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Sterling Biotech: Chinks in bankruptcy law exposed
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SME Times News Bureau | 14 Mar, 2019
The vulnerability of the bankruptcy law has been exposed once again,
this time from the banker's side, in the Sterling Biotech resolution
plan.
In this case, the bankers had approved a "One Time
Settlement" (OTS) proposal from the absconding management of the company
-- seeking withdrawal of the case from Insolvency and Bankruptcy Code
(IBC) process -- by a thumping majority of 90 per cent.
Although
the law provides for such an exercise from the committee of creditors
(CoC) under the new amendments made in the IBC, the National Company Law
Tribunal (NCLT) tried restoring the balance by rejecting the withdrawal
application while slamming creditors for the hasty manner in which they
tried to withdraw the bankruptcy application.
The matter came to
light when NCLT Mumbai pulled up Andhra Bank for accepting an OTS offer
from fugitive promoters of the Gujarat-based Sterling Biotech group,
which is embroiled in a Rs 8,100-crore bank fraud.
The bizarre
case led the bench to note: "How the proposal submitted by the Sandesara
Group is accepted by the financial creditors creates suspicion when the
promoter/ director is absconder and ED/CBI is searching for them."
The
NCLT rap on the Sterling Biotech OTS comes at a time when two such
proposals by Essar Steel and Bhushan Power and Steel -- offering to
settle 100 per cent dues of the lenders -- were rejected by their
committees of creditors (CoC).
The amended IBC provides for
withdrawal of a case from the insolvency process if 90 per cent of the
creditors approve a settlement.
The NCLT bench of V.P. Singh and
R. Duraiswamy has taken strong exception and wondered how the lenders
and creditors of the public sector bank could accept an offer from
Sterling Biotech's absconding Chairman-cum-Managing Director Nitin J.
Sandesara and Joint Managing Director Chetan J. Sandesara, when the
Enforcement Directorate (ED) and the Central Bureau of Investigation
(CBI) are on the lookout for them.
Posting the matter for further
hearing on March 26, the bench said it would also issue notices asking
all the central agencies -- Ministry of Corporate Affairs (MCA), ED,
Income Tax Department (IT), CBI, Securities and Exchange Board of India
(SEBI), Reserve Bank of India (RBI) and others -- whether they want to
make any representations in the matter.
"It is pertinent to
mention that the promoters of Sterling Biotech are absconders and we
often get news from the newspapers that various government agencies like
ED, CBI and others are unable to track them," the NCLT bench observed
on Monday.
The Sterling Biotech matter came before the NCLT in
June 2018 and during pendency of the matter, last week, the committee of
creditors comprising banks, suddenly voted to withdraw the proceedings
against the Sandesara brothers following the OTS offer from them.
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