Read Time: 06 minutes

Synopsis

The National Company Law Tribunal (NCLT) in Mumbai has recently allowed an application for initiating the Corporate Insolvency Resolution Process (CIRP) against the Indian fast-food restaurant chain, Goli Vada Pav.

This order was made by a bench consisting of Justice Kuldeep Kumar Kareer and Technical Member Anil Raj Chellan. The application was filed by the operational creditor Vista Processed Foods Pvt. Ltd under Section 9 of the Insolvency and Bankruptcy Code (IBC) 2016.

Goli Vada Pav, originally established in Mumbai in 2004 by Venkatesh Iyer and subsequently expanding to include 300 outlets across 100 cities in 20 states across India, found itself facing insolvency proceedings due to an accumulated operational debt totalling Rs. 3,56,04,233.

The applicant argued in their petition that during the years 2020, 2021, and 2022, Goli Vada Pav had provided signed balance confirmations to the operational creditor, thus admitting and acknowledging the existence of undisputed operational debt. However, despite the debt being acknowledged and admitted, Goli Vada Pav failed to make the necessary payments.

The Corporate Debtor (CD) raised several objections, contending that the application was time-barred. They also argued that the Operational Creditor's claim for interest was invalid since there was no mention of an interest clause in the invoices or purchase orders.

Additionally, the CD asserted that the balance confirmations relied upon by the operational creditor were not signed or executed on behalf of the corporate debtor. They alleged that these confirmations appeared to have been forged and fabricated by the operational creditor to circumvent the statute of limitations.

The tribunal, after referring to the purchase agreement, determined that the operational creditor had the right to charge interest at prevailing borrowing bank rates for overdue and unpaid invoices, calculated from the due date to the date of payment.

The court found that the CD's contention that the alleged balance confirmations were bogus, forged, and fabricated documents, and not signed by individuals authorized by the corporate debtor, was not adequately addressed in their reply.

Consequently, since these facts were not explicitly denied in the reply, they were deemed to have been admitted by the corporate debtor.

As a result, the tribunal accepted the application filed under Section 9 of the Insolvency and Bankruptcy Code against Goli Vada Pav.

“As a result of the foregoing discussion, we are of the considered view that the Operational Creditor has been able to establish the existence of the Operational debt due on account of supply of goods to the Corporate Debtor in respect of which default has been committed by the latter. It has also been established that the instant Application has been filed within the limitation,” the order reads.

Case title: Vista Processed Food Pvt. Ltd. vs Goli Vada Pav Pvt. Ltd.