In a significant case, the National Company Law Tribunal ( NCLT ) directed to initiate insolvency proceedings against Himalayan Mineral Waters. The Jammu and Kashmir Bank pleaded for the Corporate Insolvency Resolution Process ( CIRP ) against the corporate guarantor for Leel Electricals as they failed to repay a debt amounting to Rs 50 crore.
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. A one-time settlement offer by Leel Electricals was unsuccessful. Jammu and Kashmir Bank then invoked the corporate guarantee which lead to the initiation of insolvency proceedings against Himalayan Mineral Waters.
The Corporate Guarantor 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.
A two-member bench of Mr Praveen Gupta, Member (Judicial) and Mr Ashish Verma, Member ( Technical ) found the application under Section 7 fit to be admitted as per Section 7(5)(a) of the Insolvency Bankruptcy Code ( I & B Code ), 2016 and 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.
Further declared the moratorium in terms of Section 14 of the I&B, Code 2016. The NCLT appointed Bhoopesh Gupta as the interim resolution professional ( IRP ) to oversee the Corporate Insolvency Resolution Process ( CIRP ) for Himalayan Mineral Waters.
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