Amit Chaturvedi vs Stressed Assets Stabilization Fund

(Arising out of judgement and order dated 02.07.2024 passed by National Company Law Tribunal, Chandigarh in Company Petition No. CP(IB) No.365/ChD/PB/2024 titled SASF Vs Dwarikadhish Spinners Ltd)

In the matter of:

Mr Amit Chaturvedi Ex Director of Dwarikadhish Spinners Ltd 98 Eastern Avenue, Sainik Farm, New Delhi 110062 Appellant

Vs

1. Stressed Assets Stabilization Fund, Though its Manager Smt Shreshtha Paul, 3rd Floor, IDBI tower, WTC Complex, Cuffe Parade Mumbai 400005

2. Ms Dwarikadhish Spinners Ltd Th: Mr Prem Chand Goyal, IRP for Dwarikadhish Spinners Ltd 1, Village Kouli Majra, Tehsil Derabassi, Lalru Distt SAS Nagar 140501

Also at House No.1-F Adjoining Municipal House Model Town, Patiala Punjab 147001 Respondent

For Appellant: Ms. Purti Gupta, Ms. Heena George, Advocates

For Respondent: Mr. Anand Varma, Ms. Apoorva Pandey, Advocates 2

ORDER

JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL)

The present appeal has been filed against an impugned order dated

02.07.2024 passed by the Ld. National Company Law Tribunal, Chandigarh

Bench in Company Petition No. IB-365/CHD/PB/2018 titled as Stressed

Assets Stabilization Fund Vs M/s Dwarikadhish Spinners Ltd. The Ld.

Adjudicating Authority has allowed a petition under Section 7 of IBC filed by

the Respondent No.1 herein, despite the fact on 23.07.2019 a scheme of

arrangement under Section 391-394 of the Companies Act, 1956 has been

approved by the High Court of Punjab & Haryana.

2.B Before proceeding further let us state few brief facts.

3. In the year 2008 a scheme of arrangement under Section 391-394 of

the Companies Act, 1956, being CP No. 51/2008 was initiated by the

Corporate Debtor which was approved by the 75% of the creditors of the

Corporate Debtor viz Dwarikadhish Spinners Ltd.

4. Qua the said scheme of arrangement the first motion application viz CP

No. 51/2008 was filed before the Punjab & Haryana High Court seeking

sanction of the scheme of arrangement between Corporate Debtor and its

creditors, including Respondent No.1.

5. Between March to June 2008, the Meeting of the Creditors of the

Corporate Debtor were convened as per due procedure laid down under the

Companies Act, 1956. On 20.06.2008 the Respondent No.1 sent a letter

showing its intention on agreeing to Option No. III for the scheme of

arrangement, whereby Respondent No.1 agreed to receive Rs. 459.36 lakhs

with certain terms and conditions.

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6. On 21.06.2008 under the Chairmanship of Ms Ritu Singh, Advocate,

the meeting of the creditors was convened and thereafter on 25th July, 2008,

the first motion petition was approved by the Punjab & Haryana High Court.

7. On 30.07.2009 the second motion petition being CP No. 89/2009 was

filed in the High Court of Punjab & Haryana, but between 2009 to 2018 the

second motion petition remained pending for various reasons, including

disputes amongst several secured creditors, the corporate debtor and other

parties. Rather Respondent No.1 moved before the Ld. DRT for possession of

the property of corporate debtor under the SARFEASI Act. However, the said

application was stayed by the Punjab & Haryana High Court as the scheme

for arrangement was pending.

8. On 12.10.2018 the Respondent No.1 filed a petition under Section 7 of

IBC before the Ld. Adjudicating Authority while concealing the factum of

pendency of the Scheme for Arrangement before the Ld. Punjab & Haryana

High Court. On 23.07.2019 the second motion petition was allowed by the

Hon'ble Punjab & Haryana High Court approving the said scheme of

arrangement and with a direction the scheme shall be binding on the

appellant as well as all its stake holders, i.e. all creditors alongwith

Respondent No.1 herein.

9. On 23.09.2019 the copy of the order dated 23.07.2019 passed in CP

No. 89/2009 was sent to the Respondent No.1 by the appellant with a choice

to Respondent No.1 either to stick with Option No. III already opted for or any

other option provided in the scheme. However, on 02.08.2022 the

Respondent No.1 filed an application for recall of the order dated 23.07.2019

in CP No. 89/2009 which allowed the second motion petition and the said 4

order dated 2307.2019 was thus recalled by the Punjab & Haryana High

Court.

10 On 10.10.2022 the company appeal PP No. 14/2022 was filed before

the Hon'ble Division Bench of Punjab & Haryana High Court and while issuing

notice in the said appeal, the operation of recall order dated 2nd August, 2022

was stayed.

11. On 28.10.2022 the appellant filed an affidavit alongwith an order dated

10.10.2022 before Ld. NCLT but ultimately on 02.07.2024, the impugned

order was passed whereby the Ld. Adjudicating Authority allowed the CP

under Section 7 of the IBC 2016 filed by the Respondent No.1.

12. Thus the question before us is whether the Ld. NCLT ought to have

exercised jurisdiction under Section 7 of the Code, when a Scheme of

Arrangement was already in existence, as approved by the Ld. Single Judge

of the Punjab & Haryana High Court on 23.07.2019 itself.

13. It is the submission of the learned counsel for the Respondent No.1 that

in the present case the lenders have unanimously agreed to withdraw the

consent to the scheme of arrangement upon Corporate Debtor's failure to take

steps in filing of the second motion petition in time and the withdrawal of

such consent was communicated to the Corporate Debtor vide letter dated

03.07.2019 and that the lenders even filed objections before Hon'ble High

Court bringing to the notice of the High Court the consent of lenders stands

withdrawn as period for filing second motion had elapsed and only for this

reason, the scheme sanctioned order dated 23.07.2019 was recalled by the

Ld. Single Judge on an application filed by the lenders and though the said

order was stayed by the Ld. Division Bench of Punjab & Haryana vide its order 5

dated 10.10.2022 but it did not quash the order dated 2nd August, 2022

passed by the Ld. Single Judge and the same still exists.

14. Now admitted fact as they emerge are the order of recall dated 2nd

August, 2022 stands stayed in APP No.14/2022 by the Ld. Division Bench of

Punjab & Haryana High Court. The said appeal is still pending before the

Punjab & Haryana High Court and is now listed on 19th August, 2025.

15. The question is what we need to do till the pendency of the appeal before

the Ld. Division Bench of Punjab & Haryana High Court where the legality of

the scheme is being challenged. Admittedly an approved scheme has a

statutory force and is binding upon all its creditors and it operates as a

judgement in rem. Admittedly the scheme was initially accepted by the

requisite majority of creditors, including the Respondent No.1 (SASF).

Admittedly the Hon'ble High Court had sanctioned the scheme on 23.07.2019

i.e. much prior to the impugned admission order dated 02.07.2024. Thus

admittedly at the time of admission of the petition, a sanctioned scheme, as

approved, was already in existence. Section 391(3) of the Companies Act,

1956 makes an approved scheme binding on all the parties, including

Respondent No.1 and it cannot resile. Further Section 391(6) of the

Companies Act, 1956 provides for stay of all coercive action against the

sanction of the scheme of arrangement. Admittedly in its order dated

10.10.2022 in CPP 14/2022 the Hon'ble Division Bench noted there was a

consent of 75% of the creditors under the Scheme.

16. It was one of the submission of the appellant, consent once given could

not be withdrawn by lenders and their refusal to accept the payment upon

sanction of the scheme cannot be considered as a default on the part of the 6

Corporate Debtor. Now the withdrawal of the consent or default is an issue

pending before the Ld. Division Bench of High Court and it was not

appropriate for Ld. Adjudicating Authority to over-reach such jurisdiction. Per

force, as the scheme of arrangement was sanctioned on 23.07.2019 there

existed a novation of contract and the debt stood resolved per Suresh Kr

Reddy Vs Canara Bank and others 2023 (5) SCR 387.

17. Further Section 7 of the IBC uses the word "may", making admission of

a petition discretionary. Now the facts and circumstances so warrant, the

Adjudicating Authority should have kept the admission in abeyance till the

App No.14/2022 was decided.

18. The mandate of Section 7 of the Code is to explore a resolution for the

benefit of the company and it had already taken place under a sanctioned

scheme, when it stood sanctioned vide order dated 23.07.2019. Such a

rehabilitation was in line with the object of the Insolvency Code. Admittedly

the insolvency proceedings are not recovery proceedings and SASF, the

predecessor of M/s Omkar viz Respondent No.1 had admittedly settled at

Rs.459.36 lakhs under the scheme of arrangement and now in its insolvency

petition is claiming an inflated amount of Rs.154 crores.

19. In Lavkash Verma V M/s Vigneshwara Developers Pvt Ltd (IB)-

1076(ND)/2019, an admission order passed under Section 7 of the Code, was

kept in abeyance since a scheme of arrangement was approved by the High

Court of Delhi.

20. The learned counsel for the Respondent No.1 though referred to Grand

Developers V Nitin Batra, dated 15.05.2024 in CA (AT)(Ins) No.899/2024

wherein despite the scheme of arrangement pending between the parties the 7

petition under Section 7 of IBC was directed to be continued, but to our mind

the said judgment shall not be applicable to facts since in the cited case, the

scheme of arrangement was still pending, but whereas in the present case the

scheme has already been sanctioned prior to filing of Section 7 petition of the

IBC. Secondly the reliance of Respondent No.1 upon Forech India Ltd Vs

Edelweiss Assets Reconstruction Co (2019) SCC 549 is also not correct since

it was a case of winding up of the company and not a case of scheme of

arrangement.

21. In the light of the above circumstances we are of the considered view as

the objections to the scheme are still pending in APP No.14/2022 before the

Hon'ble Division Bench of Punjab & Haryana High Court and as the order of

recall in CP No. 89/2009 stands stayed in APP No. 14/2022 much prior to

the passing of the impugned order and as the Respondent No.1 ought to have

disclosed the factum of sanctioning of scheme before the Ld. NCLT; hence in

these circumstances the Ld. NCLT ought to have at least waited till disposal

of App No. 14/2022 pending before Ld. Division Bench of Punjab & Haryana

High Court, now listed for 19.08.2025. Thus in this case we set aside the

order of admission under Section 7 of IBC passed by Ld. NCLT, though

keeping the petition filed under Section 7 of IBC pending and only after the

APP No. 14/2022 is disposed of, the Ld. NCLT should have a fresh look in the

matter in the light of the order passed in APP No. 14/2022 (supra). 8

22. The appeal is disposed of in terms of the above.

23. Pending applications are also disposed of.

(Justice Yogesh Khanna) Member (Judicial)

(Mr. Ajai Das Mehrotra) Member (Technical) Dated: 18-08-2025 BM