NCLAT: Unresolved BIFR Claims Must Be Adjudicated Under IBC Framework

NCLAT: Unresolved BIFR Claims Must Be Adjudicated Under IBC Framework

Introduction

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench has held that an unresolved claim under the Board for Industrial & Financial Reconstruction (BIFR) scheme constitutes a claim under Section 3(6) of the Insolvency and Bankruptcy Code (IBC) and should be dealt with within the Code.

Factual Background

The appellant, Trinity Auto Components Ltd., had a sanctioned scheme under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), which was saved by Section 5(1)(d) of the SICA Repeal Act, 2003. However, the scheme could not be implemented, and the respondent, Axis Bank Ltd., approved a resolution plan without referencing the appellant's claim under the BIFR scheme.

Procedural Background

The appellant filed an Interlocutory Application before the National Company Law Tribunal (NCLT), which was partly allowed. The appellant then filed an appeal under Section 60(5) of the IBC before the NCLAT.

Issues

The primary issue before the NCLAT was whether an unresolved claim under the BIFR scheme can be claimed after approval of the resolution plan under the IBC.

Contentions of Parties

Appellant: The appellant submitted that the sanctioned scheme under SICA continued to remain binding on all concerned, despite the repeal of SICA.

Respondent: The respondent argued that the appellant failed to implement the BIFR scheme, and the approval of the resolution plan eclipsed the scheme, rendering the appellant's claim invalid.

Reasoning & Analysis

The NCLAT observed that:

• Claim under IBC: The demand in question arises from differential interest rate under the BIFR scheme, which qualifies as a financial debt under Section 5(8) of the IBC.
• Opportunity to Include Claim: The respondent had ample opportunity to include its claim under Regulation 12 of the Corporate Insolvency Resolution Process (CIRP) Regulations, 2016, and in the approved resolution plan.
• Clean Slate Principle: Allowing the appellant to revive the claim would defeat the objectives of the IBC and the principle of clean slate.

The bench of Justice Mohammad Faiz Alam Khan and Mr. Naresh Salecha (Technical Member) held that any unresolved claim from a BIFR scheme must be treated as a claim under Section 3(6) of the IBC and must be adjudicated within the framework of the Code.

Implications

This judgment highlights the importance of resolving claims under the BIFR scheme within the IBC framework and the principle of clean slate in insolvency proceedings. It also underscores the need for parties to raise their claims during the CIRP and not after the approval of the resolution plan.

In this case the appellant was represented by Mr. Sanat Jariwala (CA), Ms. Purti Gupta, Ms. Heena George & Ms. Sunidhi Shah, Advocates. Meanwhile the respondent was represented by Mr. Ranjeev Carvalho, Ms. Suchitra Valjee, Ms. Rajni Shah and Mr. Vansh Ved, Advocates.