NCLT Mumbai Bench Admits Insolvency Petition Against Vindhyawashini Marine Services

Tribunal Initiates CIRP Following Corporate Debtor's Failure to Satisfy Arbitral Award

In a significant decision, the National Company Law Tribunal (NCLT) Mumbai Bench has admitted an application for initiating Corporate Insolvency Resolution Process (CIRP) against Vindhyawashini Marine Services Private Limited. The application was filed by Sunil Tulsidas Gadekar and others, who are recognized as Financial Creditors, under Section 7 of the Insolvency and Bankruptcy Code, 2016. The tribunal's order comes after Vindhyawashini Marine Services failed to satisfy an arbitral award which had attained finality.

The Financial Creditors had invested Rs. 60 lakhs under a Funding Agreement with Vindhyawashini Marine Services, which was supposed to yield agreed returns. However, the Corporate Debtor defaulted on making payments as per the terms of the agreement, leading to arbitration proceedings. The arbitral award directed Vindhyawashini Marine Services to pay substantial sums to the Financial Creditors, which remained unpaid, thus prompting the insolvency proceedings.

In its detailed order, the tribunal noted that the transaction under the Funding Agreement constituted "financial debt" under Section 5(8) of the Insolvency and Bankruptcy Code, due to the time value of money and commercial effect of borrowing. The tribunal rejected the Corporate Debtor's contention that the application was merely for executing the arbitral award, reiterating that the purpose of the Insolvency and Bankruptcy Code includes the resolution of insolvency and recovery of debts due.

The tribunal further observed that the Financial Creditors had demonstrated the existence of financial debt and default thereof, presenting sufficient evidence including the NeSL records. The tribunal appointed Mr. Umesh Balaram Sonkar as the Interim Resolution Professional to oversee the CIRP, ensuring compliance with the Insolvency and Bankruptcy Code.

This decision underscores the tribunal's commitment to uphold the provisions of the Insolvency and Bankruptcy Code, facilitating debt recovery and resolution of insolvency while also safeguarding the rights of creditors.

Bottom Line:

Insolvency and Bankruptcy Code, 2016 - Application under Section 7 - Financial Creditors entitled to initiate Corporate Insolvency Resolution Process (CIRP) against Corporate Debtor upon failure to satisfy Arbitral Award which has attained finality - Transaction under Funding Agreement constitutes "financial debt" under Section 5(8) of the Code.

Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 7, 5(8), and 14; Arbitration and Conciliation Act, 1996 Sections 9 and 11

Sunil Tulsidas Gadekar v. Vindhyawashini Marine Services Private Limited, (NCLT)(Mumbai Bench) : Law Finder Doc id # 2806765