India’s National Company Law Tribunal (NCLT) admitted Yes Bank’s insolvency resolution petition against education provider Zee Learn Ltd.
The tribunal admitted the lender’s insolvency plea against the corporate debtor Zee Learn, which is a part of Essel Group and runs chain of K-12 schools, on 10 February, according to the NCLT’s order.
The insolvency order was passed by the division bench of the NCLT, comprising retired Justice P.N. Deshmukh, also a judicial member of the tribunal, and Technical Member Shyam Babu Gautam.
The bank was represented by lawyers Vyankatesh Dhond, Vinodini Srinivasana, and Dharmesh Jain in the case against Zee Learn, whose brands include Kidzee Preschool and Mount Litera World Preschool.
The Matter
Yes Bank, the financial creditor of Zee Learn, had filed the petition against the company, claiming a total default of about 469 crore rupees ($56.83 million).
The development came after the lender granted loans to borrowers –– Zee Learn Education Society, Gyanmala Public Education Trust, Mount Litera Education Foundation and Taleem Research Foundation –– and Zee Learn executed deeds of guarantee in respect of their financial debt.
The financial creditor in its petition said there was a default on the part of the principal borrowers and it invoked the deeds of guarantee by sending demand notice on 2 August 2021 to Zee Learn, which didn’t pay the amount.
“The corporate debtor has not paid the amount under the notices of demand, and is thus, in default,” it added.
The Resistance
Zee Learn in its reply said the obtained loans were standard and the bank filed the petition without enforcing the securities provided by the borrowers.
The company is in the field of education and runs preschool centers in 800 cities across India, and an insolvency order will not only cause severe financial loss and prejudice to Zee Learn, but also disrupt the academic year of its students and affect the livelihood of its teachers and staff, it added.
The Mumbai-based company also said the petition was filed against for corporate guarantees alleged to have been given to four different borrowers and the petition is not maintainable owing to misjoinder of parties and cause of action.
In addition, the company said the Section 7 of the Insolvency & Bankruptcy Code (IBC) provides for the filing of an application for initiating of corporate insolvency resolution process (CIRP) against the corporate debtor by itself or jointly with other financial creditors or by any other person on behalf of the financial creditor as may be notified by the central government.
The Section 7 of the IBC does not provide for clubbing of different causes of action in one petition, it noted.
Zee Learn said Yes Bank also failed to provide moratorium under Covid-19 Regulatory Package of the Reserve Bank of India (RBI). The company also raised issue of several anomalies, including in the deed of guarantee and non-annexure of complete statement of account with the lender’s petition, to protect itself from the jaws of insolvency.
The Rebuttal & Verdict
Yes Bank, however, rebutted the company’s allegations by filing its reply in an affidavit.
The NCLT ruled that the application filed by Yes Bank is complete in all respects as required by the law and it clearly shows that Zee Learn is in default of a debt due and payable.
“Therefore, the debt and default stands established and there is no reason to deny the admission of the petition. In view of this, this adjudicating authority admits this petition and orders initiation of CIRP against the corporate debtor,” it added.
The tribunal appointed Rohit Mehra as an interim resolution professional (IRP) of the company and said the fee payable to the insolvency professional should be compliant with the regulations of the Insolvency & Bankruptcy Board of India (IBBI).
The NCLT also ordered Zee Learn’s executives to provide all documents in their possession and furnish every details in their knowledge to the IRP within one week from the date of receipt of the order.
What Happens When Insolvency Professionals Fail To Discharge Their Duties Efficiently?
This could land insolvency professionals in trouble and draw the ire of the bankruptcy regulator. This happened with Coimbatore-based Rajagurusami Maheswaran, who ignored an e-mail that went to his “spam folder”, intimating about his appointment an IRP of Sandhhya Shipping Services Private Ltd.
If you are a resolution professional, then do keep a tab on the “spam folder” of your e-mail in order to avoid the IBBI’s admonishment and possible penalty.
(Note: $1 = 82.5314 Indian rupees)
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