Mumbai, March 14 (IANS) 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.