In Brief

This landmark judgment overrules the Delhi High Court's Continental Carbon decision and clarifies that unsecured creditors cannot opt out of a rehabilitation scheme sanctioned by the Board for Industrial and Financial Reconstruction under the Sick Industrial Companies Act, 1985. When BIFR approves a revival scheme, it binds all creditors—including unsecured creditors—to accept the scaled-down value of their dues. SICA is a mandatory, non-consensual insolvency regime designed to rescue viable sick companies from liquidation in the larger public interest. Allowing creditors to hold out would frustrate rehabilitation efforts and render schemes unworkable. Scaling down debts does not violate property rights under Article 300A, as it is done by statutory authority and represents part of necessary loss-sharing inherent in insolvency proceedings.

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