NCLAT Delhi Upholds Initiation Of Insolvency Proceedings Against Birla Tyres Ltd., A B.K. Birla Group Company
The National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, comprising of Justice Rakesh Kumar Jain (Judicial Member) and Shri Naresh Salecha (Technical Member), has upheld the order whereby the NCLT had initiated Corporate Insolvency Resolution Process (“CIRP”) against Birla Tyres Ltd. (“Corporate Debtor”). Background Facts Birla Tyres Ltd. is a part of...
The National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, comprising of Justice Rakesh Kumar Jain (Judicial Member) and Shri Naresh Salecha (Technical Member), has upheld the order whereby the NCLT had initiated Corporate Insolvency Resolution Process (“CIRP”) against Birla Tyres Ltd. (“Corporate Debtor”).
Background Facts
Birla Tyres Ltd. is a part of B.K. Birla Group of Companies. In 1991, it was incorporated as a part of Kesoram Industries Ltd. but was later demerged in 2018 as a part of re-structuring plan. In Financial Year 2021, Birla Tyres had made losses to the tune of Rs 287.63 Crore, while total revenue stood at Rs 153.11 Crore.
SRF Ltd. (“Operational Creditor”) had supplied Tire Cord Fabric to Birla Tyres Ltd. (“Corporate Debtor”) between 2018-19 in view of Work Order dated 06.04.2018. When payment against the supplies were not received, the Operational Creditor had served a Demand Notice upon the Corporate Debtor for an amount of Rs.15,84,53,695.75/- (inclusive of interest), wherein the principal amount was Rs.10,06,42,246.75/-. The Corporate Debtor had addressed an email to the Operational Creditor on 03.06.2020 admitting the debt of Rs. 10.18 Crores, and had paid Rs. 10,00,000/- as its last payment to the Operational Creditor.
As no subsequent payments were received, on 23.07.2021 the Operational Creditor issued a Demand Notice under Section 8(1) of the IBC to the Corporate Debtor and the latter neither disputed the demand nor tendered any response to the same. Accordingly, the Operational Creditor filed a petition under Section 9 of IBC, seeking initiation of CIRP against the Corporate Debtor. Despite several opportunities given by NCLT, the Corporate Debtor failed to file any Reply to the petition.
On05.05.2022, the NCLT admitted the Corporate Debtor into CIRP.
Manav Investment & Trading Company Limited (“Appellant”) is a shareholder of the Corporate Debtor who filed an appeal before the NCLAT against the order dated 05.05.2022.
The Appellant submitted that the Corporate Debtor, in terms of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements), had applied before the National Stock Exchange of India Ltd. and BSE Ltd. for obtaining no objection letters from the Stock Exchanges. However, before the no objection letter could be received, the NCLT erroneously admitted the Corporate Debtor into CIRP. Further, the Corporate Debtor was suffering losses due to general economic slowdown and pandemic. There was also a huge labour unrest in the Balasore factory where 2000 workers were engaged and were obstructing the factory premises of the Corporate Debtor by staging strikes and protests. Due to the same reason, the Corporate Debtor was unable to access to its records for filing its Reply to the Section 9 petition.
NCLAT Verdict
The Bench perused the NCLT order dated 05.05.2022 and opined that the NCLT accorded all possible opportunities to the Corporate Debtor to present its case but the latter miserably failed to do so.
“We observe that the notice under section 8 (1) of Code was duly served by the Respondent No. 1 upon Corporator Debtor on 23.07.2021 and the Corporate Debtor did not reply to the demand notice……We also observe that the Operational Creditor raised 44 invoices for the supply of Tire Cord Fabric to the Corporate Debtor, during 2018-2019 arising out of work order dated 06.04.2018, which remained unpaid by the Corporate Debtor……We note that through E-mail dated 03.06.2020, the Corporator Debtor admitted the sum of Rs.10.18 Crore due and payable to Respondent No. 1 and also that through an E-mail dated 19.06.2020, the Corporate Debtor gave payment plan to the Respondent No. 1 which also failed. It is significant to observe that there is no record to show any preexisting dispute.”
The Bench took the view that there being no pre-existing dispute and debt and default having been proved, the Section 9 petition has been correctly admitted by the NCLT. The Bench has upheld the initiation of CIRP against the Corporate Debtor.
The appeal has been dismissed.
Case title: Manav Investment & Trading Company Limited v SRF Limited & Anr.
Case No.: COMPANY APPEAL (AT) (Insolvency) No. 692 of 2022
Counsel for Appellants: Mr. Ankit Virmani & Ms. Ruchika Agarwala, Advocates.
Counsel for Respondent: Mr. Abhijeet Sinha, Mr. Swankit Nand, Mr. Saikat Sarkar, Mr. Anuj Tiwari, for RP. Mr. Kunal Vajani, Mr. Kunal Mimani, Mr. Kartikey Bhatt, Mr. Akshay Luthra, Mr. Abhinav Jain, for R1.