A bankruptcy court has admitted the listed MT Educare, formerly known as Mahesh Tutorials, into the corporate insolvency resolution process (CIRP) and appointed Ashwin Bhavanji Shah as the interim resolution professional for the Mumbai-based coaching firm.
The Mumbai bench of the National Company Law Tribunal (NCLT) allowed the company’s operational creditor Connect Residuary to initiate the insolvency proceedings. The operational creditor had approached the bankruptcy court in November last year after the company defaulted on its dues of about Rs 5.37 crore.
“This bench after hearing the submissions of both sides and upon perusing the material available on record is thoroughly convinced that the operational creditor (Connect Residuary) has successfully demonstrated the existence of ‘debt’ and ‘default’ committed by the corporate debtor (MT Educare) in this case,” observed the bench of HV Subba Rao and Anuradha Sanjay Bhatia in an order of December 16.
As per the stock exchange filing, during FY 2022, the company reported revenue of Rs 30.40 crore and a loss of 25.17 crore. In FY2019, the company reported total revenue of over Rs 249 crore and a profit of 9.12 crore.
Before the tribunal’s order, Nausher Kohli, counsel for MT Educare, had argued that the coaching institute was adversely affected by the COVID-19 pandemic.
“The object of the insertion of section 10A (in IBC) was to safeguard the companies from the serious repercussions on its financial health on the account of COVID-19,” argued the counsel for the listed coaching institute.
Due to the COVID-19 pandemic, the government introduced Section 10 A, in the Insolvency & Bankruptcy Code (IBC), which said that no application for initiation of the CIRP of a company shall be filed for any default arising on or after March 25, 2020, for a period of six months or such further period, not exceeding one year from such date.
The coaching class chain also argued that it is a listed company in the business of education and has extremely sound and prosperous financial health. The Mumbai-based company provides employment to nearly 900 employees across India and has more than 52 active tutorial classes spread all over the country.
The counsel for the operational creditor had argued that the company had defaulted from July/August 2019 onwards in payment of rent instalments and other monies.
The tribunal, while allowing the petition to admit the company, observed that from the email address by MT Educare to its creditor, except pleading mercy in reducing a certain amount of rent and also expressing their financial difficulties due to COVID-19, did not raise any pre-existing disputes.