India - Rajani Associates Advises Vistar Metal Industries Against Ashok Wadhwani Under Insolvency & Bankruptcy Code.

Legal News & Analysis - Asia Pacific - India - Insolvency & Restructuring

7 June, 2019

 

Rajani Associates has recently acted for, and advised, Vistar Metal Industries Private Limited (“Respondent No. 1”), in relation to proceedings filed by Ashok Wadhwani (“Financial Creditor”) against the Respondent No. 1 and Kharewali Steel Pvt. Ltd. (Respondent No. 2) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“Code”). 

 

Team: Vistar Metal Industries was represented by Devesh Juvekar, Partner, Dikshat Mehra, Senior Associate and Pooja Vasandani, Associate from Rajani Associates. 

 

Case Background: 

 

The present proceedings were filed by the Financial Creditor against Respondent Nos. 1 & 2 before the NCLT, Mumbai Bench, to initiate Corporate Insolvency Resolution Process (“CIRP”) against Respondent Nos. 1 and 2 on the ground of default in repayment for a loan given by the Financial Creditor to Respondent No. 1 on the basis of a Bill of Exchange. Respondent No. 1 had drawn and executed a Demand Bill, and Respondent No. 2 had guaranteed payment of the loan amount, by accepting the said Bill of Exchange. Since the Respondent Nos. 1 and 2 failed to make the payment, the Financial Creditor had filed the Petition before NCLT, Mumbai. 

 

Challenges: 

 

  • On behalf of Vistar Metal Industries, Rajani Associates denied and dealt with all the allegations in the Petition as stated by Ashok Wadhwani. 
  • Rajani Associates vehemently argued that no application can be filed by the 'Financial Creditor' against 2 or more Respondents, which are not a Joint Venture company, on the ground of joint liability. 

 

Case argument: In support of their submissions, Rajani Associates relied upon the NCLAT order in the matter of Dr. Vishnu Kumar Agarwal v. Piramal Enterprises Ltd., wherein, the Hon’ble NCLAT had held that "though there is a provision to file a joint application under Section 7 by the 'Financial Creditor', no application can be filed by the 'Financial Creditor' against two or more 'Corporate Debtors' on the ground of joint liability ('Principal Borrower' and one 'Corporate Guarantor', or 'Principal Borrower' or two 'Corporate Guarantors' or one 'Corporate Guarantor' and other 'Corporate Guarantor'), till it is shown that the 'Corporate Debtors' combinedly are joint venture company." 

 

Winning verdict: Given the law laid down by Hon’ble NCLAT in the Piramal’s case supra, the Tribunal was pleased to reject the petition at the very threshold.