Administrator Of Specified Undertaking Of Unit Trust Of India & Anr. vs M/s Modern Syntex (India) Limited

a. That the Corporate Debtor received finance from the Financial Creditors in the nature of Secured Redeemable Non-Convertible Debentures (NCD) of Rs. 5385 Lacs and Unsecured Transferable Notes (UTNs) of Rs. 700 Lacs vide sanction letters signed on various dates. The details of allotment of Secured Redeemable Non-Convertible Debentures (of Rs. 5385 Lacs) is as follows:

b. The Corporate Debtor executed various documents including Letter of Allotment of 17.5% (Taxable) redeemable Non-Convertible Debentures of Rs. 100/-, Form No. 8 and Form No. 13 in accordance with the resolution passed at meeting of Board of Directors dated June 05,1995, Demand Promissory Note along with Advance Stamped Receipt for Receipt of Payment and Subscription Agreement dated June 21, 1995.

c. Thereafter, at the request of the Corporate Debtor, the restructuring package was approved vide UTI's ref no. UT/DOIM/M-121/607/98-99 dated 09.09.1998 which has been annexed with the application as Annexure C. As per the terms enumerated in the Letter, the overdue interest and simple interest on the debt as on cut-off date of 30.09.1998 was to be converted into 16% Optionally Secured Fully Convertible Debentures (OFCDs) redeemable in 32 quarterly instalments commencing from 01.04.2000. The outstanding principal of all the UTNs and NCDs was to be converted into 17% NCDs redeemable in 32 quarterly instalments commencing from 01.04.2001. Thus, the repayment of the aforesaid 16% OFCDs and 17% NCDs was to be completed in 32 quarterly instalments. The Corporate Debtor vide letter dated 14.09.1998 conveyed the acceptance of the aforesaid approval. Copy of the same has been annexed with the Application at Annexure-D.

d. It has further been submitted that after the restructuring of Debt in September 1998, a sum of Rs. 112.56 Lacs was paid by the Corporate Debtor during 15.05.2000 to 25.10.2000 which was adjusted towards part payment of interest. Copy of the Statement of Accounts has been annexed as Annexure E.

e. On 08.12.2000, the Corporate Debtor was referred to Board for Industrial and Financial Reconstruction (BIFR) vide Case No. 399/2000 on the basis of financial results as on 31.03.2000. Thereafter, the Corporate Debtor filed subsequent references with BIFR from time to time. It has been further submitted that the date of Default was 31.01.1999 whereas during the period starting from 2000 till 16.12.2016, the Corporate Debtor enjoyed the protection/bar on legal proceedings as per Section 22 of The Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).

f. Meanwhile, in the year 2002, the Unit Trust of India (Transfer of Undertaking and Repeal) Act,2002 was enacted whereby the body of Unit Trust of India was bifurcated into following entities:

The Administrator of the Specified Undertaking of the Unit Trust of India (SUUTI), a Successor to the erstwhile Unit Trust of India (UTI), having its Office at UTI Tower, Gn Block, Bandra Kurla Complex, Bandra (East), Mumbai-400051

UTI Trustee Company Pvt Ltd, the Trustee Company of UTI Mutual Fund (UTIMF), a successor to the erstwhile Unit Trust of India, acting through UTI Asset Management Company Limited, having its registered office at UTI Tower, 'Gn' Block, Bandra Kurla Complex, Bandra (East), Mumbai-400051.

g. Upon enactment of the Insolvency and Bankruptcy Code, 2016 (the Code) and in accordance with the provisions thereof, the last pending reference being Case No. 60/2010 in BIFR stood abated on 16.12.2016. Thus, there was a continuous default as on 16.12.2016.

h. The Financial Creditors have submitted that the application has been filed within limitation considering the extension in limitation by virtue of pendency of proceedings in BIFR. Also, the pendency of proceedings in BIFR results firstly in creating a bar on initiation of legal proceedings and secondly in extending the limitation of legal proceedings.

a. The Respondent/Corporate Debtor became sick in the year 2000 and on 08.12.2000, the reference to BIFR was made which was subsequently registered as Case No. 399/2000. The said reference continued till 01.12.2016 and stood abated on the said date upon coming into operation of the Code.

b. As per sanction letter dated 09.09.1998, security was to be created within a period of 3 months from the date of sanction of restructuring failing which additional interest was to be charged @1.05% p.a. However, the Respondent did not create any security for converting restructured 17% debentures of Rs. 60.85 crores and has also not created security for restructured optionally secured fully convertible debentures of Rs. 28.31 Crores. As the Respondent/Corporate Debtor did not file any modification of the earlier charges return in Registrar of Companies ('ROC'), accordingly the Applicants/Financial Creditors are partly Secured Financial Creditors and partly Unsecured. It has also been submitted that the claim of the Applicants besides being extremely exorbitant is superfluous and therefore, non-maintainable under the law.

c. In the year 2008, a one-time settlement ('OTS') was entered into with the Applicants for a total amount of Rs. 16 crores against the dues. The Respondent paid Rs. 2.4 Crores out of the settlement amount, however could not pay the remaining 13.6 crores due to pending reference and approval of Draft Rehabilitation Scheme before BIFR and also on account of heavy losses incurred by the Company because of unprecedented rise in oil prices leading to exorbitant increase in power and raw material cost. The Copy of the settlement dated 23.10.2008 has been annexed with the Reply as Annexure-R4.

d. The Respondent/Corporate Debtor has made untiring endeavours to settle the outstanding dues except that of the Applicants/Financial Creditors which is solely attributable to their adamant and whimsical attitude. It has also been submitted that the Corporate Debtor is willing to pay the balance amount of Rs. 13.60 crores along with reasonable interest, if any, pursuant to the direction of the High Court Order dated 20.07.2020.

e. The Corporate Debtor has also submitted that on 30.01.2018 a proposal for One Time Settlement was sent to the Petitioners/Financial Creditors which was rejected vide letter dated 05.02.2018. Thereafter, numerous letters came to be exchanged to arrive at a One Time Settlement but the same could not be achieved. The approach adopted by the Applicants/Financial Creditors in the entire process smacks of malafide and high-handed approach to coerce the Corporate Debtor into pressure and be liquidated. Such torturous act under the garb of a particular code is unwarranted and uncalled for especially when the entity despite being such unit has managed to settle its creditors and is on revival mode with the incoming investor desirous to invest in the unit.

f. The Corporate Debtor also contended that the Applicants/Financial Creditors have filed the application without proper authorisation/Power of Attorney in favour of the Authorised Representative Ms. Anita Patole. The Authority Letters available at Pg. 18 and 26 of the Application are letter simplicitor as no Board Resolution has been filed in favour of the signatories to the aforesaid letter. It is a settled position of law that any proceedings be it a suit/application/complaint under any provisions of law, in case of corporate body, should be filed exclusively by a person who has been duly authorised. Therefore, the very foundation of the application which is resting on the alleged defective authorisation cannot be considered as proper authorisation.

g. It has further been mentioned that the Application lacks the essential ingredients of Section 7 of the Code and in Part IV the Petitioners have deliberately mentioned wrong dates with respect to allotment of 15% NCD amounting to Rs. 85 Lacs as on 24.09.1995 against the correct date being 24.09.1985. The same has been done deliberately to cross the bar of Limitation.

h. The reply also states that the filing of the Application is barred by Limitation. The sanctioned/subscribed Redeemable NCDs of Rs. 5385 Lacs and UTNs of Rs. 700 Lacs in the year 1994 and 1995 were restructured on 09.09.1998 due to default in payments from 01.04.1996, being the date when right to sue arose for the first time. The applicants restructured its debts and accordingly on 01.01.1999 when the interest for the quarter ended the payment became due on 31.12.1998 and the same was not paid. Therefore, three years of limitation from 01.01.1999 expired in the year 2002. The alleged debt as claimed to be due and payable is time barred. Accordingly, the Application is beyond limitation.

It has been submitted that the Hon'ble Apex Court in B.K. Educational Services Private Limited v. Parag Gupta and Associates (2018)11 SCC 633 made it clear that the provision of the Limitation Act, 1963 will apply to the application made under Section 7 and 9 of IBC. The Hon'ble Court also held that intent of IBC is not to give a new lease of life to debts which are already time barred and Article 137 will apply to the application filed under IBC. According to the Respondent, the Petitioners have deliberately not specified any date of default in Part IV of the Application.

j. The Respondent has further contended that the Code is not an enforcement procedure for debts. The Code is a special act enacted for resolution of Corporate Persons keeping in mind the interest of concerned parties. It has been submitted that it is the case of the Applicant that till date they have not invoked their rights towards the adjudication of debt, since the year 1996, hence, IBC cannot be used as a substitute for Debt Adjudication and Enforcement Procedure, as held by the Hon’ble NCLAT in M/s Reliance Asset Reconstruction Company Ltd. v. M/s Hotel Poonja International Private Limited [Company Appeal (AT)(Ins) No. 1011 of 2019].

k. Further, it has been submitted that it is a settled proposition of law that Application under Section 7 of the Code is not a recovery claim or suit, it is just the resolution of Corporate Debtor. Section 7 has been brought into force on 1st December, 2016 vide S.O 3594(E) dated 30th November, 2016. Therefore, triggering CIRP in respect of defaults occurring prior to 1^st December, 2016 would be impossible in view of Application of Article 137 of the Limitation Act, 1963.

S.P. Chengalvaraya Naidu (Dead) by Lrs. Vs. Jagannah (dead) By Lrs. And Others. (1994) 1 SCC 1

Nibro Limited Vs. National Insurance Co. Ltd. (Suit No. 933 of 1983 Decided on 06.03.1990)

Schemenge GMBH and Company Ledger Vs. Saddler Shoes Private Limited ( Civil Suit No.689 of 1999 and Application No. 3189 of 1999 decided on 29.10.2010)

State Bank of Travancore Vs. Kingston Computers (I) P. Ltd Vs. Kingston Computers (I) P. Ltd. [Civil Appeal No.2014 of 2011 (Arising our of SLP (C) No. 18179 of 2009) Decided on 22.02.2011]

B.K. Educational Services Pvt Ltd v. Parag Gupta and Associates (2019) 19 SCC 633

Jignesh Shah & Anr. Vs Union of India & Anr. [Writ Petition (Civil) No. 455 of 2019]

Gaurav Hargovindbhai Dave Vs. Asset Reconstruction Company (India) Ltd. & Anr. (Civil Appeal No. 4952 of 2019) viii. Vashdeo R Bhojwani Vs. Abhyudaya Co-operative Bank Ltd & Anr. (Civil Appeal No. 11020 of 2018) ix. Sagar Sharma & Anr. Vs. Phoenic ARC Pvt. Ltd. & Anr. (Civil Appeal No. 7673 of 2019)

Babulal Vardharji Gujar Vs. Veer Gurjar Aluminium Industries Pvt. Ltd. And Another (Civil Appeal No. 6347 of 2019) 2020 SCC Online SC 647 xi. V Hotels Limited Vs. Asset Reconstruction Company (India) Limited (Company Appeal (AT) (Insolvency) No. 525 of 2019) xii. M/s Reliance Asset Reconstruction Company Ltd. Vs. M/s Hotel Poonja International Private Limited (Company Appeal (AT)(INS) No. 1011 of 2019) xiii. A. Balakrishnan Vs. Kotak Mahindra Bank Limited (Company Appeal (AT) (Insolvency) No. 1406 of 2019) xiv. C. Shivakumar Reddy Vs. Dena Bank & Anr. [Company Appeal (AT) (Insolvency) No. 407 of 2019]

Sumeet Maheshwari Vs. Navbharat Press (Bhopal) Private Limited & Anr. [Company Appeal (AT) (Insolvency) No. 197 of 2020]

Bimalkumar Manubhai Savalia Vs. Bank of India (Company Appeal (AT) (Insolvency) No. 1166 of 2019)

Bishal Jaiswal Vs. Asset Reconstruction Company (India) Ltd. & Anr. (Company Appeal (AT)(Insolvency) No. 385 of 2020)

Rajesh Kumar Tekriwal Vs. Bank of Baroda (Company Appeal (AT) (Insolvency) No. 225 of 2020)

State Bank of India Vs. Krishidhan Seeds Pvt. Ltd. (Company Appeal (AT) (Insolvency) No. 972 of 2020)

a. The Financial Creditors/Applicants submitted that the Order of the Hon'ble High Court dated 20.07.2020 would not act as an impediment for this Authority to exercise its authority and jurisdiction in admitting the petition and appointing a Provisional Insolvency Resolution Professional once a prima facie case is found to be in favour of the petitioners. The “consideration” of any offer/proposal would be at appropriate stage defined under IBC Code and would be considered while “deciding the main petition”. For the purpose of appreciating the jurisdiction and authority of this Tribunal reliance was placed on the preamble of the Code.

b. The Petitioners further submitted that the OTS sanctioned by the Petitioner No. 1 in terms of its letter dated 23.10.2008 was cancelled in August 2009 & all original liabilities were restored in terms of Petitioner No. 1’s letter dated 12.08.2009. Copy of the same has been annexed as Annexure A of the Rejoinder.

c. It has also been submitted that the Respondent/Corporate Debtor failed multiple times (in the year 1998, 1999, 2000 & 2008) and neglected to fulfil its commitment/s made, way back in the year 1998. Also, the settlement proposal which was then accepted by the Petitioner No. 1 ceased to be effective and valid. Further the respondent no more remained entitled to seek any waiver or concession that was earlier considered by the Petitioner since the OTS was cancelled vide petitioner’s letter dated 12.08.2009 and all original liabilities were restored. Therefore, any “consideration” of settlement proposal of the Corporate Debtor would be only in the four corners of the Code and not on the basis of any legal or contractual rights available to the Corporate Debtor and no such legal right exists in favour of the Respondent/Corporate Debtor outside the framework under IBC Code.

d. It was further mentioned in the rejoinder that as per the OTS sanctioned, the Corporate Debtor was required to make a payment of Rs. 16 Crores whereas no payment was made, hence the OTS was cancelled in August 2009. In December 2009, SUUTI, received Rs. 2.40 Crores from IFCI from the sale proceeds of two units of the Company sold under SARFAESI Act 2002 situated at Alwar, Rajasthan. After the repeal of Sick Industrial Companies (Special Provisions) Act, 1985, the reference to what transpired before BIFR is not relevant for the purpose of deciding this petition which is within four corners of the IBC Code.

e. It has been submitted that as per Annexure C of the Application, the instalments under restructuring sanctioned in September 1998 were to commence from 01.04.2000. The Corporate Debtor's reference was registered with BIFR on 08.12.2000. On 16.12.2016, the reference stood abated and the petition is dated 04.01.2018. Considering the time gap of 8 months between April and December 2000 and 12 months subsequently between abating of reference and filing of petition, it is clear that the petition is within limitation considering the extension in limitation period by virtue of pending proceedings in BIFR. Secondly, the pendency of proceedings in BIFR results firstly in creating a bar on initiation of legal proceedings and secondly in extending the limitation for legal proceedings. This can in no way be construed as if the instalments under sanctioned terms would enjoy a moratorium period of the whole span of years when the matter was pending before BIFR. The instalments fell due on respective dates. The only implication of BIFR was extension of limitation to file legal proceedings for enforcing debt. The contention of the Respondent stating that default could not have been taken place so long as the BIFR proceedings were pending is erroneous. It is clear from the proposal of settlement that there was a default.

a. B.K. Educational Services Private Limited Vs. Parag Gupta & Associates (2019) 11 SCC 633

b. Yogeshkumar Jashwantlal Thakkar Vs. Indian Overseas Bank & Ors. (NCLAT Company Appeal (AT) (Insolvency) No. 236 of 2020)

c. Laxmi Pat Surana v. Union Bank of India & Anr. ((2021) 8 SCC 481) The aforementioned judgments have been quoted to enunciate the applicability of the Limitation Act, 1963 under the Insolvency and Bankruptcy Code, 2016.

a. The Insolvency Resolution Professional proposed by the Applicant Mr. Partha Sarathy Sarkar is hereby appointed as the IRP to take over the affairs of the Corporate Debtor and duties as required to be performed by him under the provisions of IBC, 2016 including the issue of the publication in widely circulated Newspapers as contemplated under the provisions of IBC, 2016 and calling for the claims from the creditors of Corporate Debtor and collation of the same shall be done.

b. Further, as a sequel of admission, moratorium as envisaged under Section 14 of IBC, 2016 is invoked in relation to the Corporate Debtor which will be in vogue during the Corporate Insolvency Resolution Process of the Corporate Debtor. The IRP shall carry out CIRP strictly as per the timelines specified and as envisaged under the provisions of IBC, 2016 in relation to the Corporate Debtor.

c. The said IRP shall act strictly with the provisions of IBC, 2016 and to defray his expenses to be incurred and fees on the account, the Applicant is directed to deposit a sum of Rs. 2,00,000/- (Two Lakhs Only) to the account of IRP within three days from the date of this order. The IRP shall duly file a status report apprising this Adjudicating Authority about the progress of CIRP, as it unfolds, concerning the Corporate Debtor. In terms of Section 17 & 19 of IBC, 2016 all personnel of the Corporate Debtor including promoters and Board of Directors, whose powers shall stand suspended, shall extend all cooperation to the IRP during his tenure as such and the management of the affairs of the Corporate Debtor shall vest with the IRP.

d. In terms of Section 7 of IBC, 2016, this order shall be communicated at the earliest, not exceeding one week from today, to the Applicant, Corporate Debtor as well as the IRP appointed by this Adjudicating Authority to carry out the CIRP. A copy of this order shall also be communicated to IBBI for its records.

I. The Corporate Debtor moved an application numbered as IA/256/JPR/2020 under Section 75 of the Code read with Rule 11 of the NCLT Rules, 2016 against the Petitioner/Financial Creditors for furnishing false information and concealment of material particulars in the Application filed under Section 7 for initiation of CIRP. It has been submitted in the IA that no exact date of default has been mentioned in the main petition which is mandatory in terms of the scheme of the Code. Further the petitioner has also failed to mention the OTS dated 23.10.2008 or the payment received from the Corporate Debtor. Also, it has been mentioned that Ms. Anita Patole had no authorisation on behalf of the Petitioners to file affidavit in the main petition. Reply to this application was filed vide Diary No. 928/2020 dated 08.10.2020. Rejoinder to the same was filed vide Diary No. 826/2020 dated 24.11.2020. The contentions put forth in the present IA are mere technicalities sought to be amplified by the Corporate Debtor without being fatal in any way.

II. The above has been adequately examined in the preceding narrative. Therefore, the Interim Application IA No. 256/JPR/2020 filed by the Corporate Debtor is dismissed and accordingly stands disposed of.

I. The Corporate Debtor moved an application under Rule 11 of the NCLT Rules, 2016 vide Diary No. 2068/2021 seeking urgent appropriate directions in terms of the Order of the High Court of Rajasthan dated 20.07.2020. It has been submitted by the Corporate Debtor that in case the settlement is not considered at the stage when the final order has been reserved in the main petition, the whole purpose and intent of the order passed by the Hon'ble High Court would be defeated and same would be great violation of natural justice and would also amount to flouting the directions passed by the High Court in its extraordinary jurisdiction of Article 226 of the Constitution of India.

II. In our examination of the order of the Hon’ble High Court dated 20.07.2021 conceptually viewed with the recent judgment passed by the Hon’ble Supreme Court in E.S.Krishnamurthy & Ors Vs. Bharath Hi Tech Builders Pvt. Ltd. (Civil Appeal No. 3325 of 2020) dated 14.12.2021, the Interim Application IA No. 334/JPR/2020 filed by the Corporate Debtor is dismissed and accordingly stands disposed of.