The National Company Law Tribunal (NCLT) has admitted the insolvency plea against Sintex Plastics Technology Ltd (SPTL), a leading maker of water storage tanks and plastic-based interiors.
The Ahmedabad bench of NCLT admitted the application filed by its Financial creditor Asset Reconstruction Company (India) Ltd claiming an outstanding amount of Rs 350.28 crore, which includes Rs 215.77 crore principal amount and Rs 134.50 crore towards interest.
The NCLT appointed Kshitiz Chhawchharia as the Interim Resolution Professional for the company.
Insolvency proceedings against SPTL were triggered as it was a corporate guarantor of loans given to Sintex BAPL Ltd (SBL). SBL is presently going through Corporate Insolvency Resolution Process (CIRP), and a bid of Rs 1,251 crore is pending for approval.
However, NCLT said the claim of the Financial Creditor is not fully met in the CIRP of SBL, hence it also directed to initiate insolvency against SPTL.
SPTL is a holding company of SBL, which had taken a loan of Rs 250 crore from Axis Bank.
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In this SPTL, the corporate debtor had executed "irrevocable, absolute and unconditional" deed of guarantee in favour of the Financial Creditor and secured the entire credit facility granted to the SBL.
It also executed a letter of comfort and undertaking on September 13, 2017, undertaking that it shall cause to ensure that SBL fulfils the said debt service obligation in favour of Axis Bank.
Meanwhile, NCLT initiated insolvency proceedings against SBL on December 18, 2020, over a petition moved by one of its operational creditors Zielem Industries.
Thereafter, on December 20, 2020, SPTL, being the holding company of SBL filed an appeal before the National Company Law Appellate Tribunal (NCLAT) challenging the admission of the order dated December 18, 2020, of NCLT on the grounds that a settlement had arrived between the Operational Creditor and SBL.
NCLAT on January 4, 2021, asked SPTL to approach NCLT and placed on record the terms of the settlement. However, at NCLT, this was opposed by KKR India Financial Services, one of the financial creditors of SBL.
Later NCLT on June 29, 2021, withdrew insolvency proceedings against SBL.
Now this time, KKR India Financial Services challenged NCLT's order of withdrawal of insolvency before the appellate NCLAT.
The appellate tribunal took note of the fact that other financial creditors and operational creditors had large claims pending for payment by the borrower Corporate Debtor SBL.
Therefore on July 12, 2021, NCLAT stayed the NCLT order dated June 29, 2021, and directed the status quo ante of the order and insolvency against proceeded again SBL.
In the meanwhile, KKR India Financial Services also filed a separate insolvency plea against SBL before NCLT, which was admitted on July 19, 2021.
This was again challenged in NCLAT by one of the ex-director of SBL, on which NCLAT said two simultaneous CIRPs cannot be permitted and thereby set aside the order dated July 19, 2021, and the earlier one continued.
During the pendency, Axis Bank assigned its debt to Asset Reconstruction Company, which become the main financial creditor.
Since SBL committed a default in repaying the outstanding loan amount, the Financial Creditor invoked the Deed of Guarantee and called upon SPTL, the guarantor Corporate Debtor to repay the entire outstanding amount.
During the course of the hearing on January 3, 2023, SPTL's counsel submitted that it was not in a position to pay the default amount.
A Resolution Plan for SBL worth Rs 1,251 crores was filed by Resolution Professional. However, Asset Reconstruction Company (India) Ltd, is a Secured Creditor in SBL and holds 9.28 per cent voting rights.
Asset Reconstruction Company voted against the Resolution Plan of SBL.
"The amount claimed by dissenting Secured Financial Creditors, who did not vote in favour of the Resolution Plan is around Rs. 793.07 crores while an amount of Rs 392.4 crores is provided to such dissenting Creditors who did not vote in favour of the Resolution Plan," said NCLT order.
"Though the approval of the Resolution Plan in the case of borrower company (SBL) is still pending for approval by this NCLT, it is noted that the claim of the Financial Creditor in this application is not fully met in CIRP and as such the present application which is filed within the limitation period and defect free, deserves to be admitted," it said.
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