Hero Electric Faces Insolvency as NCLT Admits ₹1.85 Crore Dues Case

29 Dec 2024 , 11:00 PM

The National Company Law Tribunal (NCLT) initiated the Corporate Insolvency Resolution Process (CIRP) against Hero Electric Vehicles Pvt Ltd based on a petition by Metro Tyres. Metro Tyres claimed Hero Electric had failed to pay dues amounting to ₹1.85 crore for tyres and tubes supplied between August and December 2022.

In its order on December 20, the tribunal said that Hero Electric could not establish any earlier dispute in relation to Metro Tyres’ payment claims. The petition was admitted under Section 9 of the Insolvency and Bankruptcy Code, 2016, since the tribunal found no valid arguments put forth by Hero Electric against the claims.

Metro Tyres supplied goods worth ₹3.69 crore. Of this, ₹4.27 lakh was paid, and the balance amount of ₹1.85 crore remained unpaid even after repeated follow-ups.

Hero Electric raised allegations of quality issues in the supplied tyres and tubes on account of defects such as tread separation, bubbles, and air leakage. These were complaints raised nine months after the last delivery.

The tribunal noted that Hero Electric did not raise any quality concerns at the time of delivery or during internal quality checks and continued purchasing goods from Metro Tyres.

Hero Electric also raised claims about discrepancies in account reconciliation and that ₹5 lakh paid in March 2023 was not accounted for, which the tribunal held were not supported by evidence.

The tribunal dismissed the defense raised by Hero Electric as a “moonshine defense” and termed it an afterthought, where their user manuals had explicitly excluded tyres and tubes from warranty cover.
Bhoopesh Gupta has been appointed as the Interim Resolution Professional (IRP) for managing Hero Electric’s operations during the corporate insolvency process.

The board of the company is suspended, and a moratorium is on, where no transfer, encumbrance, or disposal of Hero Electric’s assets are allowed. Hero Electric has been directed to deposit ₹2 lakh in the IRP for initial expenses and produce all relevant documents within one week.

The IRP has been directed to announce the process of insolvency in public within three working days and constitute a Committee of Creditors to further oversee the process.