Allahabad HC on enforcement under IBC of a scheme under SICA

The Allahabad High Court recently dealt with another writ petition filed by an ex-director of Lohia Machines Limited (LML), a company facing moratorium, praying that the repayment plan which was pending before the Board for Industrial and Financial Reconstruction (BIFR) remain operative despite moratorium..Deepak Singhania, the petitioner, along with two others had recently sought stay from Allahabad HC on the proceedings pending before the DRT against them in their capacity as guarantors..LML, was declared a sick company by the BIFR in 2007. A rehabilitation scheme, arrived under the SICA Act, 1985 was pending before the BIFR. BIFR was later dissolved in December 2016 in view of notification of the SICA Repeal Act, 2003. However, insolvency against LML was triggered by itself under Section 10 of the Insolvency and Bankruptcy Code, 2016. The NCLT while admitting the petition passed an order under Section 14 of the IBC, inter alia, prohibiting institution or continuance of any suits against the debtor company (LML)..The petitioner relied on Section 5 of the SICA Repeal Act, 2003, a provision which embodies a savings clause, to make its case. It was argued that as a result of the savings clause, all rights acquired or accrued under the repealed enactment would be binding. It was further argued that even though the scheme could not be sanctioned as a part of the BIFR proceedings, the arrangement entered into between the petitioner and the respondent banks is binding inter-se in view of Section 5..The HC however observed that there is no lis between the parties to adjudicate on, given that LML is facing moratorium under the IBC. The court further added,.“However, no authoritative finding can be recorded in this regard since the records of the NCLT are not before us and pleadings are inadequate. Further, the company (LML) has also not been impleaded as a party and has consequently not submitted its stand in the instant writ petition. As such the claim of the petitioner cannot be adjudicated at this stage in the instant writ petition ”.The court, however, also wrote in its judgment that while it cannot intervene at this stage, the petitioner has the liberty to question the veracity of claims if the respondent banks do not stake their claims in accordance with the sanctioned scheme..The petitioner was represented by Dinesh Kacker and Akash Chandra Maurya where as ASGI along with others appeared for the Union. Pranjal Mehrotra appeared for IFCI Ltd, one of the respondents..Read the judgment below.