Bankruptcy court admits BSE-listed Bothra Metals & Alloys for insolvency resolution

As long as there is an acknowledgement of the debt in the books of the company, the lenders can approach the dedicated bankruptcy court against the debtor for initiating Corporate Insolvency Resolution Process (CIRP) ruled the National Company Law Tribunal (NCLT).
The Mumbai bench of NCLT, while admitting the insolvency resolution plea of the Syndicate Bank against BSE-listed Bothra Metals and Alloys observed that an acknowledgement of debt in the balance sheet of the company satisfies the requirements of the limitation.

The bank had approached the tribunal last year in July after the company failed to repay its dues of over Rs 44 crore. The total claim of the Syndicate Bank is over Rs.61.47 crore including working capital loans and letter of credit among other things.

However, the company had argued that the question of limitation will have to be considered since the date of default is September 2019 and the date of declaration of the Non-Performing Asset (NPA) December 2015. The company had also argued that the bank has initiated civil suits under the SARFAESI Act before various judicial fora and hence this petition is not maintainable.

However, rejecting the arguments of the Bothra Metals, the division bench presided over by judicial member Rajesekhar VK and a technical member Ravikumar Duraisamy, observed that there is an acknowledgement of debt in the balance sheet of the corporate debtor all along.

“An acknowledgement in the balance sheet of the company satisfies the requirements of section 18 of the Limitation Act, 1963, leading to a fresh period of limitation commencing from each such acknowledgement,” said the tribunal while admitting the plea. “Further, the reply also makes it clear that there is a debt due and payable to the Financial Creditor, which remains unsatisfied. Therefore, the aspect of limitation raised as one of the defences by the Corporate Debtor does not hold water.”

The tribunal on July 7, while admitting the plea of Syndicate Bank also approved the appointment of Harish Kant Kaushik as the Interim Resolution Professional (IRP) of the company.

“The fact that the Corporate Debtor has itself submitted various OTS proposals to the Bank, is ipso facto an admission of the fact that there is a debt due and payable to the Financial Creditor,” said the tribunal in its 10-page order.

When contacted, Nishit Dhruva, managing partner of law firm MDP & Partners, who had represented the bank in the case, confirmed the development.

“The fluctuation in the exchange rate of the US dollar leading to a steep decline in rupee value also proved detrimental,” the company had argued further. “The Maharashtra Pollution Control Board issued an order against the Corporate Debtor leading to shut down of the Plant. All these processes affected manufacturing activity and also the contractual obligations towards buyers.”

However, the tribunal had rejected those arguments as well and said that all such things cannot be considered to be defences in a petition.