Rajani Associates advises Vistar Metal Industries Pvt. Ltd. against Ashok Wadhwani under Insolvency & Bankruptcy Code (IBC)

Rajani Associates has recently acted for, and advised, Vistar Metal Industries Pvt. Ltd. (“Respondent No. 1”), in relation to proceedings filed by Ashok Wadhwani (“Financial Creditor”) against the Respondent No. 1 and Kharewali Steel Pvt. Ltd. (Respondent No. 2) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“Code”).

Team: Vistar Metal Industries was represented by Devesh Juvekar, Partner, Dikshat Mehra, Senior Associate and Pooja Vasandani, Associate from Rajani Associates.

Case Background:

The present proceedings were filed by Ashok Wadhwani against Vistar Metal Industries Pvt. Ltd.and Kharewali Steel before the NCLT, Mumbai Bench, to initiate Corporate Insolvency Resolution Process (“CIRP”) against Vistar Metal Industries Pvt. Ltd.  and Kharewali Steel Pvt. Ltd., on the ground of default in repayment for a loan given by Ashok Wadhwani to Vistar Metal Industries Pvt. Ltd.  on the basis of a Bill of Exchange.

Vistar Metal Industries Pvt. Ltd. had drawn and executed a Demand Bill, and Kharewali Steel Pvt. Ltd. had guaranteed payment of the loan amount, by accepting the said Bill of Exchange. Since Vistar Metal Industries Pvt. Ltd. and Kharewali Steel Pvt. Ltd. failed to make the payment, Ashok Wadhwani had filed the Petition before NCLT, Mumbai.

Challenges:

• On behalf of Vistar Metal Industries Pvt. Ltd., Rajani Associates denied and dealt with all the allegations in the Petition as stated by Ashok Wadhwani.
• Rajani Associates vehemently argued that no application can be filed by the ‘Financial Creditor’ against 2 or more Respondents, which are not a Joint Venture company, on the ground of joint liability.

Case argument: In support of their submissions, Rajani Associates relied upon the NCLAT order in the matter of Dr. Vishnu Kumar Agarwal v. Piramal Enterprises Ltd., wherein, the Hon’ble NCLAT had held that “though there is a provision to file a joint application under Section 7 by the ‘Financial Creditor’, no application can be filed by the ‘Financial Creditor’ against two or more ‘Corporate Debtors’ on the ground of joint liability (‘Principal Borrower’ and one ‘Corporate Guarantor’, or ‘Principal Borrower’ or two ‘Corporate Guarantors’ or one ‘Corporate Guarantor’ and other ‘Corporate Guarantor’), till it is shown that the ‘Corporate Debtors’ combinedly are  joint venture company.”

Winning verdict: Given the law laid down by Hon’ble NCLAT in the Piramal’s case supra, the Tribunal was pleased to reject the petition by Ashok Wadhwani at the very threshold.