NCLT Mumbai Orders Insolvency Proceedings Against Carnival Films After ₹71-Crore Default

The National Company Law Tribunal (NCLT) at Mumbai has recently admitted an insolvency plea by JC Flowers Asset Reconstruction Pvt Ltd against film production company Carnival Films Entertainment Pvt Ltd, after finding that it had defaulted on dues of Rs. 71 crore.

A subsidiary of the company had owned Carnival Cinemas, the popular multiplex chain that shut its operations after the onset of the Covid-19 pandemic.

The bench of Judicial Member KR Saji Kumar and Technical Member Anil Raj Chellan said the lender had placed enough material on record to show that Carnival Films owed the money and had not repaid it.

“The various documents produced by the FC clearly establish the existence of debt and default. Additionally, the CD has unequivocally admitted the default in the repayment of this debt,” the order said.

Yes Bank had first sanctioned a term Loan of Rs 50 crore to Carnival Films in September 2016, followed by a Funded Interest Term Loan of Rs. 2.61 crore during the Covid-19 period to help the company meet interest dues. Carnival Films defaulted on its loan in 2019 and on the FITL on 1 January 2020. Yes Bank then issued a recall notice in July 2021 and invoked three guarantees later that month after no repayment was made.

JC Flowers told the tribunal that Yes Bank assigned the entire debt to it under an agreement dated 16 December 2022, making it the secured creditor acting as trustee of the JCF YES Trust 2022-23/5. Carnival Films said its cinema operations were shut for more than two years during the pandemic, cutting off its main source of revenue.It said it did not have the financial capacity to repay the dues and did not oppose the insolvency plea.

The tribunal said its role at this stage was limited to checking whether the debt existed and whether default had occurred. Referring to the Supreme Court's ruling in Innoventive Industries v. ICICI Bank, it noted,

“In the case of a Corporate Debtor who commits a default of a financial debt, the Adjudicating Authority has to merely see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred.”

The tribunal admitted the plea, imposed a moratorium and appointed Ashok Kumar Gulla as the Interim Resolution Professional. It also directed J C Flowers to deposit Rs 5 lakh with the IRP towards initial CIRP expenses.

Click Here To Read/Download Order