NCLAT sets aside plea by Hong Kong-based Sansing to initiate insolvency against APL Metals

New Delhi: Appellate tribunal NCLAT on Wednesday set aside a petition by Hong Kong-based Sansing Ltd and upheld an NCLT order rejecting a plea to initiate insolvency proceedings against Kolkata-based APL Metals.

A two-member NCLAT bench said NCLT has rightly come to the conclusion that the corporate debtor APL Metals raised a "bonafide dispute" regarding the debt claimed by Sansing.

Moreover, Sansing had assigned the debt to HSBC Bank, which has not itself instituted this proceeding under the Insolvency & Bankruptcy Code, therefore this application is not maintainable as the reasons assigned by the NCLT are "cogent and require no interference", the NCLAT observed.

Earlier on October 15, 2019, the Kolkata bench of the National Company Law Tribunal (NCLT) set aside Sansing plea holding that there was a dispute over the claims, which appeared to be bona fide, hence the plea to initiate insolvency under Section 9 of IBC was not maintainable.

This was challenged by Sansing before the National Company Law Appellate Tribunal (NCLAT). Sansing Ltd is a Hong Kong-headquartered global supplier of scrap and recycled non-ferrous metals.

It supplied varied quantities of lead scrap radio and other associated materials to APL Metal in FY 2011-12. As per the terms and conditions, payment was to be made within 45 days of the receipt of the goods.

According to the petitioner, only certain paltry payments were made on January 5, 2013, for a sum of USD 108,000 and after adjustment USD 646,000 was still due and outstanding on account of the invoices raised for such supplies.

Later a notice was issued in March 2015 and APL Metal had in May 2015 admitted its outstanding dues of USD 646,000 (Rs 4.39 crore) and agreed to pay half of that in six monthly instalments between July and December 2015.

A settlement agreement in July 2015 was entered into between the appellant and respondent with the consent of HSBC (financer) and Euler Hermes (credit insurance cover provider), however, no such payment was made.

A notice under IBC was issued by Sansing on June 19, 2017, and was replied to by APL Metal on June 30, 2017, raising a dispute over the claims.

APL Metals submitted that the purported claim was disputed due to reasons such as delayed shipments of goods, supply of inferior quality of goods, change of price of LME (London Metal Exchange), invalidated contract etc.

For the said reasons eight invoices had been assigned to HSBC, who had a financing arrangement with the appellant and such finance was under credit insurance cover from Euler Hermes in 2012.

"The Appellant deliberately concealed the fact from the NCLT that its alleged claim which is the subject matter of this Appeal had already been settled by the said Euler Hermes, the credit insurance provider," said APL Metal, adding Sansing had received the value of the said 8 invoices from HSBC on its assignment and HSBC has recovered the same from the said Euler Hermes.

This was not produced by Sansing neither before NCLAT nor before the NCLT purposefully, it alleged.

NCLAT also agreed with the submission and rejected Sansing's plea said:"We are of the considered opinion that Application filed under Section 9 of the IBC has rightly been rejected by the NCLT in view of the settlement agreement dated July 21, 2015, arrived between the Appellant – Sansing Ltd with HSBC and Respondent – APL Metals Ltd."