India’s National Company Law Tribunal (NCLT) admitted Prudent ARC Ltd.’s application to initiate personal insolvency resolution proceedings against the bankrupt MT Educare Ltd.’s founder-promoter Mahesh Shetty.

The Mumbai bench of the NCLT passed the order on 7 June against Shetty, who acted as personal guarantor for the loan availed by education support and coaching services provider, the tribunal order showed.

The development comes after the financial creditor Prudent ARC filed a petition on 26 November 2021 for initiating insolvency resolution process against Shetty to recover a debt of 16.64 crore rupees ($2 million) as on 5 October 2021.

THE BACKGROUND

According to Prudent ARC, MT Educare had executed the facility and loan agreement with a lender, where Shetty was one of the executors of the personal guarantee deed dated 12 April 2017.

Following the failure of the parties to clear the outstanding dues, the lender on 23 August 2021 assigned MT Educare’s debt to Assets Care & Reconstruction Enterprises Ltd. The company’s debt was further transferred by Assets Care & Reconstruction via a deed of assignment on 11 August 2023 in favor of Prudent ARC.

Prudent ARC sent a legal notice to the company and its guarantors, including Shetty, as well as a demand notice to him to pay the dues, but he failed to clear the dues.

In December 2022, MT Educare was admitted for insolvency resolution following an application filed by its operational creditor.

THE VERDICT

The NCLT said the insolvency resolution petition against Shetty is complete in all aspects, and the present case is, therefore, fit for admission.

“Taking into consideration the facts as submitted by the financial creditor and the report submitted by the resolution professional, this bench is of the view that this matter is fit case for admission,” the division bench of Judicial Member Kishore Vemulapalli and Technical Member Anu Jagmohan Singh said in the order.

The tribunal also directed the resolution professional Santanu Ray to issue a public notice to invite claims from all creditors.

Shetty held 1,340 shares in MT Educare while Zee Learn Ltd. owned 4.27 crore shares, or a 59.12% stake in the company at the end of March 2024, the stock exchange data showed.

ABOUT MT EDUCARE

MT Educare, formerly known as Mahesh Tutorials, started its operations in 1988 with a small classroom in Mulund near Mumbai with some students of Class 9 and Class 10, according to its website.

The company gradually expanded its operations to include classes for science and commerce streams as well as chartered accountancy.

In 2012, MT Educare was listed on the BSE the National Stock Exchange of India. The company later become a national player with a multi-state presence and a diverse product portfolio, thanks to its technology-enabled business processes and digital content delivery.

The insolvent MT Educare’s received total claims of over 229 crore rupees from creditors until 1 March 2024, while total admitted liabilities stood at 95 crore rupees, according to its website. Apart from Prudent ARC, the company’s other secured financial creditors are Axis Bank, IndusInd Bank and Shamrao Vitthal Co-operative Bank (SVC Co-Operative Bank).

MT Educare’s operational creditor Connect Residuary Private Ltd. had filed the insolvency petition against the company over default of more than 5.37 crore rupees.

(Note: 1$ = 83.5317 Indian rupees)

(Send feedback to editor@cornerofficejournal.com)

India Watch List For Tuesday - August 1