# In the matter of Modi Rubber Limited & Ors. vs. Continental Carbon India Ltd. & Ors.

> SC judgment dated 2023-03-17. Citation: TCN-2023-SC-00091. The case involves multiple civil appeals concerning the rights of unsecured creditors under the…

- **Court:** SC
- **Order date:** 17 Mar 2023
- **Citation:** TCN-2023-SC-00091
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/supreme-court-of-india/modi-rubber-limited-ors-vs-continental-carbon-india-ltd-ors-d1cd3dc0

## Summary

### Background

The case involves multiple civil appeals concerning the rights of unsecured creditors under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The core issue revolves around whether unsecured creditors are bound by rehabilitation schemes sanctioned by the Board for Industrial and Financial Reconstruction (BIFR) or if they have the option to reject the scaled-down value of their dues and wait for the company's full rehabilitation to recover their debts. The appeals arise from differing judgments of the Delhi High Court and the Madhya Pradesh High Court regarding the interpretation and application of SICA provisions concerning unsecured creditors.

## Facts

Several companies, including Modi Rubber Limited, OCL India Limited, and TVS Sewing Needles Ltd., were declared sick and underwent rehabilitation schemes under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). These schemes involved scaling down the debts owed to various creditors, including unsecured creditors like Continental Carbon India Ltd. Some unsecured creditors challenged the schemes, arguing that they should not be bound by the scaled-down values and should have the option to wait for the companies to fully recover and then claim their full dues. The Delhi High Court, in some cases, supported the unsecured creditors' position, while the Madhya Pradesh High Court followed the Delhi High Court's view. The companies appealed to the Supreme

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## Issues and analysis

### Issue 1: Whether on approval of a scheme by the BIFR under the Sick Industrial Companies (Special …

**Ratio:** The rehabilitation scheme sanctioned by the BIFR under Section 18 of SICA, 1985, is

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**Reasoning:** The Supreme Court reasoned that the primary object and purpose of SICA, 1985, is the

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**Interpretation:** The Court interpreted Section 18 of SICA, 1985, broadly to include unsecured

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**Application:** The Court applied the ratio to the specific facts of the case, holding that the

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## Parties

- **Judges:** M.R.…; Sudhanshu…
- **Appellants:** Modi Rubber…
- **Respondents:** Continental…

## Timeline

- **2008-04-08 — Scheme Ap…**: The scheme of rehabilitation of the…
- **2011-06-23 — AAIFR Dis…**: The AAIFR dismissed the appeal…

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