The principal bench of the National Company Law Appellate Tribunal (NCLAT) is reviewing an order by a lower court that had dismissed a plea by the Central Bank of India to commence bankruptcy proceedings against Kolkata-based Simplex Infrastructures.
The appellate tribunal has admitted that the Kolkata bench of the NCLT erred in relying on the judgment of Vidarbha Industries Power versus Axis Bank to dismiss the lender’s plea against the company. It has given Simplex three weeks to file its reply and fixed the next date for hearing on August 22.
“The Adjudicating Authority committed an error in relying on the judgment of Vidarbha Industries Power Ltd vs. Axis Bank Ltd,” a two-judge NCLAT bench of chairperson Ashok Bhushan and Barun Mitra said, pointing out that the awards referenced in the order still await final judicial closure.
The NCLAT was referring to the Kolkata bench of the National Company Law Tribunal (NCLT) order which had dismissed a petition by the Central Bank of India to start insolvency proceedings against Simplex Infrastructures, noting that the engineering company still has pending dues from government agencies and other contractors stuck in arbitration. The court reasoned that these potential recoveries could help pay back creditors and hence insolvency was not the solution.
In their submission to the NCLAT lawyers for the bank argued that the total awards in favour of Simplex are about ₹554 crore and dues of the Central Bank are only ₹105 crore. Still, there are as many as 28 banks who were lenders and a total sum due is about ₹8,000 crore which will not be recovered from these awards.
Bankers said the NCLAT’s order has increased the chances that the company may be finally admitted to insolvency.
If admitted for bankruptcy, Simplex will be one of the largest accounts to be taken to bankruptcy courts in recent times. “This is a step forward. Hopefully, the case will be admitted, giving lenders a chance towards recovery,” said a person familiar with the process.
ET had reported in May that a two-judge NCLT bench of Bidisha Banerjee and Balraj Joshi relied on last July’s Supreme Court order in the Vidarbha Industries Power case which had ruled that proven default cannot be the reason for the initiation of insolvency proceedings.
