The National Company Law Tribunal (NCLT) has directed initiating insolvency proceedings against Himalayan Mineral Waters, allowing Jammu & Kashmir Bank’s plea for default of a corporate guarantee given for LeeL Electricals. The Allahabad bench of NCLT has also appointed Bhoopesh Gupta as the interim resolution professional (IRP) for this Dehradun-based firm’s Corporate Insolvency Resolution Process (CIRP).
“We are satisfied that the Applicant/Financial Creditor (J&K Bank) has proved the debt and the default, which is more than the threshold limit… the application u/s 7 is found to be fit for initiation of the CIRP against the Corporate Debtor (Himalayan Mineral Waters,” said a two-member bench in the order passed last Monday.
Jammu & Kashmir Bank had claimed a default of Rs 50 crore against Himalayan Mineral Waters, engaged in the business of manufacturing of beverages, being the corporate guarantor for the credit facilities availed by the Leel Electricals.
LeeL Electricals had in May 2017 sold its consumer durable business to Havells India for a consideration of Rs 1,550 crore.
Insolvency proceedings were initiated against LeeL Electricals by NCLT in April 2020 over a plea by one of its operational creditors. Later, NCLT passed a liquidation order in December 2021 after it failed to get a buyer.
In 2015, a consortium arrangement led by the State Bank of Bikaner & Jaipur (now State Bank of India) sanctioned credit facilities to LeeL Electricals for working capital facilities of Rs 35 crore (fund-based) and Rs 15 crore (non-fund based).
This was later extended to Rs 70 crore in 2017 and Himalayan Mineral Waters stood as surety for both agreements.
Later in 2017, when the borrower sold its consumer durable business to Havells India, it requested the financial creditor to reduce the working capital limit to Rs 37 crore on pro-rata basis.
After receiving no payment from the borrowers, the financial creditor declared the credit facilities account of the borrower to be non-performing assets (NPS) as of January 31, 2019 as per the prudential norms issued by the Reserve Bank of India.
The borrower offered a one-time settlement (OTS), which was rejected by the creditor.
Since the borrower did not settle the remaining dues, the financial creditor sent a guarantee invocation notice on February 12, 2020 to all the guarantors, including Himalayan Mineral Waters, requesting payment of the liability.
The matter was referred to NCLT, where Himalayan Mineral Waters contended that the working capital, consortium agreement and the deed of guarantee were executed with 12 banks forming a consortium of banks and no individual bank has any right to call the outstanding amount of the credit facility.
It contended that the consortium banks will form opinions and act collectively.
Rejecting it, NCLT said these arguments are not ‘tenable’ and there is a clear-cut default on the part of the corporate debtor to pay the outstanding amount.
Allowing the plea, NCLT said, “We are satisfied that the present application under Section 7, has been found fit to be admitted… against the Corporate Debtor, M/s, Himalaya Minerals Water Private Ltd and accordingly, a moratorium is declared in terms of Section 14 of the I&B, Code 2016.”
