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“22. ......... The BIFR has also not considered the impact of Section 22A or the transactions, contracts/agreements entered into between the company and third parties prior to the filing of reference when the company was not a sick entity. If the BIFR was of the view that the agreement for sale of land was not in the interest the company, it could have suspended the contract under Section 22(3) of SICA as it was a pre-existing contract. Despite arguments to the contrary, the BIFR has not given any reasons to justify how Section 22A of SICA applies to a pre-existing agreement for sale entered into between the company and a third party prior to filing of the reference. In fact, the agreement for sale is a clog on the absolute ownership of the property of the appellant company and the property cannot be said to be free from encumbrance unless the registered agreement for sale is cancelled. The property under agreement cannot be sold to others during the subsistence of agreement for sale.
42. We observed that the BIFR has fixed the cutoff date as 30.07.2007 on the basis of the CDR scheme while passing the order under Section 17(3). The fixation of cut off date implies that the liabilities and the dues of the creditors will be determined as on that date and the repayment obligations will commence during the year following the cut oil date. If there is a substantial gap between the cut off date fixed and the date of sanction of the scheme, the scheme will become a non starter because the sick industrial company will be unable to fulfill its repayment obligations for the period between the cut off date as stipulated in the impugned order and date of sanction of the scheme, The issue can be resolved by determining a prospective cut off date. Section 17(4)(b) of SICA vests in the BIFR the necessary power to review and modify its orders under Section 17(3) of SICA. Therefore, in our view the cut off date fixed by the BIFR in the impugned order is required to be suitably modified by the BIFR.”
“(8)..................The AIFR further held that prior to the filing of the reference under Section 15 of SICA, a debt restructuring scheme under the CDR mechanism on 12/12/2007 and 21/1/2008, the CDR package envisaged sale of surplus land as well as sale of investments of the appellant company. Any restraint order on the sale of land, under the agreements for sale, would not only complicate the matter but would hamper the revival process and would also lead to a prolonged litigation between the parties and this will not be in the interest of revival of the sick company. The provisions of Section 22A which are prospective in nature would not impact pre existing contract for sale entered into by the company before it filed reference under Section 15(1) of SICA and, therefore, the directions given under Section 22A will not apply to the agreement for sale deed 1/3/2007. The restraint order passed by the BIFR would apply to any subsequent proposals for disposal of assets of the company, if any. But these agreements will be subject to interim orders and final orders to be passed by the High Court in the pending writ petition challenging the settlement dated 5/9/2008. For all these reasons, the AIFR held that the agreement for sale cannot be part of DRS under Section 18(d) of SICA as the same is under transfer and unencumbered and legally enforceable contract exists between the appellant company and respondent no.13. However, the AIFR held that the balance sale consideration in respect of the land to the tune of Rs.124.64 crores receivable by the company from respondent no.13 should form part of the means of finance in the DRS to be formulated by the BIFR for rehabilitation of the company. One payment of balance sale consideration by respondent no.13, the same shall be deposited with an interest bearing NLA with the operating agency for utilisation as per the rehabilitation scheme to be sanctioned by the BIFR. The said scheme was for workers dues including Rs.45 crores for ERS and appropriately crystallized amount for ex-employees dues as per the settlement dated 5/9/2008 with NRC Mazdoor Sangh. The AIFR further observed that if the BIFR considers it necessary to make payment to the workers as provided for in the agreement with the workers, before the sanction of the revival scheme, it could do so to alleviate the hardships of the workers.”
“SICA furthermore was enacted to secure the principles specified in Article 39 of the Constitution of India. It seeks to give effect to the larger public interest. It should be given primacy because of its higher public purpose. Section 26 of SICA bars the jurisdiction of the civil Courts.
What scheme should be prepared by the operating agency for revival and rehabilitation of the sick industrial company is within the domain of BIFR. Section 26 not only covers orders passed under SICA but also any matter which BIFR is empowered to determine.