NCLT Mumbai Admits Insolvency Application Against Sparklet Engineers Pvt Ltd

Tribunal Upholds Operational Creditor's Claim, Initiates CIRP Proceedings under IBC

In a significant development, the National Company Law Tribunal (NCLT), Mumbai Bench-VI, has admitted an insolvency application filed by M/s Enquest Petrosolutions Private Limited against M/s Sparklet Engineers Private Limited. The tribunal's decision comes in the wake of alleged defaults by the corporate debtor on substantial dues owed to the operational creditor, amounting to over Rs.9 crore.

The application was filed under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016, with the operational creditor seeking the initiation of Corporate Insolvency Resolution Process (CIRP) against Sparklet Engineers. The tribunal, comprising Shri Nilesh Sharma (Member Judicial) and Shri Sameer Kakar (Member Technical), found the application to be maintainable, rejecting various defenses raised by the corporate debtor.

Enquest Petrosolutions, engaged in providing services within the oil and gas sector, claimed a default amount of Rs.9,19,96,841, which included principal dues and interest as per the Micro, Small and Medium Enterprises Development Act (MSMED Act). The tribunal noted the operational creditor's entitlement to interest at three times the Reserve Bank of India's bank rate under the MSMED Act, even in the absence of an explicit agreement clause.

The corporate debtor, Sparklet Engineers, argued that the dues arose from a settlement agreement and not as operational debt, and also pointed to an arbitration clause in the agreement. However, the tribunal clarified that the consolidation of operational debt in a settlement agreement did not alter its inherent operational nature.

Moreover, the tribunal dismissed the contention that the arbitration clause barred the filing of an application under Section 9 of the IBC, reaffirming that the IBC aims at resolution rather than recovery.

Addressing the corporate debtor's plea concerning insufficient stamping of the Vendor Settlement Agreement, the tribunal cited that the existence of debt and default could be established through other documents on record.

The tribunal ordered the initiation of the CIRP and appointed Mr. Madan Bajarang Lal Vaishnawa as the Interim Resolution Professional (IRP). The adjudicating authority further declared a moratorium, prohibiting the institution or continuation of suits or proceedings against the corporate debtor and restricting the transfer or disposal of its assets.

The decision underscores the tribunal's stance on enforcing operational creditors' claims while balancing statutory provisions under the IBC and MSMED Act. It also highlights the tribunal's commitment to ensuring that the CIRP is used as a tool for resolution rather than a recovery mechanism.

Bottom Line:

Insolvency and Bankruptcy Code, 2016 - Operational creditor's application under Section 9 is maintainable despite claims of settlement agreement by corporate debtor - Settlement agreement consolidating operational debt does not change its operational character.

Statutory provision(s):

• - Insolvency and Bankruptcy Code, 2016 - Section 9
• - Micro, Small and Medium Enterprises Development Act, 2006 - Section 16

M/s Enquest Petrosolutions Private Limited v. M/s Sparklet Engineers Private Limited, (NCLT)(Mumbai Bench-VI) : Law Finder Doc Id # 2821487