Case Note & Summary
The appeal was filed by Paradeep Phosphates (PPL) challenging the order dated 17.01.2023 of the National Company Law Tribunal (NCLT), which rejected the company's petition for tax exemption under the sanctioned scheme SS-08. The appellant, a public limited company engaged in fertilizer manufacturing, had its net worth turn negative in 2002 and was declared a sick industrial company by the Board for Industrial and Financial Reconstruction (BIFR) in 2005. A draft rehabilitation scheme was approved in 2008, which included tax exemptions. However, the appellant's net worth turned positive in 2011, and it sought deregistration from SICA, which was granted, but its requests for tax exemptions were not fulfilled. The NCLT framed three points for determination regarding the entitlement to tax exemption, the binding nature of the scheme, and the appellant's right to seek exemption despite collecting taxes. The NCLT ruled against the appellant on all points, stating that the right to claim tax exemption was closed after the disposal of MA 442/2011, and the scheme was not binding on the state as it had not consented to it. The court found that the appellant's application was not maintainable under the IBC as the scheme had lapsed. The appeal was dismissed, affirming the NCLT's decision.
Headnote
A) Company Law - Tax Exemption - Entitlement Post Disposal of MA - Sick Industrial Companies Act, 1985, Section 19 - The appellant was not entitled to claim tax exemption after the disposal of MA 442/2011 on 16.08.2011 as the order became final and no appeal was filed against it. The adjudicating authority held that the appellant's right to claim any direction against the state was closed after the disposal of the MA. (Paras 12-12). B) Company Law - Consent Requirement - Binding Nature of Sanctioned Scheme - Sick Industrial Companies Act, 1985, Section 19 - The sanctioned scheme SS-08 was not deemed consented by the State of Orissa as the representative clearly communicated the lack of policy to provide relief to sick companies. Thus, the scheme was not binding on the state. (Paras 20-20). C) Company Law - Maintainability of Application - Insolvency and Bankruptcy Code, 2016 - The application filed by the appellant before NCLT was not maintainable as the sanctioned scheme had lapsed and no consent was given by the State of Orissa. (Paras 25-25).
Issue of Consideration
Whether the appellant was entitled to tax exemption after the disposal of MA No.442/2011 and the binding nature of the sanctioned scheme SS-08.
Final Decision
The appeal was dismissed, affirming the NCLT's order rejecting the petition for tax exemption. The court held that the appellant was not entitled to claim tax exemption after the disposal of MA 442/2011, and the sanctioned scheme was not binding on the State of Orissa.
Law Points
- Sick Industrial Companies Act
- 1985
- Insolvency and Bankruptcy Code
- 2016
- tax exemption
- consent requirement
- binding nature of sanctioned schemes
