NCLT admits MT Educare under Corporate Insolvency Resolution Process
NCLT admits MT Educare under Corporate Insolvency Resolution Process
The coaching firm had feigned financial difficulties due to the Covid-19 pandemic
The Mumbai bench of the National Company Law Tribunal (NCLT) has allowed the operational creditor, Connect Residuary Private Limited to initiate insolvency proceedings against the corporate debtor, MT Educare (formerly known as Mahesh Tutorials).
The operational creditor had approached the bankruptcy court last year after MT Educare defaulted on its dues of Rs.5.37 crore.
The bench of HV Subba Rao (judicial member) and Anuradha Sanjay Bhatia (technical member) observed, "We are convinced that the operational creditor (Connect Residuary) has successfully demonstrated the existence of 'debt' and 'default' committed by the corporate debtor (MT Educare)."
In 2020, MT Educare reported a revenue of Rs.30.40 crore and a loss of Rs.25.17 crore. In 2019, it reported a total revenue of over Rs.249 crore and a profit of Rs.9.12 crore.
Before the tribunal's order, the corporate debtor had argued that the coaching institute was adversely affected by the Covid-19 pandemic.
It stated, "The object of the insertion of Section 10 A of the IBC was to safeguard the companies from the serious repercussions on its financial health on account of Covid-19."
As a result of the pandemic, the government had introduced Section 10 A, in the Insolvency & Bankruptcy Code (IBC). It meant that no application for the initiation of the Corporate Insolvency Resolution Process (CIRP) of a company would be filed for any default arising on or after March 25, 2020, for six months and not exceeding one year.
The coaching class chain had submitted that it was a listed company in the business of education and had sound and prosperous financial health. The Mumbai-based company provides employment to nearly 900 employees and over 52 active tutorial classes across the country.
The operational creditor had argued that the company had defaulted from July-August 2019 onwards in paying the rent instalments and other financial aspects.
Thus, while allowing the petition, NCLT observed that from the email correspondence with its creditors, except for pleading mercy in reducing a certain amount of rent and expressing financial difficulties due to Covid-19, MT Educare had not raised any pre-existing dispute. The tribunal appointed Ashwin Bhavanji Shah as the interim resolution professional for the coaching firm and admitted it into CIRP.
