The National Company Law Tribunal (NCLT) has ordered the opening of insolvency proceedings against the National Textile Corporation (NTC) after admitting a plea from one of its operational creditors claiming a default of around Rs 14 lakh .
The New Delhi bench of the NCLT also appointed Amit Talwar as an Interim Resolution Professional (IRP), suspending the NTC board and also declared a moratorium against the PSU as per the provisions of the Insolvency Code and bankruptcy (IBC).
A two-member bench of the NCLT also dismissed NTC’s claims and said the dispute it had raised over the amount owed by its operating creditor was merely an “unlawful dispute and that said default is was produced for payment”.
This is probably the first time since the entry into force of the code that insolvency proceedings against a centrally owned public sector unit (PSU) have been initiated.
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 operating factories, located across India.
NCLT management has come on a petition filed by Hero Solar Energy Private Ltd (HSEPL) through its lawyer Pallav Mongia, claiming default of Rs 13.84 lakh for two solar power project installation contracts on the roofs.
The case relates to a contract almost six years old. NTC had awarded a work order in May 2016 to Tamil Nadu for a rooftop solar PV system with a total capacity of 780 kWp connected to the grid.
As per the contract of the two projects, the amount of Rs 2.21 crore towards Project 1 and Rs 1.86 crore towards Project 2 becomes due upon completion of works in December 2016 and April 2017, respectively.
However, NTC failed to release the full payment due to HSEPL and withheld an amount of Rs 13.84 lakh from the terms of the agreement.
It was informed by the operating creditor that under the terms of the agreement there was no penalty and served notice to NTC under Article 8 of the IBC.
However, NTC in its response stated that HSEPL was 117 days late in executing the work order and suffered losses and therefore deducted penalties from the amount due.
This was denied by HSEPL and stated that no notice of dispute was ever given by NTC to HSEPL and, in fact, in his several letters written to the PSU, demanding the pending dues, no dispute over the late payment. execution was raised.
The insolvency court also agreed with the operational creditor’s submissions and said: “Given the documents in the file, it is true that the defendant never raised a dispute on the amount of the claim or the delay of the plaintiff The debtor company has not filed any document on file proving that the said imposition of sanction was never communicated to the plaintiff before the issuance of the notice of formal notice.
No debit note in this regard was ever issued by the respondent, observed NCLT adding “No penalty or damages were imposed by the debtor company”.
“Certainly, under the terms of the agreement, the debtor company is not entitled to impose any sanction on the plaintiff. his 10-page order was passed on May 27.
The court further stated that even Indian contract law provided that if the promisor fails to perform the contract at the agreed time and the promise still accepts the performance of that promise at any time other than the agreed time, the beneficiary cannot claim compensation for any loss.
“It is not the case of the defendant (NTC) that the work order was never fulfilled by the plaintiff. The defendant has already made payments to the plaintiff which demonstrates that there is no vice in the execution of the contract”, he specified.
This leaves no doubt that the default occurred for the payment of the operating debt to the claimant and the so-called dispute raised by NTC is only an “unlawful dispute”.
“Therefore, in the facts and circumstances presented, it can be concluded that the plaintiff has established its claim which is due and payable by the debtor company and that the debtor company has not proven the existence of a pre-existing dispute concerning the amount claimed by the plaintiff. The present claim is allowed, said NCLT.
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