# In the matter of Bombay Rayon Clothing Limited

> NCLT judgment dated 2025-04-24. Citation: TCN-2025-NCLT-00183. Catalyst Trusteeship Limited, the Financial Creditor, filed a Company Petition under Section 7…

- **Court:** NCLT
- **Order date:** 24 Apr 2025
- **Citation:** TCN-2025-NCLT-00183
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/bombay-rayon-clothing-limited-a0bcc846

## Summary

### Background

Catalyst Trusteeship Limited, the Financial Creditor, filed a Company Petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate Corporate Insolvency Resolution Process (CIRP) against Bombay Rayon Clothing Limited, the Corporate Debtor. The petition was filed due to a default of Rs. 2,93,26,51,822/- arising from the invocation of a corporate guarantee furnished by the Corporate Debtor for Non-Convertible Debentures (NCDs) issued by Reynold Shirting Limited, the Principal Borrower. The Corporate Debtor argued that the application was barred by Section 10A of the Code and that the default amount was incorrect due to a restructuring agreement. The Financial Creditor contended that the restructuring was revoked due to the Principal Borrower's

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## Facts

Catalyst Trusteeship Limited, the Financial Creditor, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate Corporate Insolvency Resolution Process (CIRP) against Bombay Rayon Clothing Limited, the Corporate Debtor. The Corporate Debtor acted as a corporate guarantor for Non-Convertible Debentures (NCDs) issued by Reynold Shirting Limited, the Principal Borrower. The total default amount was Rs. 2,93,26,51,822/-, arising from the invocation of the corporate guarantee. The Principal Borrower made an upfront payment of Rs. 5 Crore on 05.01.2023 as per the Restructuring Letter but failed to repay the second installment. The Debenture Holder intimated the obligors, including the Corporate Debtor and the Principal Borrower, regarding

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## Issues and analysis

### Issue 1: Whether the application under Section 7 of the IBC is maintainable despite the initial demand …

**Ratio:** The cause of action for initiating legal action arises either from a default of the

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**Reasoning:** The Tribunal reasoned that while the initial demand notice was issued during the period

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**Interpretation:** The interpretation is that the restructuring of debt, while initially putting

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**Application:** The ratio and reasoning apply to the facts by establishing that the revocation

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## Parties

- **Judges:** ANIL RAJ C…; K. R. SAJI…
- **Appellants:** Catalyst Trusteesh…
- **Respondents:** Bombay Rayon…
- **Advocates:** Shyam Ka…; Jyoti A…; +4 more

## Timeline

- **2017-10-12 — Debenture Trustee…**: Debenture Trustee Agreement executed with the Principal Borrower (i.e. Reynold Shirting…
- **2017-10-14 — Debenture Tru…**: Debenture Trust Deed executed between the Principal Borrower in its capacity as the…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 7 — Initiation of corporate insolvency resolution…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-7)

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