Sick Unit’s MoU-based Rehabilitation Scheme Can’t be Treated as Resolution Plan Under IBC | SC

Case Details: Pramod Kumar Pathak v. Arfat Petrochemicals (P.) Ltd. - [2023] 154 taxmann.com 635 (SC)

Judiciary and Counsel Details

• • Sanjiv Khanna & S.V.N. Bhatti, JJ.
  • Pankaj Jain, Sarthak Dugar, Yajur Bhalla, Vishnu Kant Pandey, Rohan Chanda, Anchita Nayyar, Advs. & Shubham Bhalla, AOR for the Petitioner.
  • Arvind Kumar Gupta, Ms Purti Gupta, Ms Henna George, Advs. & Ms Henna George, AOR for the Respondent.

Facts of the Case

In the instant case, the corporate debtor ‘JK’ was declared a sick industrial unit by the Board of Industrial and Financial Reconstruction (BIFR). JK entered into an MoU with the respondent, on the basis of which, the implementation of the rehabilitation scheme was approved by the Appellate Authority for Industrial & Financial Reconstruction (AAIFR).

The appellant claiming to be a representative of the workmen’s union filed an application under section 33 of the IBC contending that the rehabilitation scheme was a resolution plan within the meaning of the IBC and claimed that an order of liquidation be passed against the corporate debtor for breach of the said scheme.

However, the Adjudicating Authority (NCLT) rejected the application of the appellant. The appellant assailed the said order in appeal before the NCLAT relying on Notification No. S.O. 1638(E), dated 24-5-2017.

However, the same was rejected vide the impugned order in view of the judgment in Spartek Ceramics India Ltd. v. Union of India [2019] 111 taxmann.com 535 holding that the said notification travelled beyond the scope of removal of difficulties provisions thus approved rehabilitation scheme could not be treated as a resolution plan within the meaning of IBC.

Supreme Court Held

The Supreme Court held that in view of the judgment of the instant court in the case of Spartek Ceramics (Supra), the NCLAT rightly held that the said notification would not confer and give jurisdiction to Tribunal to decide the issue raised by the appellant. Therefore, the instant appeal was to be dismissed.