The National Company Law Tribunal (NCLT) has ordered to initiate insolvency proceedings against state-run National Textile Corporation (NTC) after admitting a plea by one of its operational creditors claiming default of around Rs 14 lakh.

The New Delhi bench of the NCLT has also appointed Amit Talwar as an interim resolution professional (IRP), suspending the board of NTC and has also declared a moratorium against the PSU as per the provisions of the Insolvency & Bankruptcy Code (IBC).

A two-member NCLT bench also rejected the claims of NTC and said the dispute it raised over the due amount claimed by its operational creditor is merely a “moonshine dispute” and said default has occurred for the payment.

This is probably for the first time since the code has come into effect that insolvency proceedings against a central government-owned public sector unit (PSU) has been initiated.

NTC is under the jurisdiction of the ministry of textile, Government of India. It is engaged in the production of yarn and fabric through its 23 mills in operation, located all over India.

The NCLT direction came over a petition filed by Hero Solar Energy Private Ltd (HSEPL) through its counsel Pallav Mongia, claiming a default of Rs 13.84 lakh for two contracts for installing solar rooftop power projects.

The matter relates to an almost six-year-old contract. NTC had awarded a work order in May 2016 in Tamil Nadu for a total 780 kWp grid-connected rooftop solar power PV system.

As per the contract of both the projects, the amount of Rs 2.21 crore towards Project 1 and Rs 1.86 crore towards Project 2 become due upon the completion of work on December, 2016 and April, 2017, respectively.