Recently, the National Company Law Tribunal (NCLT) in Allahabad decreed the commencement of insolvency proceedings against Himalayan Mineral Water Private Limited.
The NCLT's ruling stemmed from a plea presented by Jammu and Kashmir Bank. The bank requested the commencement of insolvency proceedings due to a ₹50 crore debt owed by Leel Electricals, with Himalayan Mineral Water serving as the corporate guarantor.
On June 3, a bench of the NCLT comprising judicial member Praveen Gupta and technical member Ashish Verma accepted the plea and directed the commencement 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.
As of December 31, 2021, the outstanding dues surpassed ₹50 crores, as indicated. The bank subsequently issued a Guarantee Invocation Notice to Himalayan Mineral Water, demanding repayment of these dues. Following Himalayan Mineral Water's failure to comply, the bank petitioned the NCLT to initiate the Corporate Insolvency Resolution Process (CIRP) against Himalayan Mineral Water.
The bank emphasized that CIRP could be initiated against the corporate guarantor, even if the principal borrower (Leel Electricals) was undergoing liquidation.
In response, Himalayan Mineral Water argued that individual banks lacked the authority to demand repayment since the credit facilities were extended under agreements with a consortium of twelve banks. Additionally, it opposed the bank's plea for insolvency proceedings, citing that the bank's claim against Leel Electricals had already been admitted in the ongoing liquidation proceedings against Leel.
However, the NCLT dismissed these arguments, concluding that there was a clear default on the part of 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.
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