# In the matter of Khatema Fibres Limited

> NCLT judgment dated 2023-10-13. Citation: TCN-2023-NCLT-01213. The case involves an application under Section 7 of the Insolvency and Bankruptcy Code, 2016,…

- **Court:** NCLT
- **Order date:** 13 Oct 2023
- **Citation:** TCN-2023-NCLT-01213
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/khatema-fibres-limited-d81119c7

## Summary

### Background

The case involves an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by Assets Care and Reconstruction Enterprise Limited (ACRE), acting as trustee of ACRE-127-TRUST, against Khatema Fibres Limited (KFL), the Corporate Debtor. The application seeks initiation of the Corporate Insolvency Resolution Process (CIRP) due to defaults on financial debts. KFL had obtained credit facilities from Bank of Baroda and ICICI Bank, which were later assigned to ACRE. Settlement agreements were executed, but KFL defaulted on payments. ACRE issued a demand/recall notice, leading to the current application. The Respondent/Corporate Debtor, Khatema Fibres Limited submitted its reply stating that the application suffers from material defects which can neither

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## Facts

Khatema Fibres Limited (KFL) obtained multiple credit facilities from Bank of Baroda and ICICI Bank. KFL defaulted on these facilities, leading to the banks classifying the accounts as Non-Performing Assets (NPAs) in 2008 and 2011. The outstanding financial debt was assigned to Assets Care & Reconstruction Enterprise Limited (ACRE) acting as trustee of ACRE-49-TRUST. Settlement agreements were executed between KFL and ACRE, but KFL defaulted on the agreed-upon payments. ACRE granted extensions for repayment on multiple occasions. KFL proposed one-time settlements, but these were not fulfilled. ACRE issued a demand/recall notice for the entire outstanding debt. The debt was subsequently assigned from ACRE-49-TRUST to ACRE-127-TRUST. KFL alleges collusion between

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## Issues and analysis

### Issue 1: Whether the assignment of debt from one trust to another within the same assets reconstruction …

**Ratio:** Section 7(2A)(a) of SARFAESI Act provides authority to specifically act on behalf of the

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**Reasoning:** The Tribunal reasoned that inter-trust assignments are permissible under RBI guidelines

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**Interpretation:** The legal issue concerns the validity of transferring debt between trusts

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**Application:** The Tribunal applied the ratio to the facts, finding that the debt assignment

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## Parties

- **Judges:** Praveen…; Ashish…
- **Appellants:** Assets Care and…; Assets Care &…
- **Respondents:** KHATEMA FIBRES…; M/s Khatema…

## Timeline

- **2008-08-28 — NPA Declaration by…**: ICICI Bank declared Khatema Fibres Limited's…
- **2011-03-31 — NPA Declaration by Bank…**: Bank of Baroda declared Khatema Fibres…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 3(12) — Definitions](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-3)

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