NCLAT stays the Constitution of the Committee of Creditors in CIRP against Bombay Rayon Fashions Ltd

NCLAT stays the Constitution of the Committee of Creditors in CIRP against Bombay Rayon Fashions Ltd

"Till the next date of 'Hearing', the constitution of COC shall remain stayed" NCLAT on the matter.

The Delhi bench of the National Company Law Appellate Tribunal (NCLAT) has stayed the Constitution of the Committee of Creditors ("CoC") in the Corporate Insolvency Resolution Process (CIRP) of Bombay Rayon Fashions Ltd on 15 June 2022.

The bench comprising Justice M. Venugopal (Judicial Member) and Shri Kanthi Narahari (Technical Member), adjudicated an appeal filed in the case of Prashant Agarwal v Vikash Parasprampuria.

The present issue arose when Bombay Rayon Fashions Limited ("Corporate Debtor") failed to make the balance payment to its supplier Vikash Parasprampuria (Operational Creditor) the sole Proprietor of Chiranjilal Yarn Traders. The Operational Creditor raised several invoices against the supplies, and the same was accepted by the Corporate Debtor without any protest or demure, additionally, the Corporate Debtor even made partial payments towards the invoices.

However, upon failure to pay the balance amounts, the Operational creditor sent several reminders followed by a demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016, however, there was no response.

An application was filed under Section 9 of the IBC before the Mumbai bench of NCLT to initiate a CIRP against the Corporate Debtor for defaulting in payment of Rs.1,60,87,838/-, wherein the principal amount was Rs. 97,87,220/- and remaining was interest. The Operational Creditor met within the threshold of 1 Crore by including the interest component in the amount and relying on the case 'Pavan Enterprises v. Gammon India.'

The Mumbai bench of NCLT held in its order that the application under Section 9 was complete in all respects, and thereby directed to initiate the CIRP process. Mr. Santanu T Ray was appointed as the Interim Resolution Professional.

Aggrieved by the NCLT's decision, the Corporate Debtor filed the present appeal in the NCLAT. It was stated that the Operational Creditor has proposed a proposal, wherein the Corporate Debtor will have to pay the principal amount along with the CIRP cost of the settlement.

The Corporate Debtor is yet to accept the proposal.

Meanwhile, the NCLAT has stayed the constitution of the COC and the CIRP process would continue otherwise.

The matter is listed before the court for 7 July 2020.

Case title: Prashant Agarwal v Vikash Parasprampuria, Company Appeal (AT) (Ins.) No. 690 of 2022.