NCLT dismisses Central Bank insolvency plea against Simplex Infrastructures

EPC firm's balance sheets do not show negative net worth, says tribunal's Kolkata bench

The National Company Law Tribunal (NCLT) in Kolkata has dismissed an insolvency application filed by Central Bank of India against Simplex Infrastructures.

A bench comprising Bidisha Banerjee and Balraj Joshi, in an order on May 4, said the application might create larger harm to the corporate debtor (Simplex Infrastructures).

Relying on the Supreme Court’s Vidarbha Industries Power judgment that stressed upon the discretionary power of the adjudicating authority, the NCLT bench said that the case before it was a financial failure while the business model was sound in keeping with the general industry practice. Simplex is an engineering, procurement and construction (EPC) firm.

“Having said that, it is not likely that any new management would be in a position to do something better which the current management is not able to do,” it said.

The bench noted that Simplex Infrastructures' balance sheets do not show negative net worth “and as such cannot be termed as insolvent”. A list totaling to an amount of Rs.554.17 crore had been provided in the application by Simplex on the strength to trade receivables.

Simplex worked as a construction company on EPC and the order mentioned “the larger issue of the quality of the tender documents, the competition in the sector, the delay in the execution of the works due to various hinderances – both attributable to the owner and attributable to the corporate debtor and also various permutations thereof – remains unchanged even after the change of management through the resolution process.”

Central Bank filed on July 15, 2021 a petition for initiating a corporate insolvency resolution process (CIRP) against Simplex Infrastructures. It was filed on the ground that Simplex had defaulted in the payment of around Rs 105 crore.