The National Company Law Tribunal (NCLT) has initiated insolvency proceedings against Himalayan Mineral Water, following a plea by Jammu & Kashmir Bank citing a default of Rs 50 crore. The Allahabad bench appointed Bhoopesh Gupta as the interim resolution professional.
Background and Context
Himalayan Mineral Water, based in Dehradun, provided a corporate guarantee for the credit facilities availed by LeeL Electricals. The credit facility, initially set up in 2015, was increased to Rs 70 crore in 2017. Despite selling its consumer durable business to Havells India in May 2017, LeeL Electricals defaulted on its payments, prompting Jammu & Kashmir Bank to declare the account as a non-performing asset (NPA) on January 31, 2019【66†source】.
Details of the Case
LeeL Electricals’ financial difficulties led to insolvency proceedings initiated by NCLT in April 2020, which eventually resulted in a liquidation order in December 2021 after failing to find a buyer. Jammu & Kashmir Bank’s plea to NCLT claimed a default by Himalayan Mineral Water, the corporate guarantor. Despite arguments from Himalayan Mineral Water regarding the collective action required by the consortium of banks, NCLT found the company in default and admitted the application for insolvency proceedings【66†source】.
Legal Proceedings and Implications
The NCLT’s order declared a moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) 2016. This decision underscores the stringent measures taken by financial institutions and the judiciary to address corporate defaults and protect creditor interests.
The appointment of an interim resolution professional marks the beginning of the Corporate Insolvency Resolution Process (CIRP) for Himalayan Mineral Water. This process will involve assessing the company’s financial situation, inviting claims from creditors, and formulating a resolution plan to address the outstanding debts.
Conclusion
The initiation of insolvency proceedings against Himalayan Mineral Water highlights the robust framework of the IBC in addressing corporate financial distress. This case serves as a reminder of the critical importance of maintaining financial discipline and the potential repercussions of defaulting on corporate guarantees.