NCLT Mumbai Initiates Insolvency Process Against Bombay Rayon Fashions Ltd.

Background Facts

Vikash Parasprampuria ("Operational Creditor") is the Sole Proprietor of Chiranjilal Yarn Traders and had supplied goods to Bombay Rayon Fashions Limited ("Corporate Debtor"), which is a public listed company. Nine invoices were raised by the Operational Creditor which was accepted by the Corporate Debtor without any demur, protest or dispute and part payments were also made towards certain invoices. When the Corporate Debtor failed to release balance payments, the Operational Creditor sent him reminder letters followed by a Demand Notice under Section 8 of the IBC dated 05.11.2020, which was delivered but no response was received from the Corporate Debtor.

The Operational Creditor had filed an application under Section 9 of the Insolvency & Bankruptcy Code, 2016 ("IBC") seeking to initiation of CIRP against the Corporate Debtor, for defaulting in payment of Rs.1,60,87,838/-, wherein the principal amount is Rs. 97,87,220/- and remaining is interest. The date of default was 01.11.2020.

Contentions Of The Operational Creditor

To justify the compliance of Rs. 1 Crore threshold for initiating CIRP, the Operational Creditor placed reliance on the NCLAT judgment in Pavan Enterprises v. Gammon India, Company Appeal No.148 of 2018, wherein it was held that "If in terms of any agreement interest is payable to the Operational of Financial Creditor then the debt will include interest". Therefore, the threshold of Rs. 1 Crore was being met by including the interest component.

The Corporate Debtor had not filed any reply to the application.

Decision Of The NCLT

The Bench observed that the Corporate Debtor had time and again by its letter, invoices and by making part payment acknowledged its liability. The Bench held that the application under Section 9 was complete in all respects as required by law, as there was a default by the Corporate Debtor in payment of debt amount. Accordingly, the application was admitted and CIRP was initiated against the Corporate Debtor. Mr. Santanu T Ray has been appointed as the Interim Resolution Professional.

Case Title: Vikash Parasprampuria v Bombay Rayon Fashions Limited, CP (IB) No.1443/MB-IV/2020

Counsel For Petitioner: Mr. Viraj Parikh i/b Mr. Saurabh Pandya, Advocate.

Counsel For Respondent: Mr. Sunil A.Vyas a/w Mr. Deep Morabia i/b Fox Mandal & Association, Advocate

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