NCLT nod for withdrawal of insolvency proceeding against Aspen Bio Pharma

The National Company Law Tribunal (NCLT) has given its approval to withdraw corporate insolvency resolution process (CIRP) against Hyderabad-based pharma company Aspen Bio Pharma Ltd after both the operational creditor, which has filed the insolvency petition and the only financial creditor agreed for a withdrawal.

Aspen Bio Pharma owed Rs 93.82 lakh to one of its suppliers Survival Technologies Pvt Ltd for various sales made as of October 2018.  In January 2019, Aspen Bio issued a cheque of Rs 32.73 lakh for part payment of the dues. However, that cheque was dishonoured due to insufficient balance in the account. After that despite many rejoinders and promises of payment by Aspen, the dues remain unpaid for almost a year.

The supplier even threatened the debtor of initiating insolvency proceedings against it. However, nothing seemed to work, forcing Survival Technologies to file insolvency petition against the corporate debtor. The NCLT admitted the petition on 29 November 2019.

The NCLT appointed AVS Krishna Menon as the interim resolution professional.

Soon claims from operational and financial creditors were called for. The only financial Creditor – Andhra Bank – submitted a claim of Rs 1.83 crore on 18 December 2019.

However, managing director of the corporate debtor Sateesh Reddy had by then informed the IRP that his company has finalized a settlement agreement with the operational creditor as per which Aspen Bio Pharma will pay Rs 94.68 lakh to Survival Technologies.

The Operational Creditor also informed the IRP it was ready to withdraw the insolvency petition under Section 12A of the IBC.

The application for withdrawal was filed with the NCLT, which asked the IRP to issue a notice to the Andhra Bank, the only financial creditor. However, Andhra Bank opposed filing of withdrawal application citing default by the corporate debtor forcing the bank to classify the account as NPA.

Andhra Bank argued that it had issued demand notice in April 2018 demanding repayment of Rs 1.44 crore, which the debtor failed. The bank then issue possession notice and later sale notice for sale of assets for recovery of the due amount. It fixed 24 January as the date for sale, however, the sale could not be materialised as no buyers showed interest.

Later, on 21 July 2020 the bank informed the RP that the corporate debtor has paid off the money and gave its node to withdrawal of the insolvency application.

Given the facts of the cases, the NCLT finally approved the withdrawal of the insolvency application against Aspen Bio Pharma.