The National Company Law Tribunal (NCLT) has ordered the opening of insolvency proceedings against the state-owned National Textile Corporation (NTC) after a plea from one of its operating creditors was filed claiming a default of around Rs 14 lakh.
The New Delhi bank of the NCLT has also appointed Amit Talwar as an interim resolution professional (IRP), suspending the board of NTC and has also declared a moratorium against the PSU under the provisions of the Insolvency & Bankruptcy Code (IBC).
A two-member NCLT bank also dismissed NTC’s claims, saying the dispute it raised over the amount owed claimed by the operational creditor is just a “moonshine dispute” and the default has occurred for payment.
This is likely the first insolvency proceedings against a central government-owned government unit (PSU) since the code’s entry into force.
NTC is under the jurisdiction of the Ministry of Textiles, Government of India. It is engaged in the production of yarns and fabrics through its 23 factories in operation across India.
The NCLT board came across a petition filed by Hero Solar Energy Private Ltd (HSEPL) through its counsel Pallav Mongia alleging a default of Rs 13.84 lakh for two contracts to install solar energy projects on the roof.
The case concerns a nearly six-year-old contract. NTC had been awarded a work order in Tamil Nadu in May 2016 for a total of 780 kWp grid-connected rooftop PV system.
According to the contract of both projects, the amount of Rs 2.21 crore for Project 1 and Rs 1.86 crore for Project 2 will be due upon completion of works in December 2016 and April 2017 respectively.
However, NTC failed to release full payment to HSEPL and kept an amount of Rs 13.84 lakh under the terms of the agreement.
It was informed by the operating creditor that there was no provision for the imposition of a fine under the clauses of the agreement and sent a reminder to NTC under Section 8 of the IBC.
However, in its response, NTC had said that HSEPL was delayed by 117 days in executing the work order and suffered losses and therefore deducted penalties from the amount owed.
This was denied by HSEPL saying that NTC has never given any notice of dispute to HSEPL and in fact in the several letters written to the PSU requesting the outstanding dues there is no dispute about delay in implementation to the put in order.
The insolvency judge also agreed with the operational creditor’s comments, saying: “Given the documents recorded, it is true that the defendant never raised any dispute as to the extent of the claim or the applicant’s delay. The business debtor failed to any document upon document to show that the imposition of a fine was ever communicated to the applicant before the issuance of the formal notice.” The respondent has never issued a debit note in this regard, the NCLT noted, adding, “No fines or damages have been levied by the company’s debtor”.
Admittedly, in terms of the agreement, the business debtor is not entitled to fine the applicant. The defendant has even reconciled the applicant’s accounts and has not raised any dispute over the applicant’s claim during the reconciliation. raised,” NCLT said. in its 10-page long sequence passed on May 27.
The tribunal further said that even the Indian Contract Law stipulated that in the event that the promiser does not perform the contract at the agreed time and the promise still accepts the performance of such promise at a different time than agreed, the promisee will not receive compensation for any can claim loss.
“It is not the case of the Defendant (NTC) that the work order has never been completed by the Applicant. The Defendant has already made payments to the Applicant demonstrating that there is no defect in the performance of the contract…”, it said. the.
This leaves no doubt that the default has occurred for the payment of the operational debt to the applicant and the so-called dispute raised by NTC is merely a “moonshine dispute”.
“Therefore, in the facts and circumstances given, it can be concluded that the applicant has established his claim which is due and payable by the business debtor and that the business debtor has not proved the existence of any pre-existing dispute as to the amount claimed by the applicant. The current application has been admitted,” NCLT said.
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