Skip to main content

Pledged assets can be auctioned by insolvency professionals: NCLT


A recent National Company Law Tribunal (NCLT) order has sent corporate lawyers and promoters intoatizzy. The NCLT´s Mumbai Bench has asked for the personal properties of promoters to be auctioned off even when the process of insolvency is pending before the insolvency professional.
The petition was filed by Schweitzer Systemtek India, invoking the Insolvency and Bankruptcy Code (IBC) with the NCLT, after it defaulted onaloan of Rs 4.5 crore given by Dhanlaxmi Bank.
The suit was initiated by the promoter himself against the asset reconstruction company (ARC) after Dhanlaxmi Bank sold the loan to Phoenix ARC.
The NCLT Mumbai Bench said the promoters cannot be granted any relaxation under the IBC and appointed an insolvency professional to go ahead with the auction of the property.
“This Code of 2016 has prescribed certain limitations, which are inbuilt and must not be over looked.
The ´moratorium´ indeed is an effective tool, sometimes being used by the corporate debtor to thwart or frustrate the recovery proceedings, as is the case here,” said the order of July 3. “Going by the strict interpretation of the relevant provisions, no fault can be found with the order of the NCLT, but the material question that remains lingering is whether the prayer could have been granted in the interest of justice and equity,” saidRSLoona, managing partner, Dhaval Vussonji Alliance.
If any viable restructuring is worked out, the creditor will recover his dues without enforcement of any security.
Else, the creditor will be entitled to stand outside liquidation proceedings and realise his dues by enforcement of all security, including collateral ones.
Another lawyer said the onus is now on the company to approach the NCLT tribunal and getastay against this order.
“This case will have farreaching impact on other similar cases being taken up by the NCLT Bench, which is set to hear 500 nonperforming asset cases in the years to come,” said a lawyer.
According to the IBC,acompany gets 270 days to resolve the debt in which an insolvency professional is appointed by the NCLT and the present board of directors is suspended.
After 270 days, if the debt is not resolved, the professional can sell the company´s assets to recover the loan.
But according to the NCLT´s order in Schweitzer Systemtek India suit, instead of waiting for the sixmonth waiting period, the insolvency professional can now go ahead and sell the promoter´s personal property, which was pledged with the banks.
The NCLT Bench, in its examination of the balance sheet of the company, found its assets were significantly insufficient even as the liability was approximately Rs 5.3 crore.
The Business Standard, New Delhi, 20th July 2017

Comments

Popular posts from this blog

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

RBI rushes in to prop up falling rupee

RBI rushes in to prop up falling rupee India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices. Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg. On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank interven…

GST Refund of Rs 20,000 Cr Pending: Exporters’ Body

GST Refund of Rs  20,000 Cr Pending: Exporters’ Body Refund of over Rs 20,000 crore on account of Goods and Services Tax (GST) is pending with the government with more than half the amount stuck as input tax credit, Federation of Indian Export Organisations said on Tuesday. While claims over Rs7,000 crore were cleared in March, the amount was Rs 1,000 crore in April.However, after exporters’ request, the GST council and tax department are organizing a second phase of Special Refund Fortnight starting May 31, which will enable exporters to draw their refunds at a speedy pace. Many exporters have been unable to file the refund of input tax credit due to technical glitches, exports and claim happened in different months. The major challenge lies on ITC refund especially because the process is partly electronic and partly manual which is cumbersome and add to the transaction cost, the exporters’ body said. On IGST, refunds are getting delayed due to airline and shipping companies not submitt…