NCLT Orders Insolvency Proceedings Against Himalayan Mineral Waters Following Rs 50 Crore Default
The National Company Law Tribunal (NCLT) recently ordered the initiation of insolvency proceedings against Himalayan Mineral Waters, following a plea by Jammu and Kashmir Bank. The decision came after Himalayan Mineral Waters, acting as the corporate guarantor for Leel Electricals, failed to repay a debt amounting to Rs 50 crore. This debt was owed to Jammu and Kashmir Bank which arose...
The National Company Law Tribunal (NCLT) recently ordered the initiation of insolvency proceedings against Himalayan Mineral Waters, following a plea by Jammu and Kashmir Bank. The decision came after Himalayan Mineral Waters, acting as the corporate guarantor for Leel Electricals, failed to repay a debt amounting to Rs 50 crore. This debt was owed to Jammu and Kashmir Bank which arose from credit facilities obtained by Leel Electricals.
The NCLT's decision was based on the Jammu and Kashmir Bank's submission that Himalayan Mineral Waters defaulted on its obligations which was evidenced by the outstanding debt exceeding the threshold limit. The NCLT appointed Bhoopesh Gupta as the interim resolution professional (IRP) to oversee the Corporate Insolvency Resolution Process (CIRP) for Himalayan Mineral Waters.
The default arose from the sale of Leel Electricals' consumer durable business to Havells India in May 2017 for Rs 1,550 crore. Prior to this transaction, a consortium of banks, led by the State Bank of Bikaner & Jaipur (now State Bank of India) provided credit facilities to Leel Electricals, with Himalayan Mineral Waters acting as a guarantor.
However, following the sale, Leel Electricals requested a reduction in its working capital limit, which was not met by the financial creditor. Consequently, the credit facilities were declared as non-performing assets (NPAs) by the Reserve Bank of India's prudential norms.
Efforts for settlement, including a one-time settlement offer by Leel Electricals, were unsuccessful. Jammu and Kashmir Bank then invoked the corporate guarantee which lead to the initiation of insolvency proceedings against Himalayan Mineral Waters.
Himalayan Mineral Waters contested the bank's claims and argued that the credit facilities were extended under agreements with a consortium of twelve banks, and thus, no individual bank had the right to demand repayment. However, the NCLT rejected this argument and held that there was clear default on the part of Himalayan Mineral Waters.
The NCLT found that the bank adequately proven the debt and met the criteria for initiating CIRP under the Insolvency and Bankruptcy Code. Additionally, the NCLT dismissed Himalayan Mineral Waters' objection regarding the bank's individual pursuit of insolvency proceedings.
The bench held that:
“we are satisfied that the present application under Section 7, has been found fit to be admitted as per Section 7(5)(a) of the I & B Code, 2016 and hence, the application is admitted in terms of Section 7(5)(a) of the I & B Code, 2016 against the Corporate Debtor, M/s, Himalaya Minerals Water Private Ltd. and accordingly, moratorium is declared in terms of Section 14 of the I&B, Code 2016.”
The order imposed a moratorium on Himalayan Mineral Waters and prohibited actions such as the institution of suits, disposal of assets, and recovery of property. The moratorium will remain in effect until the completion of the CIRP or until the approval of a resolution plan by the tribunal.
Case Title: Jammu And Kashmir Bank Vs Himalayan Mineral Waters Private Limited
Case Number: CP (IB) NO.37/ALD/2022
Advocate for the Applicant: Rahul Chaudhary
Advocate for the Respondent: Kiran Bala Agarwal
Date of Judgment: 03rd June, 2024
Click Here To Read/Download Order or Judgment