NCLT Admits State-Run ConCor For Insolvency Resolution

The National Company Law Tribunal (NCLT) admitted government-owned Container Corporation of India Ltd. (ConCor) for insolvency resolution following a petition by its operational creditor.

The development came after ConCor’s operational creditor Roadwings International Private Ltd. filed a petition before the NCLT under Section 9 of the Insolvency and Bankruptcy Code (IBC) 2016, according to the tribunal’s order.

Roadwings sought initiation of corporate insolvency resolution process (CIRP) against the state-run logistics firm for defaulting on a payment of 87.50 crore rupees ($10.65 million), the order showed.

The tribunal, after going through the written submissions and arguments of the parties, decided to admit ConCor, a Navratna company, for insolvency resolution on 12 July.

The New Delhi bench of the NCLT -- comprising Judicial Member P.S.N. Prasad and Technical Member Binod Kumar Sinha -- also appointed Vivek Sharma as ConCor’s interim resolution professional.

BACKGROUND

The dispute is related to the payment of an arbitration award, which has been challenged by ConCor.

In 2009, ConCor had issued a tender for manufacture, supply and commissioning along with operations and maintenance of reach stacker machines and Roadwings was declared as the successful bidder.

Roadwings supplied and commissioned the reach stackers of the desired technical specifications as mentioned in the contract, but certain issues and differences arose between the parties during the continuance of the contract.

The parties could not amicably resolve some issues related to the contract through direct informal negotiations and as a result, Roadwings initiated arbitration proceedings against the company.

The arbitral tribunal after hearing both the parties passed the final award on 1 June 2022 for about 81.37 crore rupees at a simple interest rate of 10% per annum along with the applicable tax.

Following this, Roadwings issued the demand notice to ConCor on 15 July 2022 and claimed the awarded amount of 87.50 crore rupees. However, the New Delhi-based company failed to make any payment or reply to the demand notice within the prescribed timeline of 10 days of receiving the notice.

On 22 July 2022, ConCor sent a reply to Roadwings informing the company is disputing the award and approaching the higher judicial forum for setting aside the arbitral award.

Accordingly, Roadwings sought the admission of the present application under Section 9 of the IBC. Thereafter, both the parties presented their arguments and written submissions before the tribunal.

OBSERVATIONS

The NCLT, in its order, remarked the ConCor submitted that the present application under Section 9 of the IBC is premature.

The notice demanding the amount was sent on 15 July 2022 to ConCor, even prior to receiving the complete award signed and stamped from the arbitral institution SCOPE, it noted.

The NCLT said ConCor’s 22 July 2022 reply to the demand notice of Roadwings does not disclose that the company had already received the soft copy of the arbitral award via email on 1 June 2022.

“Therefore, the said reply is misleading,” it added, noting that as such, the submission of ConCor that the demand notice was served prematurely and even prior to receiving the complete award, does not hold any force.

The tribunal also agreed with the contention of Roadwings that the delivery of the signed copy of the arbitral award via email on 1 June 2022 is a valid delivery. It also raised questions on ConCor’s some other arguments.

The NCLT remarked that so many inconsistencies in ConCor’s version show that it has not come before this adjudicating authority with “clean hands.”

“After going through the pleadings, hearing of the oral arguments submitted by the parties as well as after going through the written notes of arguments submitted by the parties, this adjudicating authority is satisfied that this is a fit case for initiation of corporate insolvency resolution process against the corporate debtor (ConCor) and we therefore, direct the initiation of the same” the tribunal said.

CONCOR’S NEXT MOVE

In a stock exchange announcement today, ConCor said the insolvency petition against the company was admitted despite the fact that it has challenged the arbitral award before the High Court of Delhi.

The company has filed an appeal against the NCLT order before the National Company Law Appellate Tribunal (NCLAT) in New Delhi on 13 July, ConCor said.

The NCLAT will hear the matter on 14 July, it added.

Note: $1 = 82.1814 Indian rupees

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