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2023 Supreme(Online)(SC) 8585
M.R. SHAH, J
Modi Rubber Limited – Appellant
Versus
Continental Carbon India Ltd. – Respondent
CIVIL APPEAL NO. 375 OF 2017 | CIVIL APPEAL NO. 377 OF 2017 | CIVIL APPEAL NO. 379 OF 2017 | TRANSFER PETITION (C) NO. 543 OF 2016 | CIVIL APPEAL NO. 1755 OF 2023 (@ SLP (C) No. 4282 of 2020)
For the Appellants/Petitioners: Shri Jayant Bhushan, Shri C.U. Singh, Shri P.S. Sudheer, Shri A.K. Shrivastava
For the Respondents: Legal representatives of Continental Carbon India Ltd., M/s. Amar Forging Pvt. Ltd.
The SICA mandates that unsecured creditors accept scaled down dues, prohibiting the option to wait for full recovery post-rehabilitation to ensure the overall purpose of debt restructuring is met.
Headnote:(A) Sick Industrial Companies (Special Provisions) Act, 1985 - Sections 18 and 22 - In cases of rehabilitation schemes, unsecured creditors must accept scaled down dues. Unsecured creditors cannot opt out to recover full debts post-rehabilitation, contradicting SICA intent. (Paras 10, 12, 14, 15)
(B) Legal Principles - The provisions of SICA are binding on all creditors, and any deviation from this undermines the purpose of the Act. (Para 11.14)
(C) Findings of Court - The rehabilitation scheme approved under SICA applies universally to all creditors, preventing any individual from obstructing the rehabilitation of a sick company. The High Court's previous ruling on this matter has been quashed, reaffirming the necessity for all creditors to sacrifice for revival. (Paras 11.10, 14)
(D) Issues - The core legal question was whether unsecured creditors could abstain from accepting scaled-down dues. The court determined that this option is not authorized under SICA. (Paras 3, 15) (E) Ratio Decidendi - The court ruled that the binding nature of rehabilitation schemes under SICA justifies the scaling down of debts. Tolerance for selective creditor opt-outs would jeopardize the intent of legislative measures aimed at corporate recovery. (Paras 12, 15) (F) Conclusion - Appeals allowed; High Court's previous judgment set aside, reinforcing the binding schemes under SICA. (Paras 12, 15)
| Table of Content |
|---|
| 1. common questions arising from multiple civil appeals. (Para 1 , 2 , 3 , 4) |
| 2. arguments relating to unsecured creditors' rights under sica. (Para 5 , 6) |
| 3. court's reasoning on the binding nature of sica schemes. (Para 7 , 9 , 10 , 12) |
| 4. legislative intent behind the sick industrial companies act. (Para 11) |
| 5. conclusion on the enforceability of rehabilitation schemes for creditors. (Para 15) |
JUDGEMENT
M.R. SHAH, J.
1. As common question of law and facts arise in these group of appeals, they are being disposed of by this common judgment and order.
Civil Appeal No. 375 of 2017 - (To be treated as the lead matter)
2. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court of Delhi at New Delhi passed in Writ Petition (C) No. 4854 of 2011 by which the Division Bench of the High Court has allowed the said writ petition preferred by the respondent No.
1 herein – Continental Carbon India Ltd. (unsecured creditor) and has held that the original writ petitioner is an unsecured creditor and has the option not to accept the scaled down value of its dues and may wait till the scheme of rehabilitation of the appellant company [company before the BIFR under Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as “SICA”)] has worked itself out with an option to recover its debt post such rehabilitation, the original respondent No. 1 – Modi Rubber Ltd. has preferred the present Civil Appeal No. 375 of
2017. Civil Appeal No. 377 of 2017 2.1 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court of Delhi at New Delhi passed in Writ Petition (C) No. 8154 of 2010 by which the Division Bench of the High Court has dismissed the said writ petition preferred by the appellant herein confirming the orders passed by BIFR and AAIFR taking the view that the appellant herein, on obtaining the decree in its favour has to stand in the queue alongwith other unsecured creditors, who were to be given 54 paisa in a rupee as per the scheme of revival sanctioned under the SICA, the original writ petitioner – OCL India Ltd. (unsecured creditor) has preferred the present Civil Appeal No. 377 of 2017. Civil Appeal No. 379 of 2017 2.2 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the Division Bench of the High Court of Delhi at New Delhi dated 02.03.2016 passed in Writ Petition (C) No. 832 of 2016 by which the Division Bench of the High Court has doubted the correctness of the judgment and order passed by the High Court of Delhi in the case of Continental Carbon India Ltd. Vs. Modi Rubber Ltd., 2012 (131) DRJ 294 (DB), which is the subject matter of Civil Appeal No. 375 of 2017 before this Court and has referred the matter to the Larger Bench, the original respondent – TVS Sewing Needles Ltd. has preferred the present Civil Appeal No. 379 of 2017. TRANSFER PETITION (C) NO. 543 OF 2016 2.3 Present Transfer Petition has been preferred by the petitioner – TVS Sewing Needles Ltd. to transfer the pending Writ Petition (C) No. 832 of 2016 pending before the Delhi High Court, which is also the subject matter of Civil Appeal No. 379 of 2017 as the issue involved in the writ petition is the same arising in Civil appeal No. 375 of 2017 as the correctness of the said decision, which is the subject matter of Civil Appeal No. 375 of 2017 is doubted in Writ Petition (C) No. 832 of 2016. Civil Appeal No. 1755 of 2023 (@ SLP (C) No. 4282 of 2020) Leave granted.
2.4 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court of Madhya Pradesh Bench at Gwalior passed in Civil Revision No. 96 of 2018 by which the High Court has dismissed the said revision application relying upon the decision of the Delhi High Court in the case of Continental Carbon India Ltd. (supra), which is the subject matter of Civil Appeal No. 375 of 2017, the original revisionis
