26 March 2019: The attempt by the committee of creditors to withdraw insolvency proceedings against Sterling Biotech did not materialise and the National Company Law Tribunal reserved its order in the matter and listed the matter for hearing on April 26. The bench, presided over by V P Singh and Ravikumar Duraisamy, questioned the motive of the bankers who have accepted the one-time settlement offer by the committee because granting the bankers’ plea would mean the absconding promoter would get back the company with a clean balance sheet.
26 March 2019: The Enforcement Directorate (ED) on Tuesday warned that it could attach the entire amount of the one-time settlement (OTS) to be paid by the absconding directors of the scam-hit Sterling Biotech Group to the Committee of Banks.
The ED informed the National Company Law Tribunal that it is also in the process of declaring the company’s promoter Nitin Sandesara as an absconder under the stringent Fugitive Economic Offenders Act, 2018, and the agency has already attached Rs 4,700 crore worth of the promoters’ assets so far.
Since the FEOA supersedes all other laws, the ED can also attach and seize the entire amount of the OTS which the banks, led by the Andhra Bank, expect to get from the Sterling Biotech Group.
The agency’s response came to the March 14 notice issued by the NCLT, Mumbai members V.P. Singh and R. Duraiswamy, after the Committee of Creditors sought withdrawal of the Corporate Insolvency Resolution Process (CIRP) after the Stering Biotech Group’s absconding promoters agreed to pay an OTS.
In another revelation on Tuesday, the Committee of Creditors’ lawyers said that the promoters have revised the settlement offer and instead of clearing the full OTS by March 31, they will now pay a token Rs 179 crore and the rest, estimated around Rs 3,100 crore, in June.
The Gujarat-based pharmaceutical giant owes Rs 8,100 crore only to the banks and more to other financial creditors, amounting to a total of around Rs 14,938 crore – bigger than the Nirav Modi scam.
The OTS of around Rs 3,100 crore would mean that the banks would have to forget a whopping nearly 65 percent of their total dues.
The NCLT, questioning the sources of funds for the OTS offer, asked the Resolution Professional to verify the authenticity and posted the matter for further hearing on April 26.
It has also directed the Ministry of Corporate Affairs (MCA) to give its opinion in the matter as most of the banks involved in the matter are public sector banks.
During the last hearing, the NCLT had asked for the views of the MCA, the ED, the Securities and Exchange Board of India, the Reserve Bank of India, the Income Tax Department, and the Central Bureau of Investigation, but only the ED and SEBI have responded so far.
The NCLT had slammed the Andhra Bank’s proposal of an OTS especially since the firm’s directors were missing and even specialized agencies like the ED and the CBI have failed to track them down so far.
The Sterling Biotech matter came before the NCLT in June 2018 and during pendency of the matter, in the first week of March, the Committee of Creditors comprising banks, suddenly voted to withdraw the proceedings against it in return for a OTS from the Sandesara brothers.
If accepted, the OTS plan — under Section 12A of the Insolvency and Bankruptcy Code, 2016 — could entail a loss of around two-thirds to the creditors-lenders, and probably help the fugitives emerge unscathed by the scam.
According to the company’s last Annual Report as on March 31, 2018, it had loans, borrowings, and external commercial borrowings of Rs 7,564 crore, and financial creditors have made claims worth Rs 14,938 crore.
Of this Rs 14,938 crore, the RP has admitted claims of Rs 8,967 crore till November 21, 2018.
The company admitted that its premises were sealed by the ED and it is under the scrutiny of multiple agencies including the CBI and the Serious Fraud Investigation Office (SFIO).
In October 2018, the CBI had registered a case against Sterling Biotech and its top officials for obtaining fraudulent loans worth a total of Rs 8,100 crore from Indian banks and their overseas branches between 2004-2012.
The ED had named a web of 184 group companies in India and abroad, besides 181 accused, and charged the Sandesara brothers of hatching a criminal conspiracy to cheat the banks by manipulating the balance sheets of their companies and luring banks to sanction higher amounts in loans.
Taking action on a CBI complaint, in January, the ED nabbed former Andhra Bank Director A.P. Garg in connection with the fraud, accusing him of money-laundering and other charges.
On February 14, the Sandesara brothers moved a Delhi court seeking cancellation of the non-bailable arrest warrants against them. Their plea will come up for hearing on April 2.
26 March 2019: The National Company Law Tribunal (NCLT) for the second time Tuesday questioned the motive of lenders, led by Andhra Bank, to withdraw their bankruptcy application and to choose a one-time settlement with the absconding promotersof Sterling Biotech.
The Mumbai NCLT bench comprising VP Singh and R Duraisamy for the second time questioned the motive of banks who have accepted an out-of-court settlement offered by promoters, the Nitin Jayantilal Sandesara and family, offering Rs 3,100 crore of repayments by June 2019.
At the March 11 hearing also, the tribunal had questioned the one-time settlement by absconding promoters, for a loan of Rs 7,500 crore excluding interest and penalties from a group of lenders led by Andhra Bank, while Sandesara group owes over Rs 15,000 crore to lenders.
The four promoters of the group–Nitin Sandesara, Chetankumar Sandesara, Dipti Chetan Sandesara and Hiteshkumar Patel–are absconding and are facing extradition orders.
The tribunal Tuesday said if the one-time settlement plea is granted it will mean the absconding promoters would get back their company with a clean balance sheet.
The tribunal will hear the matter afresh on April 26.
Earlier, the tribunal had given two weeks to government and various investigation agencies to file their response. It had also sought responses from the Enforcement Directorate (which is probing an Rs 8,000 crore money laundering case against the group) the income tax department, the CBI, Sebi and RBI.
But only the ED and Sebi filed their replies, and the corporate affairs ministry asked for more time. The court asked the others also to file their replies before the next hearing on April 26.
The ED in its reply also said the government wants to attach the entire Rs 14,000 crore and the ED can attach the one-time settlement money. So it’s better for the banks to appeal in special court, it added.
The lawyers representing the lenders had on March 11 had informed the tribunal that they wanted to withdraw the insolvency process as the promoters are willing to pay the dues out-of-court.
“Over 90 percent of lenders have approved the settlement offer of around Rs 3,100 crore and under Section 12A of the Bankruptcy Code, the petition can be withdrawn,” Nishit Dhruva, managing partner of MDP & Partners, who was representing the lenders in the case had argued.
To this, the tribunal had pointed out that the settlement offer was coming from one Farhad Daruwalla, signed on behalf of the Sandasera group when the applicant before the NCLT is a specific legal entity, Sterling Biotech.
The lenders have already got a little over 5 percent of the default amount of Rs 179.67 crore from the outstanding amount on the day of default.
Apart from defaulting on loans to the tune of Rs 7,500 crore, the promoters are accused of fraud, which is being investigated by CBI. That apart, ED and Serious Frauds Investigation Office are also probing various other charges, including money laundering, and have reportedly attached assets worth Rs 4,700 crore.
26 March 2019: The Mumbai bench of the National Company Law Tribunal (NCLT) Tuesday accepted the amended resolution plan for Jyoti Structures, following an order to this effect by the appellate tribunal, a move opposed by DBS Bank saying it will move the Supreme Court.
Jyoti Structures, which owes Rs 7,010.55 crore and interest to the lenders, is among the first 12 large accounts referred to NCLTs by the Reserve Bank in June 2017.
The sole bidder Sharad Sanghi, who heads the software firm Netmagic, Monday submitted a revised bid as per an order of the National Company Law Appellate Tribunal (NCLAT) last week. In the amended bid, Sanghi will pay Rs 3,965 crore in 12 years against the original bid of 15 years.
As per this first bid, the company has a liquidation value of just Rs 1,112.52 crore, leaving the bankers with a 43 percent haircut.
However, DBS Bank, which is the first charge-holder in the case, opposed the NCLT move and said it will challenge the same in the Supreme Court. The bank is peeved by the fact that the amended plan does not distinguish between the first charge-holder and the second charge holder.
The company owes Rs 53.77 crore to DBS Bank.
It cannot noted that last week the NCLAT had set aside an NCLT Mumbai bench’s July 31, 2018 order to liquidate Jyoti Structures, and asked the bench to consider the Rs 4,000-crore resolution plan submitted by Sanghi and others.
“The case is remitted to the Mumbai NCLT to approve the revised resolution plan,” said the NCLAT order.
It can be noted NCLT Mumbai on July 31,2018, rejected the Sanghi’s resolution plan and ordered liquidation of the company which owes Rs 7,010.55 crore to the lenders.
According to the Rs 3,965.06-crore resolution plan by Sanghi, who is the managing director and chief executive of IT solutions provider Netmagic, along with others, Rs 50 crore would be paid upfront, followed by Rs 75 crore over the next 12 months and the remaining in staggered payments over the next in 15 years. Under the revised plan, he would pay the remaining amount in 12 years.
On March 26 and 27, 2018, Sanghi’s resolution plan was voted by 62.66 percent of lenders, while 23.12 percent voted against, and 14.21 percent abstained. But later, on April 2, 2018, some lenders changed their minds and agreed to accept the proposal, taking the final tally of those lenders accepting the proposal at 81.31 percent.
But Sanghi’s resolution plan was rejected by NCLT on the two grounds, citing delays beyond the mandated 270 days and the absence of required majority of 75 percent at the March 26 & 27, 2018 voting when only 62.66 percent of the lenders had accepted the bid.
Following this, Sanghi had in August moved the NCLAT, which stayed the liquidation process, saying the NCLT did not consider the eight-day gap between the firm being admitted for bankruptcy and appointment of interim resolution professional.
The appellate tribunal staying the liquidation, also noted that the application was admitted on July 4, 2017 and was uploaded on July 12, and the interim RP joined thereafter.
“If the aforesaid period of eight days is excluded, the resolution plan was approved within 270 days which the NCLT has failed to note,” it said.
26 March 2019: The National Company Law Appellate Tribunal (NCLAT) has stayed a show cause notice issued by the telecom department to Reliance Communications (RCom), asking why its license and spectrum for the Mumbai circle should not be withdrawn for defaulting on Rs21 crore spectrum payment.
The appellate tribunal Tuesday also stayed Department of Telecommunications’ (DoT) show cause notice on why they should not invoke bank guarantees, regarding the spectrum dues. The case will now be heard on April 8.
RCom shares were down 4.9% at Rs4.81 on the BSE in late trade on Tuesday.
The appellate tribunal’s decision will come as a breather to the telco under a debt of Rs 46,000 crore.
The appellate tribunal’s decision comes on the back of a legal spat between RCom and DoT. The operator had missed a March 13 spectrum payment deadline included a 10-day grace period over spectrum dues worth Rs 21 crore.
According to sources, the telco had even responded to DoT saying that it was under a payment moratorium from an earlier appellate order and therefore its license cannot be revoked. RCom has two other installments – of Rs 281 crore and Rs 492 crore – that will need to be paid in April.
26 March 2019: India will provide adequate carve-outs to protect domestic interests in the crossborder insolvency regime which is under consideration by the government, a senior government official said.
Such provisions may mean that a portion of the debtor’s assets may be kept aside to pay domestic creditors, according to the Insolvency and Bankruptcy Code (IBC).
“One thing we can be sure is that we will have all carve-outs that are required to safeguard domestic interests. We can’t adopt internationalism at the cost of domestic interests,” corporate affairs secretary Injeti Srinivas said at a conference, organised by the Confederation of Indian Industry.
Srinivas said the law would initially only give jurisdictional access on the basis of reciprocity and that the reform would give foreign investors greater confidence.
“We will go step by step and look at reciprocity initially. We need not open it up to every country; we will say every country which will reciprocate, we will only give them this facility,” said Srinivas.
While large insolvency cases have taken more than 270 days under IBC, the outcomes of such cases have been positive, Srinivas said.
“For such very large cases, there would be some amount of litigation and it (the time taken) is not too long, especially if you compare it with the average of four-and-ahalf years under the previous regime” Srinivas said, adding that the size of the loans that were being resolved and the quantum of the recoveries constituted an “extraordinary result”.
Srinivas said the IL&FS (Infrastructure Leasing and Financial Services) group entities that had been classified as “red” because of their inability to service debt obligations were not necessarily beyond revival.
“Today almost 50% of the assets (of the IL&FS group) have been put on the block. I think in the coming 2-3 months we should be able to see 50% of the IL&FS portfolio being resolved,” he said.
Of the 169 domestic IL&FS group companies, 50 entities have been classified as ‘green’. Another 13 have been classified as ‘amber’ and 80 as ‘red’.
The National Company Law Appellate Tribunal has directed all ‘green’ companies to service their debt obligations. However, ‘amber’ and ‘red’ companies continue to enjoy a moratorium on all claims against them, granted by the NCLAT in October 2018.
26 March 2019: If a developer has sold half of a planned project and delayed its completion, affected homebuyers may soon get the wherewithal to remove a builder from the project.
Given the fact that the maximum number of complaints against developers are related to project delays, the Maharashtra Real Estate Regulatory Authority (MahaRERA) is working on a plan which will allow homebuyers to remove developers and appoint another after receiving the Authority’s nod.
“If we look at all the complaints we received since the implementation of RERA, about 80 per cent complaints against the developers are related to project delay. We are working on the Standard Operating Procedure (SOP) which will allow homebuyers to remove developers from the project,” a senior official from MahaRERA told this publication.
The official added that MahaRERA is already working on the duration of the delay and the number of homebuyers who would be required to initiate the developers’ removal.
“The finer details are being worked out and we will come up with (the plan) within this month. However, the buyers cannot do it on their own. They have to approach the Authority first and then after the go-ahead from the authority, buyers can decide upon it,” the official added. The move to introduce this plan comes after consultations with various stakeholders, including homebuyers.
As of now, RERA can revoke a builder’s registration for various breaches, but the main concern is delivering flats on time. For instance, despite Amrapali and Jaypee having landed in front of the Supreme Court and the NCLT, buyers are the most affected, with most yet to received their promised flats.
26 March 2019: Ericsson filed an application in the Supreme Court on Monday, requesting to end insolvency proceedings it started against Anil Ambani-led Reliance Communications.
The telecom company too filed an affidavit in the top court, seeking to drop contempt charges against its chairman since the company has settled the matter with the Swedish equipment supplier as per court’s orders. An Ericsson spokesperson confirmed the company moving the court to end the proceedings.
RCom didn’t respond to ET’s request seeking comment until press time on Monday.
The filings from both sides will bring to an end Ericsson’s 18-month battle with RCom over network maintenance arrears.
This development comes a week after Reliance Industries’ chairman Mukesh Ambani saved his younger brother, Anil, from imprisonment by helping him clear Rs 580 crore of dues including penalty interest to Ericsson. The Supreme Court had set a March 19 deadline for RCom to clear the dues, failing which it said its chairman would go to jail.
26 March 2019: A consortium led by GIC Private Limited including a Tata Group entity and SSG Capital Management are likely to buy 40 percent stake in GMR Airport’s arm for around Rs 8,000 crore, sources privy to the developments told CNBC-TV18.
A substantial portion of the 40 percent stake is likely to be bought by GIC Private Limited, a sovereign wealth fund established by the Singapore government in 1981 to manage the country’s foreign reserve.
SSG Capital Management, founded by ex-Lehman Brothers executives, was set up in 2009 and it specialises in distressed and special situation investments.
According to sources, Tata Group’s infrastructure arm is likely to make a minor strategic investment in GMR Airports. “The group’s investment in the aviation sector is restricting them from buying a large or controlling stake in an airport due to regulatory issues,” they said.
In terms of the valuation of the deal, GMR’s Airport arm is valued at around Rs 20,000 crore, which is slightly lower than the valuation at which the private equity investors had settled with the Bengaluru-based company last year.
It was expected that GMR will be raising funds through an IPO of the airport business at a higher valuation. However, with this investment, IPO plans may be shelved for the moment.
GMR, which has a debt of over Rs 20,000 crore, has been making efforts to monetise its business to raise funds to repay debt and a large portion of the funds raised will be used for that purpose.
The parent company GMR Infrastructure currently owns 92 percent of GMR Airport. GMR currently operates the airports in Delhi, Hyderabad and Cebu (the Philippines) among others.
On March 26, GMR Infrastructure’s stock surged over 15 percent in trade on the back of expectation of fund infusion. When contacted GMR, Tata Group, GIC and SSG did not offer any comment on the deal details. CNBC-TV18 has learned that the deal announcement is likely soon.