Delhi HC Upholds The Vires Of Section 4(b) Of The Sick Industrial Companies (Special Provisions) Repeal Act,2003 [Read Judgment]

The Delhi High Court, on Tuesday, upheld the constitutional validity of Section 4(b) of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003.

The provision, which came into operation with effect from 1 December, 2016, has the effect of abating all proceedings pending before the Board for Industrial and Financial Reconstruction (BIFR) and the Appellate Authority for Industrial and Financial Reconstruction (AAIFR).

The Court was hearing a Petition filed by ATV Projects (India) Pvt. Ltd., which had been declared a sick company in April, 1999 and was on the verge of getting a draft rehabilitation scheme sanctioned when the amendment was notified, and the proceedings stood abated. It had now approached the High Court, contending that the abatement of proceedings would result in "severe justice" to it, as it had gone through several rounds of proceedings before the BIFR and the AAIFR.

The Petitioner had further pointed out that during the last hearing in its case on 30 November, 2016, further directions were issued by the BIFR. This order, it contended, could have been challenged through an appeal, if not for the notification. It, therefore, submitted that the provision is illegal and unconstitutional, as it had taken away its right to appeal.

At the outset, the Bench comprising Justice Sanjiv Khanna and Justice Pratibha M. Singh relied on the judgment in the case of Ashapura Minechem Ltd. v. Union of India and Ors., wherein it had upheld the provision, observing that the differentiation made between sick companies with approved draft schemes and those without one does not violate Article 14 of the Constitution of India.

It then took note of several other precedents and refused to agree with the Petitioner, observing, "Thus, the clear ratio of all these decisions is that if there is a manifest intention, either by express words or necessary implication, the right of appeal can be taken away and the right does not remain. The right to appeal is a statutory right and can be expressly or impliedly taken away."

It also rejected the contention that the Petitioner had a ‘legitimate expectation’ opining that it "does not have any legal basis, inasmuch as the right of the Petitioner to approach the appropriate forum has not been taken away."

It then directed, "In these circumstances, the validity of Section 4(b) is upheld and the writ petition is dismissed. Like in Ashapura (supra), this Court holds that the Petitioner, if it is so advised, may avail of the remedy provided under the Code. As the time period of 180 days has already lapsed, if the Petitioner approaches the NCLT, the request for condonation of delay, if any, be considered if permissible in law."