. In order to obviate the necessity of

approaching the Legislature for removal of every

difficulty, however trivial, encountered in the

enforcement of a statute, by going through the time-

consuming amendatory process, the Legislature

sometimes thinks it expedient to invest the Executive

with a very limited power to make minor

adaptations and 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:

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 22

"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 to notice the powers of the Central

Government to remove the difficulties under Section 242 of the 'I&B

Code', which 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.

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 23

(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 the Section 242 of the 'I&B Code'?

29. The aforesaid question was neither argued nor decided by the

Hon'ble High Court of Delhi.

Infirmity in the Notification S.O. 1683(E) dated 24th May, 2017

30. The infirmity in the impugned Notification S.O. 1683 (E) dated 24th

May, 2017 are discussed below.

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 24

31. We have noticed the decision of the Hon'ble Supreme Court in

"Madeva Upendra Sinai and others (Supra)", wherein the Hon'ble

Apex Court observed:

"In order to obviate the necessity of approaching

the legislature for removal of every difficulty,

howsoever trivial, encountered in the enforcement

of a statute, by going through the time-consuming

amendatory process, the legislature sometimes

thinks it expedient to invest the executive with a

very limited power to make minor adaptations

and 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."

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 25

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 to

operate even after amending Act 30 of 2004 and till

rules are prescribed in terms of Section 2(s) of the

NPA Act."

33. From the aforesaid observations, we find that the object of

supplying a deficiency is primary factor which is to be noticed and 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

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 26

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 made under this section shall be

laid, as soon as may be after it is made, before

each House of Parliament."

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 27

35. The question arises for consideration is whether the impugned

Notification S.O. 1683(E) dated 24th May, 2017 relates to removal of

difficulty arises in giving effect to the provisions of the case.

The Notification aforesaid, mentions the following difficulties:

"And, whereas, difficulties have arisen regarding

review or monitoring of the schemes sanctioned

under subsection (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 Sick Industrial Companies (Special

Provisions) Repeal Act, 2003 and omission of

sections 253 to 269 of the Companies Act, 2013"

36. From plain reading of the ground as shown in the impugned

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

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 28

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,

2003'. The legislature by Eighth Schedule substituted sub-clause (b) of

Section 4 of the 'SICA Repeal Act, 2003', as follows:

"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 --

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 29

"(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 under 'SICA Act, 1985', there

was a provision of the appeal under Section 25 of the 'SICA Act, 1985',

which was required to be preferred within forty-five days. The Appellate

Authority after notice to the parties and if it so desires, after making such

further inquiry as it deems fit was empowered to confirm, modify or set

aside the order appealed against (passed by the Board) or remand the

matter to the Board for fresh consideration.

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 30

40. In view of clause (b) of Section 4 of the 'SICA Repeal Act, 2003', the

appeal preferred to the Appellate Authority or any reference made 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, including the powers of the Board to give effect to the Scheme

or to monitor periodically for its implementation under sub-section (4)

read with sub-section (12) of Section 18 of the 'SICA Act, 1985' stood

abated. However, by virtue of the amendment under the Eighth Schedule,

the Company in respect 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.

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 31

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

under the 'SICA Act, 1985', including the proceedings for monitoring

under sub-section (12) of Section 18 shall stand abated, the question of

giving effect to the Scheme 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 sub-

clause (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:

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 32

"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-section (1) shall be

filed within a period of forty-five days from the

date on which a copy of the order of the Tribunal

is made available to the person aggrieved and

shall be in such form, and accompanied by such

fees, as may be prescribed:

Provided that the Appellate Tribunal may

entertain an appeal after the expiry of the said

period of forty-five days from the date aforesaid,

but within a further period not exceeding forty-

five days, if it is satisfied that the appellant was

prevented by sufficient cause from filing the

appeal within that period.

(4) On the receipt of an appeal under sub-section

(1), the Appellate Tribunal shall, after giving the

parties to the appeal a reasonable opportunity of

being heard, pass such orders thereon as it

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 33

thinks fit, confirming, modifying or setting aside

the order appealed against.

(5) The Appellate Tribunal shall send a copy of

every order made by it to the Tribunal and the

parties to appeal."

47. We have noticed that the legislature have constituted the NCLAT

under Section 421 of the Companies Act, 2013. 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

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 34

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 53Q of this

Act, and pass orders for the recovery of

compensation under section 53N of this

Act.

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

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 35

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.

(4) The Appellate Tribunal shall send a copy of

every order made by it to the Commission and the

parties to the appeal.

(5) The appeal filed before the Appellate Tribunal

under sub-section (1) shall be dealt with by it as

expeditiously as possible and endeavour shall be

made by it to dispose of the appeal within six

months from the date of receipt of the appeal."

48. The NCLAT has also been empowered by the Parliament to decide

the appeal under Section 61 of the 'I&B Code' against an order passed by

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 36

the Adjudicating Authority (National Company Law Tribunal), which

reads as follows: -

"61. Appeals and Appellate Authority. ─ (1)

Notwithstanding anything to the contrary

contained under the Companies Act 2013, any

person aggrieved by the order of the Adjudicating

Authority under this part may prefer an appeal to

the National Company Law Appellate Tribunal.

(2) Every appeal under sub-section (1) shall be

filed within thirty days before the National

Company Law Appellate Tribunal: Provided that

the National Company Law Appellate Tribunal

may allow an appeal to be filed after the expiry of

the said period 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

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 37

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' against

an order passed 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

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 38

manner and on the grounds laid down in sub-

section (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 Adjudicating Authority.

51. The impugned Notification S.O. 1683(E) dated 24th May, 2017 was

notified after five months twenty-seven days of enactment of the 'I&B

Code' (came into force from 1st December, 2016). All Schemes have been

framed by the Board prior to 1st December, 2016 i.e. before coming into

force of the 'I&B Code' i.e. much more than five months twenty-seven

days back (177 days).

52. The limitation of thirty days has been prescribed under sub-section

(2) of Section 61 for preferring an appeal against an order passed by the

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 39

Adjudicating Authority, including the order passed under section 31(1) of

the 'I&B Code'. The Appellate Tribunal for sufficient cause can condone

the delay but such period cannot exceed fifteen days. Therefore, no

appeal can be entertained after forty-five days of knowledge of order. The

Central Government, thereby cannot grant ninety days' period to prefer

an appeal under section 61(1), which is contrary to Section 61(2) of the

'I&B Code'.

53. The 'difficulty' as contemplated under Section 242 of the 'I&B Code'

has not been mentioned by the Central Government in the notification in

question. The Central Government in exercise of its powers 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

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 40

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 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.

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 41

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 appeals

58. Though we are not supposed to decide the merit of each of the

appeals, but if the arguments of the parties are accepted that the appeals

are maintainable under Section 61 read with Section 32 of the 'I&B Code'

and are within time, in such a case, following facts are to be noted:

(i) Whether the Scheme which is deemed to be a

'Resolution Plan' approved by the Adjudicating Authority

under section 31(1) of the 'I&B Code', is in contravention of

the provisions of any law for the time being in force?

(ii) Whether there has been a material irregularity in

exercising of the powers by the 'Insolvency Resolution

Professional' during the 'Corporate Insolvency Resolution

Process'?

(iii) Whether the 'debts' owed to the 'Operational Creditors'

have been provided for in the 'Resolution Plan'?

(iv) Whether Insolvency Resolution Process costs have

been provided for repayment in priority to all other debts?

and;

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 42

(v) Whether the 'Resolution Plan' complies with the

criterias prescribed by the Insolvency and Bankruptcy Board

of India?

59. The impugned Scheme was approved by the Board on 20th October,

2016 i.e. much prior to enforcement of the 'I&B Code', which came in

force on 1st December, 2016. On 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

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 43

to the resolution professional prepared on the basis

of the information memorandum.

(2) The resolution professional 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;

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 44

(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 committee of

creditors under sub-section (4) of section 30 meets

the requirements as referred to in sub-section (2)

of section 30, it shall by order approve the

resolution plan which shall be binding on the

corporate debtor and its employees, members,

creditors, guarantors and other stakeholders

involved in the resolution plan.

(2) Where the Adjudicating Authority is satisfied

that the resolution plan does not confirm to the

requirements referred to in sub-section (1), it may,

by an order, reject the resolution plan.

(3) After the order of approval under sub-section

(1),--

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 45

(a) the moratorium order passed by the

Adjudicating Authority under section 14

shall cease to have effect; and

(b) the resolution professional shall forward

all records relating to the conduct of the

corporate insolvency resolution process

and the resolution plan to the Board to be

recorded on its database."

62. From bare perusal of Section 31, it is clear that if the 'Resolution

Plan' approved by the 'Committee of Creditors' meets the requirement as

referred to in sub-section (2) of Section 30, it can be approved by the

Adjudicating Authority.

63. As the impugned Scheme dated 20th October, 2016 has not been

approved by the 'Committee of Creditors' in terms of sub-section (4) of

Section 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.

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 46

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 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

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017 47

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 court of Law for implementation the

Scheme.

70. Both the appeals are disposed of with aforesaid observations as

recorded above. However, in the facts and circumstances of the case,

there shall be no order as to costs.

(Justice S.J. Mukhopadhaya) Chairperson

(Justice Bansi Lal Bhat) Member(Judicial) NEW DELHI 28th May, 2018 /AR/

Company Appeals (AT) (Insolvency) Nos. 160 and 258 of 2017