The NCLAT observed that Pepsico India Holding cannot derive advantage of its own agreement with Oceanic Tropical Fruits over the Insolvency & Bankruptcy Code (IBC), which has provision of termination in case of bankruptcy or liquidation or similar situation to get the assets back.
The National Company Law Appellate Tribunal (NCLAT) has rejected the plea of beverages giant Pepsico India Holdings seeking release its machinery from Oceanic Tropical Fruits, which is under the insolvency process. The beverages major had moved the NCLAT against the order passed on May 28, 2019, by the Chennai bench of National Company Law Tribunal (NCLT) denying permission to PepsiCo to take back its machinery that was lying at Oceanic Tropical Fruits.
The NCLAT observed that Pepsico India Holding cannot derive advantage of its own agreement with Oceanic Tropical Fruits over the Insolvency & Bankruptcy Code (IBC), which has provision of termination in case of bankruptcy or liquidation or similar situation to get the assets back. The appellate tribunal also held that there were claims and counter claims by Oceanic Tropical Fruits and PepsiCo over the money to be paid to each other.
“From the aforesaid fact, it is clear that the claim and counter claim by the corporate debtor (Oceanic Tropical Fruits) and the appellant- Pepsico India Holdings, till it is decided, the question of handing over any asset i.e. Plant & Machinery to the appellant does not arise,” a three-member bench headed by Chairman Justice S J Mukhopadhaya said.
The appellate tribunal observed that a liquidator has to ensure that the corporate debtor (Oceanic Tropical) remains a going concern and steps required to be taken for revival and restructuring of the company during the process. “Even during the liquidation process, the Liquidator is to ensure that the ‘Corporate Debtor’ remains a going concern,” the NCLAT said.
The Resolution Professional/ Liquidator submitted before NCLAT that after initiation of the insolvency, it was not open for PepsiCo to terminate the agreement as IBC mandates him to make every endeavour to protect and preserve the value of the corporate debtor and manage its operations as a going concern.
However, the NCLAT also said that if the corporate debtor is not sold in its totality along with the employees and there is no option but to sell its assets and to distribute the same amongst the creditors, then at that stage, Pepsico India Holdings may ask the Liquidator to return plant & machinery, “if it belongs to it as the third party.”
Oceanic Tropical Fruits is facing insolvency proceedings after the NCLT allowed the plea of leading private sector lender ICICI Bank claiming a default of around Rs 100 crore. PepsiCo India in 2011 had entered into a 10-year contract with Oceanic Tropical to manufacture, process and package its mango-based drink Slice.
According to PepsiCo India, as per their agreement, either party was entitled to terminate the agreement if the other party entered into bankruptcy, liquidation or in the event that its business or assets were confiscated or seized or a winding up petition was admitted. PepsiCo had sent a termination notice on November 28, 2017, after the insolvency was triggered against Oceanic Tropical Fruits and had sought permission to take back its machinery which was lying at corporate debtor’s plant.