The National Company Law Tribunal (NCLT) at Allahabad recently ordered the initiation of insolvency proceedings against Himalayan Mineral Water Private Limited [Jammu and Kashmir Bank v. Himalayan Mineral Waters Private Limited].
The NCLT passed the order on a plea by Jammu and Kashmir Bank, which sought the initiation of insolvency proceedings over a ₹50 crore debt owed by Leel Electricals, for which Himalayan Mineral Water had stood as the corporate guarantor.
On June 3, an NCLT Bench of judicial member Praveen Gupta and technical member Ashish Verma admitted the plea and ordered the initiation of the Corporate Insolvency Resolution Process (CIRP) against Himalayan Mineral Water.
"We are satisfied that the Applicant/Financial Creditor (J&K bank) has proved the 'debt' and the 'default', which is more than the threshold limit of one crore rupees and hence, the application under Section 7 of the Insolvency and Bankruptcy Code is found to be fit for initiation of the CIRP against the Corporate Debtor," the order stated.
The NCLT was told that after Leel Electricals had defaulted on the repayment of credit facilities obtained by it from Jammu and Kashmir Bank and was eventually declared a Non-Performing Asset in 2019.
Following a 2021 order passed by the NCLT, Leel Electricals is presently undergoing liquidation.
As of December 31, 2021, the outstanding dues amounted to over ₹50 crores, it was stated.
The bank, meanwhile, sent a Guarantee Invocation Notice to Himalayan Mineral Water demanding repayment of these dues. Upon a failure to do so, the bank filed a plea to initiate CIRP against Himalayan Minter Water before the NCLT. The bank added that CIRP can be initiated against the corporate guarantor even if the principal borrower (Leel Electricals) is undergoing liquidation.
Himalayan Mineral Water countered that no individual bank had any right to call for repayment of the credit facilities since it was extended under agreements with a consortium of twelve banks.
It also opposed the bank's plea to initiate insolvency proceedings against Himalayan on the ground that the bank's claim against Leel Electricals has already been admitted in the liquidation proceedings ongoing against Leel.
The NCLT rejected these arguments and concluded that there was a clear-cut default on the part of the Himalayan Mineral Water.
"We are of the considered view that there exists financial debt which is payable and there is a default on the part of the respondent (Himalayan Mineral Water)," the NCLT held.
It thus allowed the bank's plea and initiated insolvency proceedings against Himalayan Mineral Water. Bhoopesh Gupta has been appointed as the interim resolution professional.
The matter will be taken up next by the NCLT on July 9.
Advocate Rahul Chaudhary appeared for the Jammu and Kashmir Bank.
Advocate Kiran Bala Agarwal represented Himalayan Mineral Water.
Note: An earlier version of the story incorrectly carried the image of another brand. The error has been corrected and is regretted.
[Read Order]