# In the matter of Scotts Garments Limited I.A. Nos. 87, 443 of 2020 & I.A. No. 29 of 2021 in C.P. (IB)No. 68-BB-2018

> NCLT judgment dated 2021-03-09. Citation: TCN-2021-NCLT-02758. The case involves multiple applications (I.A.Nos.87, 443 of 2020 and I.A.No.29 of 2021) filed…

- **Court:** NCLT
- **Order date:** 9 Mar 2021
- **Citation:** TCN-2021-NCLT-02758
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/scotts-garments-limited-ia-nos-87-443-of-2020-ia-no-29-of-2021-in-cp-ibno-68-bb-281e36ae

## Summary

### Background

The case involves multiple applications (I.A.Nos.87, 443 of 2020 and I.A.No.29 of 2021) filed in relation to a Corporate Insolvency Resolution Process (CIRP) initiated against Scotts Garments Limited. Canara Bank, the financial creditor, initially sought to withdraw I.A.No.87 of 2020 and initiate liquidation proceedings. Linen Art Private Limited, the Resolution Applicant, filed I.A.No.29 of 2021 seeking directions for the respondents to consider a modified resolution plan. The original resolution plan was approved on 16.09.2019, but challenges arose due to the COVID-19 pandemic and a forensic audit initiated by SBI. The Resolution Applicant has disbursed Rs.28.05 Crores towards CIRP costs, employee dues, and refurbishments.

## Facts

Saravana Distributors initially filed C.P.(IB)No.68/BB/2018 under Section 9 of the IBC, leading to the initiation of CIRP against Scotts Garments Limited, the Corporate Debtor. The CIRP was admitted on 13.08.2018. Linen Art Private Limited submitted a resolution plan, approved on 16.09.2019, with payments due by May 2022. State Bank of India (SBI) challenged the allocation in the plan before NCLAT. After plan approval, SBI requested a forensic audit, causing the Resolution Applicant to halt payments. The Resolution Applicant disbursed Rs.28.05 Crores in 2020 towards CIRP costs, employee dues, and refurbishments. The Resolution Applicant proposed revisions to the plan, including upfront payment of Rs.35 Crores and a revised payment schedule. Canara Bank sought to

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## Issues and analysis

### Issue 1: Whether the Resolution Applicant is entitled to have the modified Resolution Plan considered as a …

**Ratio:** The CoC has the prerogative to accept or reject a resolution plan. The Adjudicating

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**Reasoning:** The court acknowledges the CoC's authority but emphasizes the need for fair consideration

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**Interpretation:** The court interprets the IBC to balance the CoC's decision-making power with

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**Application:** The court directs Canara Bank and other CoC members to reconsider the

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## Parties

- **Judges:** Rajeswara Rao…; Ashutosh C…
- **Appellants:** Canara…
- **Respondents:** Scotts Garments…

## Timeline

- **2018-08-13 — CIRP Admi…**: The Adjudicating Authority admitted the…
- **2019-07-24 — Resolution Plan…**: The Resolution Applicant…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 33(3) — Initiation of liquidation](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-33)

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