MUMBAI : The Mumbai bench of the National Company Law Tribunal (NCLT) has directed the liquidation of insolvent company Bharati Defense and Infrastructure Ltd to accept Union Bank of India’s claim amounting to Rs208 crore as operational debt.
The liquidator rejected the state bank’s claim in February 2019 saying that it did not qualify as a financial debt – as was initially registered – under the provisions of the Insolvency and Bankruptcy Code (IBC). The liquidator also said the claim was not filed on time.
Section 5 (21) of the IBC defines operational debt as a claim in respect of the supply of goods or services including employment.
The Hong Kong branch of Union Bank of India filed an application before NCLT asking that the liquidator’s rejection be set aside and that the bank’s claims be granted. The bank also stated that since its debt was under the financial debt category, it should be classified as a financial creditor to Bharati Defence.
Union Bank of India also said that if the court did not grant its application, it should be allowed to file its claim as a functional creditor.
“We have no hesitation in saying that the applicant is a functional creditor of the corporate debtor (Bharati Defence),” an NCLT bench headed by Justice Prabhat Kumar said in its order on 21 November.
Union Bank of India, under an agreement dated 23 June 2011, approved a term loan to Great Offshore (International) for the construction of three shipping vessels. According to the agreement, the funds disbursed had to be used for the construction of one ship (150T anchor handling tug carrying hull number V-383).
Bharati Defense built the ship for Great Offshore’s subsidiary, Norwegian Shipping Ltd. When Bharati Defense went into liquidation in January 2019, Union Bank of India terminated the contract and sought refund along with interest. Consequently, the bank filed its claim under the corporate insolvency resolution process, which the liquidator rejected.
NCLT ordered initiation of corporate insolvency of Bharati Defense in June 2017 after Edelweiss Asset Reconstruction Company filed an insolvency petition against the company. Later, in January 2019, NCLT directed the liquidation of the company and appointed Vijaykumar V Iyer as the liquidator.
Union Bank was represented by MDP & Partners.
Edelweiss ARC and IDBI Bank are among major creditors of Bharati Defense and Infrastructure. The company owes lenders over Rs 11,300 crore.
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Updated: 30 Nov 2023, 18:57 IST