A luxury yacht and 5-year-old firm in middle of an unusual insolvency case

Silver Jet yacht
A luxury yacht, one operational creditor, and a five-year-old company are in the middle of an unusual insolvency case that has landed in the Kolkata Bench of the National Company Law Tribunal (NCLT).  

Kolkata-registered Credence Logistics, owner of the Silver Jet yacht, has dragged waterfront development company Marina Projects to the NCLT for not paying dues in accordance with the vessel’s lease agreement. With no other party coming forward to claim any dues, Credence Logistics has become the sole member of the committee of creditors. 

Complications arose after the corporate debtor approached the NCLT, requesting for the withdrawal of the application on grounds that it would pay all dues along with interest, senior counsel involved in the matter said. The claimant, who makes up 100 per cent of the CoC, rejected the proposal for withdrawal, which requires 90 per cent votes under Section 12A of the Insolvency and Bankruptcy Code (IBC).

The company has decided to take up the matter in the tribunal. S K Singhi, lawyer for Marina Projects, said the insolvency process was being misused to settle other disputes. “The creditor has used his dominant position to reject the proposal for no valid grounds only to bring the debtor to its terms,” he said. 

The operational creditor has claims amounting to over Rs 17 lakh. For any IBC process to be initiated, a minimum default of Rs 1 lakh has to be proved. “The law is not meant to be a recovery mechanism. If default of Rs 1 lakh or more is proved, then the NCLT has legally no choice but to initiate the process,” said Manoj Kumar, partner, Corporate Professionals.

IBC experts found it strange that no other claimant had emerged for a stressed asset. “If it is a stressed asset, there should have been more aggrieved parties, even for the smallest amount. It is unusual to see just one operational creditor filing for insolvency,” Kumar added.

Samir Prasad, founder of Marina Projects, said he had been paying salaries of the crew and the berthing charges to Kolkata Port Trust without delay, even though Silver Jet had been non-operational for nearly one year due to a technical glitch. “I had leased the boat thinking it was a good asset to revive. We put three times the cost of the yacht in fixing it and get it up and running till last year it developed some electronic problem,” Prasad said. 

The luxury vessel has been docked on the banks of Hooghly for nearly a year without generating any business for the company. 

“We have not received any bid till now. The creditor wants the lease amount till 2025 to be paid and the corporate debtor has offered only up to 2019,” said Sonu Jain, the resolution professional for the case. 

Operational creditors under the IBC are lower in priority compared to secured lenders. A recent IBC amendment clarified that the two cannot be treated on a par, after an order by the National Company Law Appellate Tribunal put secured financial creditors (having charge or no charge on project assets of the corporate debtor) on a par with the unsecured and operational creditors in the Essar Steel insolvency case. Operational creditors are expected to submit an affidavit challenging the latest amendment to the Code in the Supreme Court. 

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