Paradeep Phosphates Limited vs State Of Odisha Through Secretary ...

[Arising out of Orders dated 17.01.2023 passed by the Adjudicating Authority (National Company Law Tribunal, Cuttack Bench, Cuttack), in TP No. 99/CTB/2019 (Formerly C.P. (IB) No.342/KB/2017)]

IN THE MATTER OF: Paradeep Phosphates (PPL) ...Appellant Versus State of Orissa & Anr. ...Respondents

Present: For Appellant : Mr. Krishnendu Dutta, Sr. Advocate with Ms. Varsha Banerjee and Ms. Udita Singh, Advocates.

For Respondents : Mr. Shashank Bajpai, Spl. Counsel with Ms. Aashna Mehra, Mr. Akshit Saxena, Mr. Vatsal Tripathi and Mr. Govind Singh Chauhan, Advocates.

JUDGMENT

ASHOK BHUSHAN, J.

This appeal has been filed by the appellant challenging the order dated

17.01.2023 passed by the adjudicating authority (National Company Law

Tribunal, Cuttack Bench, Cuttack) in TP No. 99/CTB/2019 (Formerly C.P.

No.342/KB/2017 on file of NCLT/Kolkata). The petition filed by the appellant

has been rejected by the NCLT, aggrieved by the order, this appeal has been

filed.

2. Brief background facts of the case giving rise to this appeal need to be

noticed:

i. The appellant is a Public Limited Company engaged in the business of

manufacture and sale of fertilizers and other related products. The net

worth of the appellant company turned negative in the financial year

ending on 30.09.2002.

ii. The appellant filed a reference under provision of Sick Industrial

Company, Special Provisions Act, 1985 (hereinafter referred to as

"SICA"), which was registered as Case No. 238/2003. Appellant was

declared a SIC Industrial Company by Board for Industrial and

Financial Reconstruction ("BIFR") by order dated 20.07.2005. Draft

Rehabilitation Scheme ("DRS") was prepared and circulated to all

parties including Government of Orissa.

iii. BIFR heard the objection of DRS on 15.05.2008. In the said hearing,

representative of Government of Orissa submitted that there is no policy

to provide any relief to SIC Industrial Company. BIFR thereafter heard

the matter on 02.09.2008 and sanctioned the scheme. Paragraph 20

of the scheme which dealt with reliefs and concessions envisaged

exemption from VAT/Sale Tax and Entry Tax.

iv. Appellant sent a representation to the Government of Orissa for grant

of exemption as per the approved scheme 02.09.2008. The net worth

of appellant turned positive on 31.03.2011. Appellant filed MA

442/2011 before the BIFR praying for direction to the state to provide

benefit of exemption. Appellant also sought de-registration from the

purview of SICA. MA 442/2011 was disposed of by the BIFR on

Comp. App. (AT) (Ins.) Nos. 193 of 2023 2 of 27 02.08.2011 de-registering the company as SIC Industrial undertaking.

Appellant was assessed under Orissa Entry Tax and filed a Writ Petition

in Orissa High Court on 27858/2013, which Writ Petition was disposed

of on 15.01.2014 by the High Court, accepting the prayers of appellant

to consider the representation filed by the appellant.

v. The order dated 15.01.2014 was challenged by the appellant before the

Hon'ble Supreme Court, where Hon'ble Supreme Court disposed of the

appeal on 17.02.2014 directing the appellant to deposit 50% of the tax

demanded along with interest. In pursuance of the direction of the High

Court dated 15.01.2014, the State of Orissa passed an order rejecting

the application of the appellant seeking exemption from tax.

vi. Appellant thereafter filed an MA No.285/2014 before the BIFR seeking

direction against the state for implementation of the provisions of the

sanctioned scheme. Notice of assessment was issued to the appellant.

Appellant again filed Writ Petition No.20338/2014 before the High

Court for quashing the order rejecting the representation.

vii. On 01.12.2016 Insolvency and Bankruptcy Code, 2016 (for short the

"Code" or the "IBC") came into force and the provisions of SICA were

also repealed.

viii. Appellant filed a C.P. No.342/2017 before the NCLT Kolkata Bench on

08.05.2017 seeking declaration that approved scheme of BIFR be

declared as an approved resolution scheme under Section 31 of the IBC.

State of Orissa filed an objection to the application. The said C.P.

Comp. App. (AT) (Ins.) Nos. 193 of 2023 3 of 27 No.342/2017 was subsequently transferred to the Cuttack Bench,

which was registered as C.P. No. 99/CTB/2019.

ix. The Writ Petition 20338/2014 pending in High Court was disposed of

on 07.12.2021 by the High Court observing that NCLT to decide the

pending application in accordance with the law. Appellant also

challenged the order of the High Court dated 07.12.2021 before the

Hon'ble Supreme Court, which SLP was dismissed on 23.09.2022. The

C.P. 342/2014 was objected by the State of Orissa by filing objection.

Adjudicating authority heard the parties and by the impugned order

dated 17.01.2023 rejected the C.P.342/2017, aggrieved by which order,

this appeal has been filed.

x. Adjudicating authority in the impugned order has framed 3 points for

determination which are as follows:

"The points for determination are:

1) Whether the petitioner is entitled for tax exemption even after the disposal of M.A.No.442 of 2011 on 16.08.2011?

2) Whether the Scheme SS-08 sanctioned by BIFR without the consents of the respondents is binding upon the respondents?

3) Whether the petitioner is entitled for tax exemption under the scheme SS-08 when it collected the Taxes? xi. On Point No. 1, adjudicating authority held that appellant has no right

to prefer the petition after the disposal of MA 442/2011 on 16.08.2011.

On Point No. 2 it was held that during hearing before the BIFR on

15.05.2008, the representative of the Government of Orissa submitted

that Government of Orissa has no policy to provide any relief to sick

Comp. App. (AT) (Ins.) Nos. 193 of 2023 4 of 27 companies. It was held that any scheme sanctioned without the

consent of the entities will not be binding. The point was answered

against the appellant. Point No. 3 was also decided against the

appellant. Adjudicating authority while considering the Point No. 3

referred to Notification dated 24.05.2017 issued by the Central

Government and held that appellant did not prefer an appeal against

the order of BIFR within the time allowed. Notification dated

24.05.2017 does not revive the already time barred right to file an

appeal. After answering the 3 points of determination, the application

filed by the appellant was dismissed.

xii. Aggrieved by the said order, this appeal has been filed.

3. We have heard learned Sr. counsel Mr. Krishnendu Dutta appearing for

the appellant as well as learned counsel Mr. Sushant Bajpai, Spl. counsel

with Ms. Aashna Mehra appearing for the State of Orissa.

4. Learned counsel for the appellant submits that adjudicating authority

committed error in rejecting the company petition filed by the appellant which

was filed for enforcement of the Sanctioned Scheme SS-08. Under Clause 20

of the scheme, scheme granted relief and concessions, relating to exemption

of VAT Sale Tax and Entry Tax. Learned counsel submitted that issue of Sales

Tax, Vat Tax has stand settled and only issue surviving is the issue of

exemption in the Entry Tax. It is submitted that scheme was never objected

by representative of the Orissa Government. In the hearing dated 15.05.2009

although representative of the Government of Orissa submitted that there is

Comp. App. (AT) (Ins.) Nos. 193 of 2023 5 of 27 no policy of granting exemption to Sick Industries but that proceeding cannot

be treated to any objection or refusal of consent to the scheme. There being

no written objection communicated to the scheme it shall be deemed to be

approved by virtue of Section 19 of the SICA Act, 1985. It is submitted that

scheme was binding on the state and state was obliged. Scheme was

sanctioned for period of 7 years from 2007-14. The fact that appellant was

de-registered as SIC Industries on 16.08.2011 by order of BIFR does not affect

the entitlement of the appellant to get the benefit of scheme till 2014.

Objection of the respondent that claim of the appellant is barred by limitation

is incorrect. Appellant has been consistently approaching the concerned

department for due implementation of the scheme, since 2008. The objection

of the respondent that for availing the benefit of Section 5 of SIC Industrial

Companies (Special Provisions) Repeal Act, 2003, there must be continuing

scheme is without any basis. The de-registration of the company from

purview of SICA shall not result in non-implementation of the terms of the

sanctioned scheme. Clause 20(i)(b) of SS-08 is clear and unequivocal.

5. Learned counsel for the State of Orissa refuting the submissions of the

counsel for the appellant has referred to in his reply filed in the appeal where

various objections have been raised to the company petition filed by the

appellant. It is submitted that MA No. 442/2011 having been disposed of by

BIFR on 16.08.2011 de-registering the appellant from SIC Industries and not

granting any prayer made by the appellant for directing State Government to

grant exemption, the said order has become final. No appeal was filed against

the order dated 16.08.2011 by the appellant. Its right to claim any direction

Comp. App. (AT) (Ins.) Nos. 193 of 2023 6 of 27 against the state stood closed and become final. C.P.342/2017 filed by the

appellant before NCLT was not maintainable. The sanctioned scheme having

lapsed since 2011, the said sanctioned scheme cannot be treated to be

approved resolution plan under IBC. The company petition before the NCLT

was not maintainable. The appellant by virtue of Notification dated

24.05.2017 claimed to enforce the alleged rights under sanctioned scheme

which is not implementable. Very foundation of the C.P.342/2017 was

baseless. NCLT had no jurisdiction to entertain the application. Adjudicating

authority has rightly dismissed the application. State of Orissa had never

given its consent to the relief and concessions as prayed rather representative

of the State of Orissa had appeared before the BIFR in the proceeding dated

15.05.2008 and had submitted that state has no policy to provide any relief

to SIC Industrial Company. It is pleaded that state having never consented

to the scheme, it was unenforceable under Section 19 by virtue of Section 19

of the SICA Act. Scheme had already lapsed and cannot be enforced at the

time when C.P.342/2017 was filed. Pre-requisite for availing benefit of

Section 5 of SICA Repeal Act requires a sanctioned scheme which must be

continuing and in effect from the date of dissolution of BIFR, scheme having

approved from 7 years from 2007-14 and further by virtue of order passed by

BIFR on 16.08.2011 in MA No. 442/2011, appellant being de-registered as

SIC Industrial Company, scheme was not continuing thereafter. Sanctioned

scheme ceased to be in effect from 16.08.2011, hence there was no occasion

to file any company petition before the NCLT by the adjudicating authority.

Comp. App. (AT) (Ins.) Nos. 193 of 2023 7 of 27

6. We have considered the submissions of the counsel for the parties and

perused the records.

7. From the submission of the counsel for the parties, following questions

arise for consideration:

I. Whether the appellant was entitled to claim tax exemption even after

disposal of MA No.442/2011 on 16.08.2011?

II. Whether Sanctioned Scheme SS-08 sanctioned by BIFR on 02.09.2009

shall be deemed to be consented by the State of Orissa within meaning

of Section 19(2) of the SICA?

III. Whether the appellant has made out a case before the NCLT for issuing

any direction for granting the exemption from payment of Entry Tax till

the year 2014 as per sanctioned scheme dated 02.09.2008?

Question No. (I):

8. The facts as noticed above indicate that the appellant was registered as

a SIC Industrial unit by order dated 20.07.2005 in Case No.238/2003, DRS

was prepared and circulated and ultimately approved by BIFR on 02.09.2008.

Clause 20 of the scheme provided as follows:

"20. Relief and concessions from various other agencies concerned in addition to the above, the scheme envisages the following reliefs and concessions from various other concerned agencies i.e. Central Government and State Governments' and Statutory Authorities as given below:

(ii) From the State Govt. of Orissa Sales Tax

Comp. App. (AT) (Ins.) Nos. 193 of 2023 8 of 27

(c) To exempt the company from payment of VAT / Sales Tax payable for a period of seven years from the cut-off date.

(d) To exempt the company from payment of entry tax on company's raw material imports."

9. After approval of the scheme, the net worth of the company turned

positive on 31.03.2011 and it filed MA No.442/2011 seeking de-registration

from the purview of the SICA. In the MA No.442/2011, appellant has made

various prayers. The prayers made by the appellant in MA NO.442/2011 has

been noticed by the BIFR in its proceeding dated 16.08.2011. Copy of the

proceeding dated 16.08.2011 of the BIFR is filed as Annexure A-7 to the

appeal. The prayer made in MA No.442/2011 are noticed in paragraph 12 of

the proceedings which are as follows:

"a. Deregister the case of the applicant company. b. Issue direction to the State Govt. of Orrisa for implementation of un-implemented provisions of the sanctioned scheme (SS-08) by the concerned agencies. c. Issue direction to working capital consortium bankers for release of the first charge given by the company on its fixed assets as per para 19(iii) of the sanctioned scheme (SS-08).

d. Pass such order or any other order as may be deemed appropriate in view of the facts and the circumstances of the case."

10. The prayers made by the appellant before the BIFR were not only de-

registration of the company but also a direction to the State Government of

Orissa for implementation of unimplemented provisions of the sanctioned

scheme, which was prayer (b). The BIFR heard the parties and discharged

the company from purview of SICA. Directions were issued. The proceeding

noticed that net worth of the company has turned positive and the scheme

Comp. App. (AT) (Ins.) Nos. 193 of 2023 9 of 27 has been substantially implemented by the company and it may be discharged

from the BIFR. In paragraph 13.4 directions were issued. Paragraph 13.4 is

as follows:

"13.4 The Bench, on consideration of the submissions made, materials on record, notes that the prescribed provisions of SS-08 have been fully implemented by the company and also as the company M/s Paradeep Phosphates Ltd. (PPL) has ceased to be a 'sick industrial undertaking' within the meaning of section 3(1)(d) of the Act. The Bench hereby discharges the company M/s Paradeep Phosphates Ltd. (PPL) from the purview of SICA/BIFR and issues the following further directions:

a) SBI is relieved from the responsibility of MA.

b) The 'Special Director' appointed by the BIFR on the company's 'Board of Directors' (BoD), if any, would stand discharged with immediate effect.

c) The company would complete the necessary formalities with the concerned 'Registrar of Companies' (ROC), as may be required.

d) The Miscellaneous Application No. 442/2011 in case No. 238/2003 M/s Paradeep Phosphates Ltd is disposed-off accordingly."

11. MA No.442/2011 was disposed of accordingly. The order dated

16.08.2011 clearly indicate that only prayer granted was to de-register the

appellant from SIC Industrial Company. Other prayers of the appellant

seeking a direction for implementation of unimplemented provisions of the

sanctioned scheme were not considered and granted.

12. Appellant did not file any appeal against the order dated 16.08.2011

within 180 days which is period for limitation for filing an appeal. The order

dated 16.08.2011 passed by the BIFR became final against the appellant

having not been appealed, BIFR itself having not granted the relief claimed by

Comp. App. (AT) (Ins.) Nos. 193 of 2023 10 of 27 the appellant in MA No.442/2011 to issue any direction to the State of Orissa

to implement unimplemented provisions of the sanctioned scheme, it was not

opened for the appellant to initiate various proceedings and contend that the

scheme should be implemented. In any view of the matter, the scheme was

sanctioned from 2007-14. 7 years period also came to an end in 2014.

Appellant also filed subsequently MA No.285/2014 before the BIFR praying

for further directions which remain pending and no order has been passed.

BIFR having not granted any relief to the appellant, we are of the view that

the order dated 16.08.2011 became final and Question No. (I) is answered as

follows:

(I) The appellant was not entitled to claim tax exemption after

disposal of MA 442/2011 on 16.08.2011.

Question No. (II):

13. Revised DRS was circulated on 03.03.2008, which has been noticed by

the BIFR in its proceeding dated 03.03.2008. Sections 19(1), 19(2) & 19(3) of

the SICA on which reliance has been placed by the appellant provides as

follows:

"19. Rehabilitation by giving financial assistance.--(1) Where the scheme relates to preventive, ameliorative, remedial and other measures with respect to any sick industrial company, the scheme may provide for financial assistance by way of loans, advances or guarantees or reliefs or concessions or sacrifices from the Central Government, a State Government, any scheduled bank or other bank, a public financial institution or State level institution or any institution or other authority (any Government, bank, institution or other authority required by a scheme to provide for such financial assistance being

Comp. App. (AT) (Ins.) Nos. 193 of 2023

11 of 27 hereafter in this section referred to as the person required by the scheme to provide financial assistance) to the sick industrial company.

(2) Every scheme referred to in sub-section (1) shall be circulated to every person required by the scheme to provide financial assistance for his consent within a period of sixty days from the date of such circulation 1[or within such further period, not exceeding sixty days, as may be allowed by the Board, and if no consent is received within such period or further period, it shall be deemed that consent has been given].

(3) Where in respect of any scheme the consent referred to in sub-section (2) is given by every person required by the scheme to provide financial assistance, the Board may, as soon as may be, sanction the scheme and on and from the date of such sanction the scheme shall be binding on all concerned.

[(3A) On the sanction of the scheme under sub-

section (3), the financial institutions and the banks required to provide financial assistance shall designate by mutual agreement a financial institution and a bank from amongst themselves which shall be responsible to disburse financial assistance by way of loans or advances or guarantees or reliefs or concessions or sacrifices agreed to be provided or granted under the scheme on behalf of all financial institutions and banks concerned.

(3B) The financial institution and the bank designated under sub-section (3A) shall forthwith proceed to release the financial assistance to the sick industrial company in fulfilment of the requirement in this regard.]"

14. The objections on the DRS came for consideration before the BIFR on

15.05.2008. The proceeding that BIFR dated 15.05.2008 has been brought

on the record and for objections on DRS, the hearing was fixed for 15.05.2008.

In paragraph 7 of the proceeding, following has been noticed.

"7. Based on the revival scheme submitted by SBI (OA), the Board prepared a Draft Rehabilitation Scheme (DRS) for the revival of the company which was

Comp. App. (AT) (Ins.) Nos. 193 of 2023

12 of 27 circulated to all concerned for consent as required u/s 19(2) read with Section 19(1) of SICA. As per the DRS net worth is expected to become positive by the end of FY 2008-09 and the accumulated losses would be wiped out in the FY 2015-16, denoting that the scheme is financially viable. Short particulars of the said scheme were directed to be published in two local dailies, inviting objections/suggestions with regard to the DRS and the Board fixed a hearing on 15.5.2008 to hear objections/suggestions."

15. Paragraph 8 of the proceeding dealt with the hearing on 15.05.2008. In

Paragraph 8.2, the submission of the representative of the Government of

Orissa has been noticed in following words:

"8.2 The representative of the GOO submitted that the GOO has no policy to provide any relief to sick companies."

16. Subsequently, the scheme came for consideration on 02.09.2008 and

was approved by the BIFR. At the time of hearing on 02.09.2008, advocate

representing the Orissa Commercial Tax Department brought into the notice

of the BIFR the dues of Sales Tax and Orissa Entry Tax against the company.

Paragraph 11.7 of the proceedings are as follows:

"11.7 The Id advocate representing Orissa Commercial Tax Department, submitted that dues of Rs 1,02,346.00 on account of Orissa Sales Tax, Rs 6,91,298.00 on account of Central Sales Tax and and Rs 2,76,63,284.00 on account of Orissa Entry Tax were outstanding against the company. At this juncture, the FCA representing the company submitted that these were disputed claims and were sub-judice. He finally submitted that the company would abide by the judgment of courts on the final outcome."

17. Sanctioned Scheme SS-08 noticed all relevant details and Clause 20

deals with reliefs and concessions. Clause 20(i) which was relief from State

Government of Orissa is as follows:

Comp. App. (AT) (Ins.) Nos. 193 of 2023 13 of 27 "(i) From the State Government of Orissa Sales Tax:

(a) To exempt the Company from payment of VAT/Sales Tax payable for a period of seven years from the cut-off-date.

(b) To exempt the Company from payment of entry tax on Company's raw material imports."

18. The submission which has been much pressed by the counsel for the

appellant is that consent within meaning of Section 19(2) was never denied

by State of Orissa and in view of the fact that consent was not received within

period of 60 days it shall be deemed that the consent has been given.

19. Section 19(2) of the SICA provides for circulation of rehabilitation

scheme to every person required by the scheme to provide financial assistance

for its consent. We have noticed above that revised DRS was circulated on

03.03.2008 and hearing on the objections on the DRS was fixed by the BIFR

on 15.05.2008. When the hearing was fixed for 15.05.2008 on the objection,

it is clear that by the said period the consent could have been given to the

scheme by those who are required to provide financial assistance. Hearing

took place on 15.05.2008 before the BIFR and we have already noticed that

representative of the State of Orissa made a statement that the Government

of Orissa has no policy to provide any relief to SIC Industrial Company which

is noticed in paragraph 8.2 as extracted above. 15.05.2008 was the date for

hearing the objection on the DRS and when the state representative placed

before the BIFR that Government of Orissa has no policy to provide any relief

to SIC Industrial Company, we are not persuaded to accept the submission of

Comp. App. (AT) (Ins.) Nos. 193 of 2023 14 of 27 the appellant that the said statement cannot be treated to be denial of the

consent.

20. Learned counsel for the appellant has placed much reliance on Section

19(2) of the SICA to contend that since no consent was received within a

period of 60 days or further period, it shall be deemed that the consent has

been given. The question of deemed consent arise when there is no

communication from the state regarding consent. In the proceeding which

were proceeding for hearing objection on the revised DRS on behalf of State

of Orissa categorically stated that there is no policy of giving any relief to the

SIC Industrial Company by the Government of Orissa. The above submission

was clear denial of consent from the State of Orissa. The submission of the

appellant of deemed consent as contemplated in Section 19(2) of the SICA

shall not come into play in facts of the present case, since present is not a

case where within the period prescribed no consent was communicated rather

present is a case where on hearing an objection on DRS which was heard on

15.05.2008 by BIFR as noted above the representative of the Orissa

Government communicated that there is no policy of giving relief to the SIC

Industrial Company, thus it was a clear case of communication that State of

Orissa is not consenting to grant exemption from Entry Tax, we are not

persuaded to accept the submission of the counsel for the appellant that in

facts of the situation of the present case, consent of the State of Orissa shall

be deemed to have been given. Section 19(3) further provides that when

consent of sub-Section (2) is given every person required such sanctioned

scheme is binding on any such person. The hearing the State of Orissa rather

Comp. App. (AT) (Ins.) Nos. 193 of 2023 15 of 27 communication that there is no policy of giving any benefit to the SIC

Industrial Company consent was denied and there is no applicability of

deeming fixation as contemplated by the learned counsel for the appellant.

We thus hold that there was no deemed consent by the State of Orissa under

Section 19(2) and submission of the appellant that there shall be deemed

consent of the State of Orissa and it is bound to implement Clause 20 cannot

be accepted.

21. Learned counsel for the appellant has placed reliance on the judgment

of the High Court of Delhi in 'Damodar Valley Corporation' Vs. 'Appellate

Authority for Industrial and Financial Reconstruction & Ors.', reported

in [2009 SCC OnLine DEL 1843]. Learned counsel for the appellant submits

that in the above case, Damodar Valley Corporation failed to file its objection

within the time allowed in the DRS, hence it shall be deemed to have given

consent. In paragraph 8 of the judgment, following was laid down:

"8. It has been observed in the impugned order that the DRS was sent by the BIFR to the petitioner on March 23, 2007 and same was received by it on April 6, 2007. The petitioner failed to file objections to the DRS within the stipulated period of 60 days from the receipt thereof, i.e., by June 6, 2007. The petitioner did not apply for extension of time though it could have applied for further time not exceeding 60 days before the expiry of the stipulated period of 60 days from the date of circulation of the DRS. The petitioner had failed to place on record any document or application/communication to show that it had made a request for extension of time prior to the hearing conducted by the BIFR on July 4, 2007, when the impugned order was passed. Thus, according to section 19(2) of the SICA it will be deemed that the consent had been given by the petitioner. Since section 19(2) of the SICA was a deeming provision it was immaterial for the BIFR to record any finding in the

Comp. App. (AT) (Ins.) Nos. 193 of 2023 16 of 27 impugned order regarding "deemed consent". Certain reliefs and concessions were proposed vide clauses (ii),

(iv)(v) and (vi) of paragraph 9.3 of DRS qua the petitioner and the same were deleted by the BIFR even without filing any objections/suggestions by the petitioner. Direction regarding restoration of power supply was imperative to enable rehabilitation of respondent No. 3 company. Respondent No. 3 company was bound by the sanctioned scheme with regard to the payments of dues of the petitioner and the petitioner was at liberty to bring to the notice of the BIFR any failure on the part of respondent No. 3 company in case schedule was not adhered to. In the light of the above observations AAIFR dismissed the appeal."

22. From the facts of the above case, it is clear that in the DRS, 60 days'

time was allowed to file the extension that is by 06.06.2007. Damodar Valley

Corporation neither applied for objection nor failed to place any document or

application/communication to show that it was with respect to extension of

time till 04.07.2007 when impugned order was passed. In the above

circumstances, High Court held that under Section 19(2) of the SICA Act it

shall be deemed to have given consent. When we come back to the facts of

the present case, DRS was circulated on 03.03.2008 and 15.05.2008 was

fixed by BIFR itself for hearing objection on the DRS on 15.05.2008

representative of the state appeared and made submission that there is no

policy of the state to grant any relief to SIC Industries, any concessions to the

SIC Industries, thus present is the case where the view of the State of Orissa

was duly communicated within time allowed, hence there is no occasion for

deemed consent in the facts of the present case. Thus, the judgment of

'Damodar Valley Corporation' (supra) does not help the appellant in the

facts of the present case.

Comp. App. (AT) (Ins.) Nos. 193 of 2023 17 of 27

23. Another judgment relied by the counsel for the appellant is 'Union of

India' Vs. 'Cimco Ltd. & Ors.' reported in [2014 SCC OnLine DEL 909].

Delhi High Court came to consider provisions of Section 19 of the SICA in the

above case. In the above case, DRS was circulated to the Railways but no

objection was filed and it was after the scheme was sanctioned and circulated

certain objection was raised in paragraphs 9 to 11, Delhi High Court made

following observations:

"9. Five questions arise in this case : first, whether the BIFR may--by sanctioned scheme of rehabilitation under the SICA--only bind those entities referred to in section 18(8) ; secondly, whether clause 11.6 binds the Railways under section 19 of the SICA ; thirdly, whether clause 11.6 is binding in its own terms or whether it only recommends certain action ; fourthly, whether CBL can benefit from the concessions granted by clause 11.6 even if the BIFR has declared that company is no longer sick, and is in fact, returning positive figures ; and finally, whether the deviation from the 2005 GFR Rules envisaged by clause 11.6 renders it void.

10. As regards the first two questions, the court notes that the provisions of sections 18 and 19 are complementary, and dealing with different spheres of action. Section 18(8) states that the scheme sanctioned by the BIFR will be binding on the sick company, its creditors, employees, guarantors, etc. Indeed, these are the only entities which the BIFR can unilaterally bind. The scope of application of section 19, however, is different. In the words of the section, as regards "the Central Government, a State Government, any scheduled bank or other bank, a public financial institution or State level institution or any institution or other authority", the BIFR does not have the authority to bind these entities by its orders and thus modify the obligations and rights owed between the sick company and these entities. However, the scheme for rehabilitation may--in the interests of ensuring that the sick company returns to a profitable state as soon as possible-- envisage "financial assistance by way of loans, advances or guarantees or relief's or

Comp. App. (AT) (Ins.) Nos. 193 of 2023 18 of 27 concessions or sacrifices from" any of the above entities. These provisions in the DRS will not be binding on these entities, unless their consent is obtained. Thus, these entities--the Railways in this case--may determine whether the concessions envisaged in the DRS will be provided by them and either to consent or reject the provision. If the entity rejects the provision, unlike in the case of the entities covered under section 18(8), they will not be bound by the scheme sanctioned subsequently. This is made clear by clause 2 of section 19, which states that the DRS is to be circulated in order to obtain consent. Once consent is obtained, however, the provision becomes binding for the period of the sanctioned scheme.

Crucially, in this regard, section 19(2) categorically provides that "if no consent is received within such period or further period, it shall be deemed that consent has been given".

11. In this case, as the AAIFR has noted in the impugned order--at paragraph 3--that it is undisputed that the DRS was circulated to the Railways, for the purpose of obtaining consent and inviting suggestions/objections. No objections were filed by the Railways. It states today--for the first time since the scheme was sanctioned by the BIFR on March 11, 2010--that the scheme was circulated to the Secretary, Ministry of Railways and then redirected to the Stores Directorate of the Ministry later (which is the concerned Department, it is claimed), by which stage "hardly any time was left for filing of objection". The Railways raises this plea after almost three years of the presentation of the claim by CBL to the BIFR. No such stand was taken before, and in any event, no request for extension of time, let alone an objection taken at any stage of these proceedings before the BIFR, AAIFR, this court or the Supreme Court in the various rounds of litigation witnessed in this matter. Thus, in terms of section 19(2), deemed consent of the Railways to clause 11.6 of the sanctioned scheme was taken, and it is accordingly binding on it."

24. When we look into the facts of the above case, it is clear that the DRS

was circulated which envisaged certain concession by Ministry of Railways.

Clauses of scheme was not adhered to, aggrieved by which action by the

Comp. App. (AT) (Ins.) Nos. 193 of 2023 19 of 27 Railway, MA was filed by SIC Industrial Company before the BIFR seeking

compliance of the scheme. BIFR decided against the Railway which appealed

before Appellate Authority for Industrial and Financial Reconstruction

("AAIFR"). AAIFR dismissed the stay application which was challenged

before the Delhi High Court as well as unsuccessfully before the Hon'ble

Supreme Court. Subsequently, the appeal was dismissed on 07.05.2023

which was challenged in the Writ Petition before the High Court dated

14.09.2014 was delivered. The above judgment also clearly noticed that DRS

was circulated to the Railways which did not file any objection which has been

noticed in paragraph 11 of the judgment. In the above context Delhi High

Court held that under Section 19(2) scheme is binding on the Railway. The

above judgment is thus also clearly distinguishable in the facts of the present

case. We answer Question No. (II) in following manner:

(II) Sanctioned scheme SS-08 sanctioned by BIFR on 02.09.2009

shall not be deemed to be consented under Section 19(2) of the SICA 1985.

Question No. (III)

25. We having already held that to the sanctioned scheme no consent was

given by State of Orissa to Clause 20 of the sanctioned scheme no grounds

were made out to issue any direction to State of Orissa to grant the exemption

from payment of Entry Tax till 2014.

26. Learned counsel for the appellant relying on the judgment of the Orissa

High Court dated 07.12.2021 in Writ Petition No. 20338/2014 submitted that

High Court has specifically directed that the dispute involved in the present

Comp. App. (AT) (Ins.) Nos. 193 of 2023 20 of 27 case be adjudicated by the NCLT, which order has also been upheld by the

Hon'ble Supreme Court vide order dated 23.09.2022, hence objections as to

the maintainability was no longer opene to the respondent and deserve to be

rejected. The order of the High Court which has been relied by the appellant

has been filed along with the appeal as Annexure A-25, in which order the

High Court has noticed the proceedings before the BIFR. In paragraphs 7 to

9 of the order of the High Court, following has been directed:

"7. The Court is informed that on 31st August, 2021, the NCLT had passed an order to the effect that in view of the pendency of the present writ petition, it would prefer awaiting the outcome of the present petition before passing further orders in the said application.

8. Another development which appears to have taken place is that since the year 2011 the net-worth of PPL turned positive and it asked that it be discharged from the purview of the Scheme. This is reflected in an order dated 6th September, 2011 passed by the BIFR. In para 13.4 of the said order dated 6th September, 2011, the BIFR noted that the PPL had ceased to be a sick industrial undertaking within the meaning of Section 3(1)(o) of the SICA and discharged the PPL from the purview of Scheme under the SICA. The BIFR issued further directions including discharging the Special Director appointed by the BIFR on PPL's Board of Directors.

9. Since this Court had already taken a view in the order dated 15th January, 2014 that PPL should go before the BIFR for all incidental or ancillary reliefs it was seeking in respect of the Scheme from which it stands discharged by virtue of the above order dated 6 September, 2011, the Court considers it appropriate to reiterate that observation and direct that the NCLT before whom the application filed by PPL on 18th June, 2014 is currently pending, should proceed with the hearing of the said application in accordance with law. The Court therefore refrains from issuing any direction or making any observation on the plea urged by PPI, in the present petition and leaves it open to the PPL to urge all the pleas raised here vis-à-vis the sanctioned

Comp. App. (AT) (Ins.) Nos. 193 of 2023 21 of 27 Scheme passed in BIFR Case No.238 of 2003 before the NCLT. Likewise, the contention of the Opposite Parties vis-à-vis such plea of the PPL. is also left to be urged before the NCLT in accordance with law."

27. The above order only indicates that NCLT is to decide the application in

accordance with law. High Court has not decided any issue finally in its

judgment dated 07.12.2021, but after noticing the sequence of the event has

directed the NCLT to decide in accordance with law, thus, submission of the

appellant cannot be accepted that judgment of the High Court dated

07.12.2021 is a decision which decides any issue including the

maintainability of the application before the NCLT. When the NCLT was to

decide in accordance with law, it was free to take decision in accordance with

law.

28. At this stage, we need to notice one more aspect of the matter as has

been noticed by the adjudicating authority also in the impugned order.

Reliance was placed by the appellant on Central Government Notification

dated 24.05.2017, after IBC was enforced, the provisions of SICA Act, 1985

was repealed. Reliance has been placed on Notification dated 24.05.2017, by

which Notification, 2 provisos were added which has been noticed in

paragraph 9 of the impugned order which are as follows:

"9..."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 subsection (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:

Comp. App. (AT) (Ins.) Nos. 193 of 2023 22 of 27 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."

29. The Notification dated 24.05.2017 came for consideration before this

Tribunal in [Comp. App. (AT) (Ins.) No. 160/2017], 'Pr. Directorate

General of Income Tax (Admn. & TPS)' Vs. M/s. Spartax Ceramix India

Ltd. & Anr.', where this Tribunal took the view that Notification dated

24.05.2017 was in excess of authority of Central Government to issue order

under Section 242 of the IBC. This Tribunal held that Appellate Tribunal

cannot, pursuant to impugned Notification 24.05.2017 entertain an appeal.

The order passed by this Tribunal was challenged before the Hon'ble Supreme

Court in 'M/s. Spartax Ceramics India Ltd.' Vs. 'Union of India & Ors.'

by filing [Civil Appeal No.7291-7292/2018], which appeal was disposed of

by the Hon'ble Supreme Court on 25.10.2018. The order of the Hon'ble

Supreme Court passed on 25.10.2018 is as follows:

"1) Delay condoned.

2) Having heard learned counsel in all the three appeals before us for some time, and having gone through the judgment dated 28.05.2018 passed by the the National Company Law Appellate Tribunal (NCLAT), we are of the view that the judgment of the NCLAT holding that the appeal filed by the Central Government in that case not maintainable in view of the fact that the Notification dated 24.05.2017 travels beyond the scope of the removal of difficulties provision is correct. We are of the view that, having held that the appeal is not maintainable, the appellate Tribunal should not have adjudicated upon either the limitation

Comp. App. (AT) (Ins.) Nos. 193 of 2023 23 of 27 aspect of the case or the merits of the particular Scheme before it. Therefore, while upholding the judgment passed by the appellate Tribunal on the ground that the appeal itself was not maintainable, we set aside the judgment insofar as it purports to deal with the limitation aspect of the case and the merits including the declaration of the Scheme as being illegal.

3) Insofar as Civil Appeal No. 8247 of 2018 and Civil Appeal D. No. 33241/2018 are concerned, it is clear that on the facts in these cases, originally, the appellants had approached the High Court of Delhi in writ petitions. The High Court of Delhi, by judgment dated 22.02.2018 (as modified by order dated 17.04.2018) and 14.09.2017, respectively, ordered the parties to avail of the alternative remedy of filing an appeal before the NCLAT in view of the Notification dated 24.05.2017 which was done by the appellants in these appeals.

4) As the impugned judgment dated 28.05.2018 has set aside this Notification, and which has been upheld by us, the NCLAT, in both these cases, has dismissed the two appeals so filed, following the main judgment of 28.05.2018. This being the case, we revive the two writ petitions that had been before the High Court of Delhi in both the appeals before us with liberty to the appellants to amend the aforesaid writ petitions within a period of four weeks from today.

5) We request the High Court of Delhi to take up the writ petitions at the earliest. It is made clear that pleadings may be completed in both the writ petitions expeditiously, and all points available in fact and law to all parties shall be kept open.

6) With these observations, the appeals are disposed of.

7) Pending applications shall stand disposed of."

30. This Tribunal in [Comp. App. (AT) (Ins.) No. 312/2022], 'Pramod

Kumar Pathak' Vs. 'ARFAT Petrochemicals Private Limited' decided on

12.12.2022 has noted the order of the Hon'ble Supreme Court in 'M/s.

Sparktax Ceramics India Ltd.' (supra) and has observed that Notification

dated 24.05.2017 is not a valid Notification and there is no occasion to accept

Comp. App. (AT) (Ins.) Nos. 193 of 2023 24 of 27 the submission that approved DRS is a resolution plan giving any foundation

to file an application under Sections 33 & 34 of the IBC. After noticing the

judgment of the Hon'ble Supreme Court, in paragraphs 13 & 19, this Tribunal

has observed as follows:

"13. We are not in agreement with the submission of learned Counsel for the Appellant with regard to Notification dated 24.05.2017 that the judgment of the Hon'ble Supreme Court can be treated as only an obitor. The Hon'ble Supreme Court has clearly approved the view of the Appellate Tribunal that Notification dated 24.05.2017 travels beyond the scope of removal of difficulties provisions, which is law declared by the Hon'ble Supreme Court and is binding on all under Article 141 of the Constitution of India. The judgment of the Adjudicating Authority impugned in the present Appeal follows the judgment of the Hon'ble Supreme Court in M/s Spartek Ceramics India Ltd. vs. Union of India & Ors. When the Notification dated 24.05.2017, is not a valid Notification, there is no occasion to accept the submission that approved Rehabilitation Scheme dated 07.01.2005, which is foundation of the Application filed by the Appellant under Sections 33 read with Section 34 can be treated as a Resolution Plan within the meaning of IB Code. The very foundation of the Application filed by the Appellant under Sections 33 and 34 having been knocked out, the Application was rightly rejected by the Adjudicating Authority.

19. We are of the view that judgment of the Hon'ble Supreme Court in M/s Spartek Ceramics India Ltd. is a law declared by the Hon'ble Supreme Court, where Hon'ble Supreme Court has specifically approved the view of this Appellate Tribunal that Notification dated 24.05.2017 travels beyond the scope of removal of difficulties provisions. We have already extracted the provisions of Section 242 of the IB Code in preceding paragraphs of this judgment, where as per sub-section (1) of Section 242, Central Government is empowered to issue an order, if any difficulty arises in giving effect to provisions of this Code. The power under Section 242 is thus confine to the powers of Central Government in removing difficulties arising in giving effect to the provisions of the IB Code. The powers

Comp. App. (AT) (Ins.) Nos. 193 of 2023

25 of 27 cannot be exercised by Central Government to remove any difficulty regarding review or monitoring of scheme sanctioned under Sick Industrial Companies (Special Provisions) Act, 1985 and the repeal of Sick Industrial Companies (Special Provisions) Act, 1985, which is the specific reason mentioned in the Notification dated 24.05.2017, noticing the difficulties, which has arisen for which the order has been issued. It is useful to note following part of the Notification, which deals with difficulties, which has arisen:

"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;"

31. The above is another reason to hold that application filed by the

appellant before the NCLT being C.P. 342/2017 was not maintainable,

however as noted above, we have also held on merits that paragraph 20 of the

scheme as approved on 02.09.2008 was not binding on the State of Orissa

and State of Orissa was not obliged to grant exemption from payment of Entry

Tax as prayed by the appellant. The above findings are sufficient to answer

the question. We answer Question No. III in following manner:

(III) Appellant did not make out any case before NCLT in

C.P.342/2017 for issuing any direction for granting exemption from payment

of Entry Tax till 2014 as per sanctioned scheme 02.09.2008.

32. We are of the view that adjudicating authority after considering all

relevant aspect of the matter has rightly rejected C.P.342/KB/2017 filed by

Comp. App. (AT) (Ins.) Nos. 193 of 2023 26 of 27 the appellant. For the reasons as noticed above, appellant is not entitled for

any relief in this appeal. There is no merit in the appeal. Appeal is dismissed.

Parties shall bear their own costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

NEW DELHI

18th May, 2026

himanshu

Comp. App. (AT) (Ins.) Nos. 193 of 2023 27 of 27