ADMINISTRATOR OF THE SPECIFIED UNDERTAKING OF THE UNIT TRUST OF INDIA versus GARWARE POLYSTER LTD.

Citation: [2005] SUPP. 1 S.C.R. 192 · Decided: 09-05-2005 · Supreme Court of India · Bench: B.P. SINGH · Disposal: Dismissed
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Judgment (excerpt)

A 
ADMINISTRATOR OF THE SPECIFIED UNDERTAKING OF THE 
UNIT TRUST OF INDIA 
v. 
GAR WARE POL YSTER LTD. 
B 
MAY 9, 2005 
[B.P. SINGH AND S.B. SINHA, JJ.] 
Companies Act, 1956; Ss. 113, 391, 393/Companies (Issue of Share 
C Certificate) Rules, 1960/Bombay Relief Undertakings (Special Provision) Act, 
1958/Jndian Contract Act, 1872; Section 28/Code of Civil Procedure, 1908; 
Order XXJll Rule 1: 
Company-Loss-Revival-Restructing. package/Scheme-Common 
Subscription Agreement entered into between a Company and debenture 
D holders-Creation of Debenture Trust Deed-Challenged by one of the 
debenture holders-appellant-Filing of a Petition by the Compal1)! seeking 
approval of lhe Scheme-Allowed by the Company Judge-Appeal dismissed 
I. 
by the Division Bench of the f!igh Court-On appeal, Held: Jn terms of the 
Trust Deed, the rights, privileges and conditions attached to the debenture 
holders could be vqried, modified or abrogated only in accordance with the 
E provisions of law with the consent of debenture holders by way of a special 
resolution passed-But resolution shall not be operative.against the company 
if its modifies or varies the terms and conditions governing the debentures-
No provision as of Veto Power/unanimity provided for passing a resolution-
Principle of Majority accepted by the authorities-Court could grant sanction 
F to a scheme only when it is satisfied tharthe scheme is fair, just reasonable 
and does not contravene public policy or al(l~tatutory provision-The scheme 
~ -
applies equally to all the debenture holders and the appellant cannot be 
treated as a separate class-The purpose and object of advancing a huge 
investment by the appellant to the company is a matter of no concern to the 
company/other debenture ho/aers-The Company primafacie showed that the 
G scheme is fair and reasonable and having approval of the requisite majority 
of the debenture holders-Hence, the Company Judge rightly accepted the 
scheme-Sick Industrial Companies (Special Provisions) Act, 1985--.The 
Securities and Reconstruction of Financial Assets and Enforcement of Security 
Interest Act, 2002. 
H 
192 
• 
ADMINIST. OF THE SPECIFIED UNDERTAKING OF THE U.T.I. v. GARW ARE POL YSTER LTD. 
193 
Commercial documents-Meaning of 
TI:ie respondent-Company is engaged in the manufacture of polyster 
film and also exporting its product. The company went for expansion and 
A 
in connection thereto obtained finance by way of term loans and by 
issuance of debentures to financiers. However, the company suffered a 
huge loss and it approached the Industrial Development Bank of India for B 
restructuring package to clear its liabilities. All the debenture holders 
except the appellant no.2 agreed to the proposed package/scheme. A 
common Subscription Agreement was entered into between the company 
and the debenture holders. Later, in terms of the agreement, a Debenture 
Trust Deed was created. The company filed a petition seeking grant of C 
sanction to the Scheme before the High Court in terms of Section 391 of 
the Companies Act. The Company Judge allowed the appli~ation. 
Aggrieved, the appellant preferred an appeal which was dismissed by the 
Division Bench of the High Court. Hence the present appeal. 
Dismissing the appeal, the Court 
HELD: 1.1. In terms of clause 10 of the Trust Deed, the rights, 
privileges and conditions attached to the debentures may be varied, 
modified or abrogated only in accordance with the Articles of Association 
of the Company and the Act and with the consent of the debenture holders 
D 
by a special resolution passed at the meeting of the debenture holders but E 
in terms of the proviso appended thereto nothing in such resolution shall 
be operative against the company where such resolution modifies or varies 
the terms and conditions governing the debentures, if the same are not 
acceptable to the company. The provisions of the Trust Deed and in 
particular clauses 22, 23, 24 and 25 thereof leave no manner of doubt that F 
a resolution has to be passed in the manner laid down therein and/or in 
terms of the Companies Act. [202-D, E; 208-F) 
1.2. The common subscription agreement is an investment 
agreement. The provisions contained therein are required to be read in 
their entirety and for the said purpose it is permissible to read the negative G 
covenants with the positive covenants. It will, however, not be correct to 
say that the common subscription agreement has to be interpreted on its 
own
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