Legal Provisions Involved: Section 7 and Section 62 of the Insolvency and Bankruptcy Code, 2016; Section 62 of the Indian Contract Act, 1872

Judgement by: Supreme Court of India

Judge/Bench: Justice Sanjay Kumar and Justice K. Vinod Chandran

Facts

The Respondent issued redeemable non-convertible debentures through a Debenture Trust Deed dated 27.03.2018. Upon default, the respondent proposed restructuring directly to one debenture holder (ECLF) without involving the debenture trustee or other holders.The Appellant issued a recall notice and filed a Section 7 application, which was dismissed by both NCLT and NCLAT.

Key Legal Provisions

Section 7 and Section 62 of the Insolvency and Bankruptcy Code, 2016; Section 62 of the Indian Contract Act, 1872

Issues raised

Whether the restructuring proposal between the corporate debtor and one debenture holder modified the DTD terms?

Arguments of the case

The Appellant argued that DTD terms required written consent of all debenture holders through prescribed procedure while the Respondent argued that restructuring was agreed upon and  moratorium was operative till September 2023.

Judgement

The Supreme Court allowed the appeal, holding that NCLT and NCLAT erred in ignoring binding DTD terms.

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