NCLAT dismisses ex-Sintex Industries CMD Rahul Patel's plea on insolvency

The National Company Law Appellate Tribunal (NCLAT) has dismissed the plea of Rahul Arunprasad Patel, former chairman and managing director of Sintex Industries, challenging the insolvency case initiated against the debt-ridden textiles maker.

A two-member NCLAT bench upheld the earlier order passed by the Ahmedabad bench of the National Company Law Tribunal (NCLT), which had on April 6, 2021, directed to initiate a Corporate Insolvency Resolution Process (CIRP) against Sintex Industries over the plea filed by Invesco Asset Management (India).

"We do not find any merit in the appeal to interfere with the order impugned passed by the adjudicating authority. The impugned order dated April 6, 2021, passed by the adjudicating authority is hereby affirmed. The instant appeal is hereby dismissed," said NCLAT.

CIRP of Sintex Industries is almost near completion, where a joint bid by Reliance Industries Ltd and Assets Care and Reconstruction Enterprise has been voted with a 98.88 per cent majority and the NCLT has approved the resolution plan on February 10, 2023.

In his petition, Patel challenged the initiation of insolvency on technical grounds.

He alleged that an application under Section 7 of the IBC was filed by Invesco Asset Management (India) purportedly acting in its capacity as the investment manager for Invesco India Credit Risk Fund, a scheme of Invesco Mutual Fund, under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.

The insolvency application has not been filed by the trustee of the fund. The insolvency application has been signed by one Nupur Tainwala in her capacity as Assistant Vice President-Legal of Invesco Asset Management (India), he alleged.

According to him, Tainwala is Assistant Vice President-Legal of the Financial Creditor (being the debenture holder or the debenture trustee), but is in fact Assistant Vice President-Legal of Invesco Asset Management (India), which is not a financial creditor.

But she has filed the insolvency application in her capacity as a purported delegate of the power to file pursuant to a board resolution given by trustee of Invesco Trustee Private Ltd.

It was alleged that Invesco Asset Management (India) is effectively a third party and powers are not delegated to file the Section 7 application and hence insolvency application deserves to be dismissed on this ground also.

Invesco Asset Management (India) in its capacity as the investment manager for Invesco India Credit Risk Fund duly authorised by Invesco Trustee granted Rs 15 crore through 150 secured non-convertible debentures of the face value of Rs 10 lakh each, bearing coupon rate of 10.70 per annum.

Sintex Industries defaulted on the due date mentioned in the total principal amount of Rs 15 crore along with interest.

Following this Invesco Asset Management (India) filed a Section 7 petition on November 6, 2019 before the NCLT, Ahmedabad, which was admitted on April 6, 2021. This petition was challenged before NCLAT.

The appellate tribunal rejected the petition and said it is "fully in agreement with the reasons assigned" by the NCLT whereby the objection raised by Rahul Patel was rejected.

"... so far authorised representative of the financial creditor is concerned, the NCLT rightly found that on October 18, 2019 a board resolution was passed by Invesco Trustee, whereby, Ms Nupur Tainwala, Assistant Vice President-Legal of Invesco Asset Management (India) was authorised to file any case/suit etc before any court of law, tribunal, quasi-judicial process etc," said NCLAT.

NCLAT also held that interim applications filed by Sintex Industries before the NCLT "were mere ruse to prolong and delay the hearing" of the Section 7 application.