A scheme sanctioned under SICA is not binding on a party that expressly refused consent during proceedings. A BIFR order not appealed becomes final, and a SICA scheme cannot be deemed a resolution plan under IBC.

Headnote:(A) Sick Industrial Companies (Special Provisions) Act, 1985 - Section 19(1), 19(2) & 19(3) - Rehabilitation by financial assistance - Scheme binding on entities only with their consent - Deemed consent under Section 19(2) not applicable where the entity expressly communicated its inability to provide reliefs during proceedings. (Paras 13-20, 22, 24)

(B) Insolvency and Bankruptcy Code, 2016 - Section 242 - Removal of difficulties - Central Government Notification dated 24.05.2017 purporting to treat BIFR schemes as deemed resolution plans under Section 31 of the IBC - Such notification is in excess of the powers under Section 242 and is not valid. (Paras 28-31)

(C) SICA Scheme - Enforcement after discharge - Once a company is discharged from the purview of SICA and the BIFR order dismissing its prayer for enforcement of the scheme is not appealed, that order becomes final and the scheme cannot be enforced later. (Paras 8-12)

Facts of the case:
The appellant, a company engaged in manufacturing fertilizers, was declared a sick industrial company by the BIFR. A rehabilitation scheme (SS-08) was sanctioned, containing a clause (Clause 20) granting exemptions from VAT, Sales Tax, and Entry Tax by the State Government. The company's net worth turned positive, and it was de-registered from SICA by the BIFR on 16.08.2011. The company then sought to enforce the unimplemented provisions of the scheme, including Entry Tax exemption, by filing a petition before the NCLT under the IBC, claiming the scheme should be treated as an approved resolution plan. The NCLT rejected the petition, leading to this appeal.

Findings of Court:
The appeal was dismissed. The court held that the BIFR order dated 16.08.2011, which did not grant the prayer for direction to the State, had become final as it was not appealed. The State of Orissa had expressly communicated its inability to provide reliefs during the BIFR proceedings on 15.05.2008, thus there was no deemed consent under Section 19(2). Furthermore, the scheme could not be treated as a resolution plan under the IBC as the Central Government's notification to that effect was held to be invalid by the Supreme Court.

Issues: The main issues were whether the appellant was entitled to tax exemption after the disposal of its application before the BIFR in 2011; whether the sanctioned scheme was binding on the State of Orissa without its consent; and whether the appellant could seek enforcement of the scheme before the NCLT under the IBC.

Ratio Decidendi: The court ruled that a scheme under SICA is not binding on a party (like a State Government) that has expressly refused consent. A BIFR order becomes final if not appealed. A scheme sanctioned under SICA cannot be deemed to be an approved resolution plan under the IBC after the 2017 notification was struck down. (Paras 20, 24, 31)

Result: Appeal dismissed.

Table of Content
1. factual background and procedural history of the case. (Para 1 , 2)
2. summary of the parties' arguments. (Para 3 , 4 , 5)
3. frame of reference for deciding the appeal. (Para 6 , 7)
4. binding effect of bifr orders not appealed. (Para 8 , 9 , 10 , 11 , 12)
5. deemed consent under sica section 19(2) requires no communication. (Para 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24)
6. invalidity of notification 24.05.2017 and no binding consent. (Para 25 , 26 , 27 , 28 , 29 , 30 , 31)
7. dismissal of appeal; no grounds for relief. (Para 32)

J U D G M E N T

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 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 t

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2026 Supreme(Online)(NCLAT) 565

NATIONAL COMPANY LAW APPELLATE TRIBUNALAshok Bhushan (Chairperson) , Mr. Barun Mitra (Member (Technical)) ,Paradeep Phosphates Limited – AppellantVersusState of Odisha through Secretary Department of Finance – Respondent193/ND/2023 COMPANY APPEAL(AT)(INS)

A scheme sanctioned under SICA is not binding on a party that expressly refused consent during proceedings. A BIFR order not appealed becomes final, and a SICA scheme cannot be deemed a resolution plan under IBC.

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Ashok Bhushan (Chairperson) , Mr. Barun Mitra (Member (Technical)) ,
Paradeep Phosphates Limited – Appellant
Versus
State of Odisha through Secretary Department of Finance – Respondent
193/ND/2023 COMPANY APPEAL(AT)(INS)