Sick Industrial Companies (Special Provisions) Act, 1985 – ss. 18, 19 – Approval of a scheme by the BIFR under the 1985 Act, unsecured creditor if has the option not to accept the scaled down value of its dues – Held: No – Rehabilitation scheme u/s.18 shall bind all the creditors including the unsecured creditors and the unsecured creditors have to accept the scaled down value of its dues provided under the rehabilitation scheme – To make the company viable, the concerned persons including the unsecured creditors have to sacrifice to some extent otherwise the revival efforts shall fail – Looking to the object and purpose of the SICA, 1985 and the provisions of ss. 18 and 19, the word “creditors” shall have to be construed in a broad manner and is not required to be construed narrowly – Creditors include unsecured creditors – Thus, if the scheme binds the creditors, including other creditors like financial institutions etc., who may have a better claim than the unsecured creditors, there is no reason to treat the unsecured creditors separately and not to treat them as creditors – Minority creditors and that too some unsecured creditors cannot be permitted to stall the rehabilitation of the sick company by not accepting the scaled down value of its dues – View taken by the Delhi High Court in Continental Carbon India Ltd. case that on approval of a scheme by the BIFR, the unsecured creditor has an option not to accept the scaling down value of its dues and to wait till the rehabilitation scheme of the sick company has worked itself out with an option to recover the debt with interest post such rehabilitation, is erroneous and contrary to the scheme of SICA, 1985 and is set aside.

Sick Industrial Companies (Special Provisions) Act, 1985 – Scheme of the Act – Discussed – Constitution of India – Article 39.

Constitution of India – Article 300A – Plea of the unsecured creditors that to compel them to accept the scaled down value of its dues would be violative of Article 300A – Held: Has no substance – Scaling down the value of the dues is under the rehabilitation scheme prepared u/s. 18 of the SICA, which has a binding effect on all the creditors – It cannot be said to be violative of Article 300A – Sick Industrial Companies (Special Provisions) Act, 1985 – s. 18.