NCLT admits Fortune Spirit into insolvency on IDBI Bank’s plea
The National Company Law Tribunal (NCLT), Cuttack Bench, has admitted liquor manufacturer Fortune Spirit Limited into the Corporate Insolvency Resolution Process (CIRP) on a petition filed by IDBI Bank to recover dues of over ₹18.5 crore.
The bench of Member Technical Banwari Lal Meena and Member Judicial Deep Chandra Joshi appointed Mr. Sambhulal Agarwal as the Interim Resolution Professional (IRP) to manage the company’s affairs and oversee the resolution process. A moratorium has been declared with immediate effect, prohibiting any legal action, transfer of assets, or recovery proceedings against the corporate debtor.
The Dispute and the Debt
IDBI Bank had sanctioned a working capital limit of ₹15 crore to Fortune Spirit in December 2014 for constructing a factory and installing machinery for producing Indian-made Foreign Liquor (IMFL). The loan was later renewed and reduced to ₹12 crore in October 2019.
The bank declared the company’s account as a non-performing asset (NPA) on March 31, 2021, after it defaulted on repayments. Despite issuing a loan recall notice and initiating recovery actions under the SARFAESI Act, including the auction of one property, the bank could not recover the entire outstanding amount, which had ballooned to ₹18,50,93,177.22 with accrued interest as of February 2024.
Key Contentions and the Tribunal’s Ruling
Fortune Spirit had vehemently opposed the petition, raising several objections:
- Section 10A Bar: The company argued that the actual default occurred in October 2020, falling within the Covid-19 related suspension period (March 25, 2020, to March 24, 2021) where initiation of CIRP was prohibited under Section 10A of the IBC.
- Invalid Authorization: It contended that the bank’s official who filed the application was not properly authorized as per IBC rules.
- Defective Application: The company pointed out errors in the application, such as it being filed on a form meant for operational creditors.
The NCLT, after examining the ledger account, found that while payments were due earlier, the corporate debtor had continued making transactions until March 31, 2021. The consistent default, leading to the account being classified as NPA, occurred on this date, which is outside the Section 10A period. The tribunal relied on an NCLAT judgment to state that an application can be filed for defaults occurring after the suspension period.
The bench also noted that a failed One-Time Settlement (OTS) proposal made by the company in February 2023 amounted to an acknowledgment of the debt, which helped bring the application within the limitation period.
Dismissing the corporate debtor’s other technical objections as curable defects, the tribunal held that the existence of a financial debt and a default was unequivocally proven, satisfying the conditions for admitting the petition under Section 7 of the IBC.
Next Steps
The IRP will now take control of the company, make a public announcement inviting claims from creditors, and attempt to formulate a resolution plan. The moratorium will remain in force until the CIRP is concluded, either with the approval of a resolution plan or an order for liquidation. IDBI Bank has been directed to deposit ₹1 lakh as an initial cost for the CIRP.
About Fortune Spirit Limited
According to Tracxn, Fortune Spirit Limited is a Public Limited Company and was incorporated on Nov 21, 2007 in India. It is registered at Registrar of Companies, ROC Cuttack. Its registered address is PLOT NO-31, KHARAVELA NAGAR UNIT-III, Khordha, BHUBANESWAR, Orissa, India, 751001. Its corporate identification number is (CIN) U15511OR2007PLC009628 and its current status is Active. Its industry classification as per MCA is manufacture of country liquor.
Fortune Spirit Limited’s last Annual General Meeting (AGM) was held on 30 Sep 2024 as per records from Ministry of Corporate Affairs (MCA). Fortune Spirit Limited’s authorised share capital is Rs. 55,000,000 and its paidup capital is Rs 54,639,690. The current board of directors of Fortune Spirit Limited comprises Deepak Kumar Sahu, Rajesh Kumar Sahu and 4 more.
Also See: IDBI Bank files fresh insolvency case against Zee Entertainment
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