NCLT’s admits insolvency proceedings against Himalayan Mineral Waters

Jammu And Kashmir Bank Vs Himalayan Mineral Waters Private Limited (NCLT Allahabad)

The case between Jammu and Kashmir Bank (hereafter referred to as the “Financial Creditor”) and Himalayan Mineral Waters Private Limited (referred to as the “Corporate Debtor”) before the National Company Law Tribunal (NCLT), Allahabad, revolves around the initiation of insolvency proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC). This summary will delve into the key points and legal arguments presented by both parties, leading to the tribunal’s decision.

Background and Debt Claim:

• The Financial Creditor filed the application on 20th January 2022, claiming a total financial debt of Rs. 50,04,38,456 owed by the Corporate Debtor. This debt arose as the Corporate Debtor acted as a guarantor for credit facilities extended to Leel Electricals, which defaulted on its obligations.
• The credit facilities included working capital and non-fund based limits sanctioned to Leel Electricals under consortium arrangements.

Legal Basis and Arguments:

• The Financial Creditor argued that despite various notices and demands, both the Borrower (Leel Electricals) and the Corporate Debtor (Himalayan Mineral Waters) failed to repay the outstanding dues, leading to the declaration of the account as a Non-Performing Asset (NPA).
• They contended that the Corporate Debtor, as a guarantor, was liable under the Deed of Corporate Guarantee to ensure repayment in case of default by the Borrower.

Corporate Debtor’s Defense:

• The Corporate Debtor challenged the maintainability of the application, arguing that the Financial Creditor cannot proceed individually under Section 7 of the IBC since the credit facilities were part of a consortium agreement involving multiple banks.
• They also argued that the Financial Creditor’s claim is redundant since the Borrower (Leel Electricals) is already under liquidation, and the Financial Creditor has filed its claim in those proceedings.

Court Proceedings and Tribunal’s Decision:

• The tribunal noted that despite opportunities, the Corporate Debtor failed to file a reply promptly, leading to procedural penalties such as closure of the right to file a reply, which was later challenged and partially allowed upon payment of costs.
• In its analysis, the tribunal referred to legal precedents and the terms of the Deed of Corporate Guarantee, emphasizing the Financial Creditor’s right to proceed individually against the Corporate Debtor.
• It was established that the debt was clear and had exceeded the threshold for initiating insolvency proceedings under the IBC. The tribunal found merit in the Financial Creditor’s arguments regarding default and the enforceability of the guarantee.

Conclusion and Tribunal’s Decision:

• After considering the arguments and evidence presented by both parties, the tribunal ruled in favor of the Financial Creditor.
• The tribunal admitted the application under Section 7 of the IBC, finding that all statutory requirements were met, including the existence of debt, default, and the application being filed within the limitation period.
• It dismissed the Corporate Debtor’s objections regarding the consortium agreement and the ongoing liquidation of the Borrower, emphasizing the independent liability of the Corporate Debtor under the Deed of Corporate Guarantee.

FULL TEXT OF THE NCLT JUDGMENT/ORDER