LexMODI RUBBER LIMITED versus CONTINENTAL CARBON INDIA LTD.
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A B C D E F G H 1026 SUPREME COURT REPORTS [2023] 3 S.C.R. MODI RUBBER LIMITED v. CONTINENTAL CARBON INDIA LTD. (Civil Appeal No. 375 of 2017) MARCH 17, 2023 [M. R. SHAH AND SUDHANSHU DHULIA, JJ.] Sick Industrial Companies (Special Provisions) Act, 1985 – ss.18, 19 – Approval of a scheme by the BIFR under the 1985 Act, unsecured creditor if has the option not to accept the scaled down value of its dues – Held: No – Rehabilitation scheme u/s.18 shall bind all the creditors including the unsecured creditors and the unsecured creditors have to accept the scaled down value of its dues provided under the rehabilitation scheme – To make the company viable, the concerned persons including the unsecured creditors have to sacrifice to some extent otherwise the revival efforts shall fail – Looking to the object and purpose of the SICA, 1985 and the provisions of ss.18 and 19, the word “creditors” shall have to be construed in a broad manner and is not required to be construed narrowly – Creditors include unsecured creditors – Thus, if the scheme binds the creditors, including other creditors like financial institutions etc., who may have a better claim than the unsecured creditors, there is no reason to treat the unsecured creditors separately and not to treat them as creditors – Minority creditors and that too some unsecured creditors cannot be permitted to stall the rehabilitation of the sick company by not accepting the scaled down value of its dues – View taken by the Delhi High Court in Continental Carbon India Ltd. case that on approval of a scheme by the BIFR, the unsecured creditor has an option not to accept the scaling down value of its dues and to wait till the rehabilitation scheme of the sick company has worked itself out with an option to recover the debt with interest post such rehabilitation, is erroneous and contrary to the scheme of SICA, 1985 and is set aside. Sick Industrial Companies (Special Provisions) Act, 1985 – Scheme of the Act – Discussed – Constitution of India – Article 39. Constitution of India – Article 300A – Plea of the unsecured creditors that to compel them to accept the scaled down value of its [2023] 3 S.C.R. 1026 1026 A B C D E F G H 1027 dues would be violative of Article 300A – Held: Has no substance – Scaling down the value of the dues is under the rehabilitation scheme prepared u/s.18 of the SICA, which has a binding effect on all the creditors – It cannot be said to be violative of Article 300A – Sick Industrial Companies (Special Provisions) Act, 1985 – s.18. Disposing of the appeals, the Court HELD: 1.1 The SICA, 1985 basically and predominantly is a remedial and ameliorative enactment, insofar as it empowers a quasi-judicial Body - BIFR to take appropriate measures for revival and rehabilitation of the potentially viable sick industrial companies as quickly as possible and also to salvage the productive assets and realise the amounts due to the banks and financial institutions, to the extent possible, from the non-viable sick industrial companies through liquidation of those companies. The primary concern of the Board would be the revival of the sick company and to save the sick company from winding up. That is why with a view to see that there is no impediment in framing the rehabilitation scheme and to get out the sick company from sickness. Section 22 provides for suspension of legal proceedings, contracts etc. On a bare reading of Section 22 and Section 22A of SICA, it appears that these two provisions primarily ensure that the scheme prepared by BIFR does not get frustrated because of certain other legal proceedings and to prevent untimely and unwarranted disposal of the assets of the sick industrial company. These sections clearly state certain restrictions which will impact upon the implementation of the scheme as well as on the assets of the company. [Paras 11.6, 11.8][1054-G; 1058-B-C] Tata Motors Limited vs. Pharmaceutical Products of India Limited and Anr. (2008) 7 SCC 619 : [2008] 9 SCR 267; Raheja Universal Limited vs. NRC Limited and Ors. (2012) 4 SCC 148 : [2012] 3 SCR 388; NGEF Ltd. vs. Chandra Developers (P) Ltd. (2005) 8 SCC 219 : [2005] 3 Suppl. SCR 747 – relied on. 1.2 Under Section 18 of the SICA, 1985, it is the operating agency to prepare a scheme with respect to the sick company providing for any one or more of the measures mentioned in MODI RUBBER LIMITED v. CONTINENTAL CARBON INDIA LTD. A B C D E F G H 1028 SUPREME COURT REPORTS [2023] 3 S.C.R. Section
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