The State Trading Corporation Of India vs Ganesh Benzoplast Limited

Comp. App. (AT) (Ins) No. 753 of 2021 & I.A. No. 5739 of 2025

(Arising out of the Order dated 13.02.2020 passed by the National Company Law Tribunal, Mumbai Bench, Court-V in C.P. (IB) 1975/MB/2018.

The State Trading Corporation of India (A Govt. of India Enterprise), Registered Office at : Jawahar Vyapar Bhawan, Tolstoy Marg, ...Appellant New Delhi-110001 Versus M/s Ganesh Benzoplast Limited Dina Building, 1st Floor, M. K. Road, Marine Lines (East), Mumbai - 400002 AND ALSO AT: A-1/A-2, Gurudatta CHSL, New Jankalyan Bank, J. B. Nagar, Andheri (East), Mumbai - 400059 ...Respondent

Present For Appellants: Mr. Uday Gupta, Sr. Advocate with Ms. Shivani Lal, Mr. Hiren Dasan, Mr. Ajay Sharma, Mr. Unmukt Gera, Advocates.

For Respondent: Mr. Sanat Jariwala, CA. Ms. Purti Gupta, Ms. Henna George, Ms. Sunidhi Sah, Ms. Pooja Aggarwal, Advocates.

JUDGEMENT

( 21.01.2026)

NARESH SALECHA, MEMBER (TECHNICAL)

1. The present appeal has been filed by the Appellant i.e. The State Trading

Corporation of India which is an enterprise of the Govt. of India under Section 61 of the Insolvency and Bankruptcy Code, 2016 ('Code') against the Impugned

Order dated 13.02.2020 passed by the National Company Law Tribunal, Mumbai

Bench ('Adjudicating Authority'), in C.P.(IB) No. 1975/MB/2018.

2. The Appellant submitted that the Respondent, through its Director Mr.

Ramakant Pilani, approached the Appellant in 2004 for grant of export facilities

for industrial lubricants to foreign buyers in Latin America, Europe, North

America, Middle East, and South East Asian countries, leading to discussions and

meetings, culminating in the Respondent's letters dated 28.02.2004, 06.07.2004,

14.04.2005, and 17.06.2005 requesting processing, sanction, and exposure limits

up to Rs. 4,00,00,000/- for export bills as per specified terms.

3. The Appellant submitted that, following the Respondent's letter dated

07.10.2005 confirming procurement of various export orders and market

availability, the Appellant accepted the proposal vide letter No. STC/GBL/2005

dated 21.10.2005, which the Respondent acknowledged vide letter dated

18.11.2005, leading to execution of an Agreement dated 06.02.2006 extending

the benefit of post-shipment credit facility (CLIS) from Exim Bank to the

Respondent.

4. The Appellant stated that Mr. Ramakant Pilani executed an unconditional

and irrevocable personal guarantee dated 02.02.2006, notarized on the same date,

guaranteeing payment to the Appellant up to Rs. 5,00,00,000/- plus 15% interest

per annum in case of default by the Respondent.

Page 2 of 20

5. The Appellant contended that shipments were carried out by the

Respondent as "Shipper," with remittances received by the Appellant until July

2007, after which delays led to accumulation of outstanding dues; in accordance

with the agreement, the Respondent issued post-dated cheques for the released

amounts, stipulating presentation upon default by foreign buyers.

6. The Appellant submitted that upon the Respondent's failure to clear dues,

14 such cheques were presented to State Bank of India and dishonoured; six

statutory notices were issued within prescribed limits, and despite the

Respondent's baseless defence, the Appellant filed complaints under Section 138

of the Negotiable Instruments Act, 1881, which remain pending before the

Competent Metropolitan Magistrate at Mumbai.

7. The Appellant stated that the total debt due towards export transactions as

on 28.02.2021 stands at Rs. 23,31,74,832/- (principal Rs. 7,54,07,331/-) plus

interest at 14.35% per annum.

8. The Appellant contended that vide letter dated 07.11.2003, the Respondent

requested facilities for supply of Toluene and allied products by opening Letters

of Credit (LCs) in favour of domestic parties, specifically M/s Reliance Industries

Limited (RIL) and Raj Petro Speciality Pvt. Ltd., followed by a further request

dated 26.12.2003 for assistance in raw material procurement.

9. The Appellant submitted that these proposals were accepted vide letter

dated 13.01.2004 on specified terms, acknowledged by Mr. Ramakant Pilani on

behalf of the Respondent; raw materials were procured by the Appellant on behalf

Page 3 of 20 of the Respondent via LCs, stored in warehouse tanks at the Respondent's

Tarapur, Thane premises managed by Central Warehousing Corporation (CWC)

at the Respondent's cost, under a tripartite agreement dated 19.01.2004, with

liftings on cash-and-carry basis.

10. The Appellant stated that to facilitate procurement, Mr. Ramakant Pilani

issued a personal guarantee dated 05.04.2006, notarized on the same date, and the

Respondent issued a corporate guarantee dated 05.04.2006, notarized likewise,

undertaking full payment to the Appellant.

11. The Appellant contended that specific transactions included: (i)

Respondent's request dated 21.06.2007 for inland LC for 19 KLS Rajprol T-100

in favour of Raj Petro Speciality Pvt. Ltd., with interest-free earnest money

deposit and purchase order dated 20.06.2007; Appellant instructed Bank of India

to open LC No. 00571LCDA070119 dated 22.06.2007 for Rs. 34,90,906/- (with

+/-5% tolerance) at 60 days from invoice; (ii) Respondent's acknowledgement of

receipt vide letter dated 09.07.2007, forwarding original lorry receipts to Mr.

Bendre, Chief Manager Finance; (iii) further request dated 24.07.2007 for LC for

115 MT Toluene in favour of RIL, with earnest money and purchase order dated

10.07.2007; and (iv) request dated 24.09.2007 for LC for 80 KLS JNK process

oil 485 in favour of M/s Jeyenkay Petrogels, with earnest money and purchase

order dated 20.09.2007.

12. The Appellant submitted that apart from these, the Respondent placed

purchase orders for materials procured from the Indian market under various

Page 4 of 20 agreements; however, a cheque dated 17.08.2010 for Rs. 1,55,00,000/- from

HDFC Bank was dishonoured upon presentation to SBI, leading to proceedings

under Section 138 of the NI Act without compliance despite statutory notice;

additionally, post-dated cheques issued towards liability for procurement and

supply were dishonoured, prompting a pending criminal complaint before the

33rd Metropolitan Magistrate Court, Ballard Pier, Mumbai.

13. The Appellant stated that delays in remittances from July 2007 resulted in

accumulated outstanding dues, with total debt towards domestic transactions as

on 28.02.2021 at Rs. 4,97,31,203/- (principal Rs. 1,21,46,355/-) plus interest at

12.85% per annum from invoice dates. The Appellant further stated that the

aggregate debt due as on 28.02.2021 is Rs. 28,34,13,327/- (export: Rs.

23,31,74,832/-; domestic: Rs. 4,97,31,203/-; 'C' Forms: Rs. 5,07,292/-) plus

stipulated interest, with defaults occurring from July 2007 onwards.

14. The Appellant contended that a demand notice dated 20.03.2018 under

Section 5, Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating

Authority) Rules, 2016, in Forms 3 and 4, was served on the Respondent, eliciting

a reply dated 31.03.2018, to which a rejoinder dated 28.05.2018 was issued; the

petition under Sections 8 and 9 of Code was filed, culminating in the impugned

order dated 13.02.2020 rejecting CIRP initiation.

15. The Appellant submitted that post-impugned order, the Respondent issued

communications dated 06.03.2020 and 12.03.2020 and deposited Rs.

Page 5 of 20 2,18,88,421/-, which the Appellant rejected vide letter dated 20.03.2020 as

without prejudice to its rights.

16. The Appellant stated that the BIFR/sanctioned scheme in reference in

reference to sick Corporate Debtor dated 04.12.2015 provided two options to

unsecured creditors like the Appellant: Option 1 - payment of 25% principal in

five equal annual instalments; Option 2 - forgo scaled-down dues and wait seven

years for the rehabilitation scheme to work out, allowing action thereafter.

17. The Appellant contended that the Respondent failed to pay even a single

instalment under Option 1 from 04.12.2015 to 03.12.2020, rendering the scheme

inoperative; the Adjudicating Authority erred in directing belated payment of

25% principal (Rs. 2,18,88,421/-) instead of initiating CIRP, thereby foreclosing

Option 2 and depriving the Appellant of its vested right to wait until December

2022 for full recovery.

18. The Appellant contended that the Adjudicating Authority failed to follow

a correct judicial approach in declining CIRP initiation despite established default

and scheme non-compliance. The Appellant stated that, absent adherence to the

sanctioned scheme, the Adjudicating Authority erred in directing belated

payment of 25% principal instead of mandating CIRP under the Code.

19. Concluding his arguments, the Appellant requested this Appellate

Tribunal to set aside the Impugned Order and allow the present appeal.

20. Per contra, the Respondent denied all averments made by the Appellant as

misleading and baseless.

Page 6 of 20

21. The Respondent submitted that it filed preliminary objections on

05.10.2021 to the appeal's maintainability, including on limitation grounds,

leading to dismissal by this Appellate Tribunal on 20.04.2023. The Respondent

contended that the Supreme Court order dated 02.04.2025 restored the appeal for

merits hearing, prompting supplementary objections on 08.07.2025, which the

Appellant failed to rebut despite directions.

22. The Respondent submitted that Appellant itself prayed for 25% principal

payment in its Adjudicating Authority rejoinder, which the Adjudicating

Authority recorded in para 5 of the impugned order and enforced as reasonable

under the BIFR scheme. The Respondent contended no "person aggrieved" exists

under Section 61 of the Code, as rights were enforced, not denied; per Delhi HC

in Vinod K. Patel v. IFCI Ltd. (2001), aggrievement requires substantial denial

of personal/property rights, absent here. Even assuming crystallization, liability

capped at 25% principal, matching the Adjudicating Authority's direction the

Appellant could secure no more.

23. The Respondent submitted that its sick company registration with BIFR,

draft scheme publication in TOI (09.05.2013) inviting objections (none from

Appellant), Delhi HC sanction on 04.12.2015 post-BIFR defunction, BIFR

circulation (08.01.2016), and SLP dismissal of some other creditor (10.04.2018),

attaining finality BIFR order dated 04.12.2015 under Sections 188, 193, 32(1)

SICA with overriding effect (Clause O, per Section 32(1)). The Respondent

submitted that the Clause 11.11(a), provide unsecured creditors payments at 25%

Page 7 of 20 principal in 5 annual instalments of BIFR sanctioned order; the Appellant's 2003-

04 dues uncrystallized/disputed per audited notes, hence no payment obligation

arose. "Crystallization" clarified as converting contingent liability to

definite/enforceable debt; absent here, no default. The Respondent argued that

the claim of the appellant was contingent and not crystallised, hence nothing was

payable by the Respondent to the Appellant.

24. The Respondent contended that despite this, the Respondent proposed

settlement on 20.09.2019 before the Adjudicating Authority offering 25% lump-

sum (of contingent outstanding principal) to be paid within 30 days, extinguishing

debts and dues per scheme. The Respondent stated that the Adjudicating

Authority passed order solely on scheme's binding effect, without adjudicating

Respondent's 30.07.2018 objections to Section 9 maintainability.

25. The Respondent submitted that the Hon'ble Supreme Court in judgement

of Modi Rubber v. Continental Carbon holds scheme's Option 2 full recovery

post-7 years without waiver else it may be contrary to SICA, frustrating

rehabilitation by risking re-sickness despite secured creditors' sacrifices. The

Hon'ble Supreme Court held that "Unsecured creditors cannot reject scaled-down

value and later claim full dues, as company survives on collective sacrifices; High

Court view in Continental Carbon quashed. Appellant's sole contention thus fails;

nothing survives in appeal".

26. The Respondent contended that the Appellant exercised Option 1 via

demand notice (20.03.2018) barring Option 2; and thereby, the Appellant is

Page 8 of 20 entitled only to lump-sum 25% paid sans crystallization/pre-interest and now

can't claim option B.

27. The Respondent submitted that the Appellant accepted payment per

impugned order invoking estoppel by election per Cauvery Coffee Traders v.

Horner Resources and Cannot approbate (accept benefit) and reprobate

(challenge order). The Respondent assailed conduct of the Appellant for such

belated protest (20.03.2020 post-payment) and 18-month delayed appeal

reflecting mala fides, blowing hot and cold acts which are impermissible.

28. The Respondent denied export liabilities (06.02.2006 agreement): as the

Appellant failed to furnish buyer guarantees (Technocraft) for New India

Assurance credit insurance (premium paid by Respondent), causing its own loss;

disputed via 31.03.2018 reply. The Respondent stated that for Domestic trade

(19.01.2004 tripartite): Clause 12 vested disposal authority in Appellant (CWC

godown), not Respondent and therefore; losses were caused due to the Appellant's

inaction. The Appellant denied liability of C-Forms.

29. Concluding, all his arguments, the Respondent requested this Appellate

Tribunal to dismiss the present appeal and allow BIFR revived company to

continue on its own legs.

Findings

30. We have already noted the rival contentions of the Appellant and

Respondents in preceding discussions.

Page 9 of 20

31. It needs to be appreciated that the Corporate Debtor was declared a sick

industrial company in terms of Section 3(1)(o) of the Sick Industrial Companies

(Special Provision) Act, 1985 ('SICA') vide order dated 06.05.2011 by BIFR.

32. The BIFR appointed IDBI as Operating Agency ('OA') under Section

17(3) of the SICA to examine its viability and formulate a rehabilitation scheme.

33. The IDBI submitted a revival scheme in respect of the Corporate Debtor,

which was examined by the BIFR through multiple hearings granted to the

stakeholders.

34. The BIFR noted that, as of cut-off dates of 31.03.2011, the total statutory

dues were of Rs. 61.77 Lakhs and the dues of Secured Creditors as on 31.03.2011

was of Rs. 266.01 Crores and further the dues of Sundry creditors as on

31.03.2011 was of Rs. 20.42 Crores.

35. The IDBI in its order of sanction scheme also noted the various relief and

concession sought by the Respondent.

36. We further note that in the same BIFR sanctioned scheme, the details of

Sundry Creditors as on 31.03.2011 and the list of contingent liability as on

31.03.2011 were tabulated in Annexure 5 and Annexure VIA, respectively.

37. We also note that the liability towards the Appellant was considered as

contingent liability as can be seen in Annexure 6A which reads as under :-

Page 10 of 20

Note :- The STC figure at Serial No. 6 and the claim reflected as contingent

liability was 11.35 Crores.

38. At this stage, we also note that Annexure 5 of BIFR sanctioned scheme

which indicate the total of 191 creditors who were treated as Unsecured Creditors

as on 31.03.2011, and in the list, the name of the Appellant do not figure. This

tantamount that according to BIFR sanctioned scheme, the Appellant was not

treated as Unsecured Creditors and was only reflected in the list of contingent

liability of the Respondent/ Corporate Debtor.

Page 11 of 20

39. At this stage, we would also take into consideration the fact brought by

Appellant as well as the Respondent during hearing that one of the Unsecured

Creditor, namely, M/s Avron Chemicals Pvt. Ltd. (seen as Serial No. 47 of the

list of the Unsecured Creditors as on 31.03.2011 in BIFR sanctioned order) has

gone to the Hon'ble Supreme Court of India in SLP No. 12096 of 2016, arising

out of Impugned Judgement dated 04.12.2015 in WP (C) No. 9320 of 2015 passed

by the Hon'ble Delhi High Court. The Hon'ble Supreme Court of India vide its

order dated 10.04.2018 heard the parties and refused to interfere in the impugned

judgement and therefore, SLP was rejected by the Apex Court.

40. We further take into consideration Note No. 34 i.e., contingent liability and

legal cases attached to the notes to financial statements for the period ended on

31.03.218 of the Corporate Debtor, where the claims of the Appellant in respect

of export bill were treated by the Corporate Debtor as contingent claims and the

Corporate Debtor reflected such claims of the Appellant at Rs. 24.98 Crores as

on 31.03.2018.

41. We note that the Writ Petition (C) No. 9320/ 2015 was filed by the

Corporate Debtor before the Hon'ble Delhi High Court, seeking direction under

Article 226 and 227 of the Constitution for seeking of sanction BIFR scheme as

contained in case no. 42 of 2009, which was under consideration of BIFR. We

note that the Corporate Debtor contended before the Hon'ble Delhi High Court

that BIFR was not functioning in the absence of members in the BIFR. The

Page 12 of 20 Hon'ble Delhi High Court vide its order dated 04.12.2015 approved the BIFR

sanction scheme dated 04.12.2015.

42. We have already noted that this order dated 04.12.2025 confirming BIFR

Scheme in respect of the Corporate Debtor of the Hon'ble Delhi High Court was

challenged before the Hon'ble Supreme Court of India by one of other Unsecured

Creditors- M/s Avron Chemicals, which was rejected by the Hon'ble Supreme

Court of India on 10.04.2018. Thus, the BIFR scheme proposed and approved

by the BIFR and rectified by the Hon'ble Delhi High Court vide its order dated

04.12.2015, stood confirmed at the highest level.

43. Now, in this background, we note that the whole controversy in the present

case is regarding Appellant's dues. According to Part IV of Section 9 petition

filed by the Appellant before the Adjudicating Authority, the outstanding dues

towards the export transactions was Rs. 17,00,05,876/- and due towards domestic

transactions was Rs. 3,68,62,534/- along with the interest and outstanding dues

towards non submission of Form - C of Rs. 3,57,76,081/-.

44. It is the case of the Appellant that since the outstanding dues were not paid

by the Respondent, the Appellant issued demand notice under Section 8 of the

Code on 20.03.2018 enclosing all details, invoices and calculations of the claims

with details. It has been brought to our notice that the Demand Notice was replied

by the Respondent vide letter dated 31.03.2018 denying any outstanding payable

by the Corporate Debtor. It was contended by the Respondent that no dues are

Page 13 of 20 payable by the Corporate Debtor, since, contingent liability had not been

crystalised and cannot be treated das even Unsecured liabilities.

45. The Respondent has also brought to our notice that the Appellant never

raised any objections w.r.t to BIFR sanctioned scheme which has attained finality

as the Hon'ble Supreme Court of India has refused to interfere with the Hon'ble

Delhi High Court order sanctioning the BIFR scheme. On this point, we had put

a pointed query to the Appellant and the Appellant had replied that since the

Appellant was not a party before BIFR or the Hon'ble Delhi High Court or the

Hon'ble Supreme Court of India, he did not have opportunity or reason in raise

any objections. The Appellant further that contended as per BIFR scheme during

such phase, the Appellant was not entitled to raise its objections.

46. The main bone of contention between the Appellant and the Respondent is w.r.t. to treatment of dues of the Appellant. We note that as per the sanctioned BIFR scheme, the Unsecured Creditor had two options which are reproduced as under :-

Option No. 1: The unsecured creditors would be paid 25% of the principal amount due in five equal annual instalments.

Option No. 2: The unsecured creditors would not accept the scaled down value of their dues and wait till the scheme of rehabilitation of the company has worked itself out / seven years

47. In this connection, we would like to reproduce the exact provisions of the

sanctioned BIFR order dated 04.02.2025 as contained in Para 11.11 which reads

as under :-

Page 14 of 20

"The unsecured creditors would be paid at 25% of the principal dues in five equal annual installment with an option not to accept the scaled down value of their dues and wait till the scheme of rehabilitation of the company has worked itself out/Seven years. M/s Pennar Paterson also will be treated at par with other unsecured creditors. Unsecured creditors also includes contingent liabilities if crystallized."

(Emphasis Supplied)

48. It is the case of the Appellant that the Appellant was never treated as

Unsecured Creditors by the Corporate Debtor and the Appellant was reflected in

Annexure VI (A) list for contingent liability payable by the Corporate Debtor on

crystallisations.

49. The Appellant pleaded that, if he was to be treated as Unsecured Creditors,

he had two options, either to accept the 25% of its claims and get paid in five

equal annual installments or wait for seven years and claim full amount. The

Appellant further argued that if the Appellant was treated as Unsecured Creditors

by the Respondent, he should have been paid in five annual equal instalments

from the date of sanction of BIFR order dated 04.12.2015. Thus, he should have

paid the entire amount of 25% as claimed by the Respondent by 04.12.2020,

which was not done by the Respondent as such, BIFR scheme failed by the

Respondent.

50. The Appellant argued that on the contrary in case he was given option B

with relation to Unsecured Creditors, he was having a window period of seven

years to claim his 100% outstanding and this window would have been open to

Page 15 of 20 him after expiry of seven years from BIFR sanction order dated 04.12.2015 i.e.,

as on 04.12.2022.

51. The Appellant brought to our notice that the Adjudicating Authority vide

its Impugned Order dated 13.02.2020, have given the reasoning only in para no.

8 & 9 and in para 10 directed the Corporate Debtor to make payment of Rs.

2,18,88,421/- within the time of 30 days from the date of receipt of the Impugned

Order.

52. It is the case of the Respondent that the Respondent fully complied with

the Impugned Order and since then, paid the full amount. On this point the

Appellant submitted before us that he has received the money indicating 'without

prejudice'.

53. It is the case of the Appellant that the Adjudicating Authority could not

have forced the Appellant to accept BIFR scheme in piece meal when the

Appellant has sought the proceeding under Section 9 of the Code.

54. The Appellant vehemently argued that the BIFR Sanctioned Scheme was

not made applicable for him. The Appellant argued that if the Sanctioned BIFR

Scheme applied to him, then as per option no. 1, the Appellant should have been

paid 5 equal annual installments within 5 years of BIFR sanctioned order i.e., he

should have been paid by 04.12.2020, whereas the payment was made to him

after the passing of the Impugned Order dated 13.02.2020.

55. We note that the Appellant's argument is that BIFR order failed w.r.t. his

payments as he was not paid on the basis of five equally annual instalments as

Page 16 of 20 per clause 11.11 of the BIFR sanctioned scheme dated 04.12.2015. As such, he

cannot be compelled to accept the same. When he filed his petition u/s 9 of the

code and the Adjudicating Authority has no jurisdiction to order the Appellant to

accept BIFR payment as such belated time. The Appellant argued that the

Adjudicating Authority is not empowered the equity jurisdiction. The

Adjudicating Authority is only to determine existence of debt, default, absence

of existence of pre-existing dispute and should have admitted the petition of the

Appellant under section 9 of the Code.

56. At this stage, we would like to examine the rational used by the

Adjudicating Authority while passing such directions.

57. The rational of the Adjudicating Authority is practically contained in para

8 to 10 of the impugned order which reads as under :-

"8. Ongoing through the letter cited above, this Bench is of the view that the proposal given by the Corporate Debtor is reasonable and in view of the fact that the Petitioner being an unsecured creditor of the Corporate Debtor is bound by the scheme sanctioned by the BIFR. When this observation of this Bench is put to the learned Senior Counsel representing the Petitioner, he insisted for the admission of the Petition but we are of the considered view that the settlement offer which is in terms of sanctioned BIFR scheme is applicable to the Petitioner herein also. We are of the considered view that when the Petitioner gets 25% of principal due as offered by the Corporate Debtor, the same will meet the ends of justice.

9. The Corporate Debtor consented to make the payment of ₹2,41,74,140/- minus 25% of 'C' Forms (i.e. ₹22,85,720/-) handed over to the Petitioner, which works out to

Page 17 of 20 ₹2,18,88,421/ -. Since the original claim includes claim towards 'C' Forms not issued by the Corporate Debtor and now the 'C' Forms were issued, this is also in order.

10. This Bench doth order as follows:

a. That the Corporate Debtor is directed to make the payment of ₹2,18,88,421/ -.

b. That the payment shall be made within a period of 30 days from the date of receipt of this order."

(Emphasis supplied)

58. Based on the detailed arguments before us and the Impugned Order noted

above, it is seem that the Respondent was to follow the BIFR scheme in toto and

to make the payment as due and available towards the Appellant in five equal

installment i.e., beginning from 04.12.2015, if Corporate Debtor considered the

Appellant as Unsecured Creditor and not contingent liability. It is undisputed

fact that the Respondent did not make any payment to the Appellant till the

Impugned Order was pronounced by the Adjudicating Authority. The argument

of the Respondent that in any case the Appellant would have been entitled

maximum 25% of his claims does not hold any logic. If, Respondent treated the

Appellant as Unsecured Creditor, he should have paid on annual basis which

Respondent failed to do so. As such, the Appellant was not bound by the same

and he was within his right to file Section 9 petition under the Code.

59. We hold that the Adjudicating Authority was duty bound to adjudicate on

existence of debt, default and existence of pre-existing dispute if any, and if debt

Page 18 of 20 and default and no pre-existing dispute were confirmed then the Adjudicating

Authority ought to have admitted Section 9 petition of the Appellant.

60. Forthwith, on the treatment of Appellant as contingent liability in the books

of Corporate Debtor, we put a direct and pointed query to the Respondent as to

how and under what circumstances the dues payable towards Appellant was

shown under contingent. The Respondent merely answered that the same is

reflected in the financial statement. The Respondent could not satisfy us as how

the claims of the Appellant was contingent liability.

61. We would like to indicate that the Respondent also argued that the debt

itself was not payable. If the argument of the Respondent is to be accepted, we

wonder how the Adjudicating Authority could have directed the Respondent to

make a payment of Rs. 2,18,88,421/- which could have been ordered only when

debt was payable.

62. One of the another arguments of the Respondent before us was that since

debt of the Appellant was contingent, the same was required to be crystallised

before debt could have become due and such crystallisation could have been done

by competent court of law. The Respondent, however, could not satisfy us, if this

is the case, then why the due amount has been paid to the Appellant after the

Impugned Order. As such, we do not accept the logic of the Respondent on the

same issue.

63. The Respondent has also brought to our notice that the Hon'ble Supreme

Court in case of Modi Rubber (Supra) has already settled the principals of law

Page 19 of 20 regarding validity of the order passed by BIFR in regard to the option being

provided in the sanctioned scheme by it, which makes binding for unsecured

creditors to accept the provision in relation of payment of the restructured or and

to wait for a period of 7 years, till the scheme works itself out. On this issue we

note that the facts of both the cases are different in the case of Modi Rubber

(Supra) where Operational Creditor was clearly treated as Unsecured Creditors

and there was no issue of contingent liability. In that sense, the Appellant, herein,

was not treated as unsecured creditors at all but only as contingent liabilities under

clause 11.11 of sanctioned BIFR scheme dated 04.12.2015.

64. Thus, for the reasons discussed before, the Appeal succeeds and the

Impugned Order is set aside. The original petition bearing C.P. (IB)

1975/MB/2018 is restored back before the Adjudicating Authority. Both the

parties are directed to appear before the Adjudicating Authority on 05.02.2026.

The Adjudicating Authority, shall decide the said case afresh strictly in

accordance with law. No cost. I.A., if any, are closed.

[Justice Mohammad Faiz Alam Khan] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical) Sim

Page 20 of 20