Judgement would bring confidence among lenders apprehensive about insolvency proceedings
Can defaulting companies take shelter under the ongoing insolvency proceedings to stop creditors from taking away assets provided as security?
Kolkata High Court has allowed a creditor to take away equipment financed by it from the possessions of defaulting steel company, Ramsarup Industries, which has applied under the Insolvency and Bankruptcy Code.
The judgement would bring confidence among lenders and creditors who might be apprehensive about insolvency proceedings.
But ICICI Bank, fearing impediments in recovering money by disposing of assets, has reportedly challenged the acceptance of Ramsarup’s case by the National Company Law Tribunal (NCLT), which would be taken up tomorrow.
ICICI Bank has faced problem while taking possession of Ramsarup’s assets, the bank’s lawyers have submitted before NCLT.
“It is submitted on behalf of the award debtor that the said award debtor is a sick company and has filed an application under the Bankruptcy Code before National Company Law Tribunal. However, pendency of that application cannot be an excuse for not returning the asset of which admittedly the award holder is the owner,” Judge Soumen Sen has ruled in the case filed by the creditor against Ashish Jhunjhunwala, the promoter and managing director of Ramsarup Industries.
The troubled company’s steel and wire rope making facilities are now lying closed after turning sick and running up over Rs 2,000 crore dues to lenders.
The assets under question include cranes which were earlier financed by the creditor, a finance company which went to court in 2014 for recovery of about Rs 8 crore extended for buying the equipment.
After Ramsarup started defaulting, the finance company approached the court and appointment of a receiver was ordered that year.
But as nothing moved, the creditor again approached the court in May.
Like many other industrial promoters, Ramsarup too tried to take shelter under the Sick Industrial Companies (Special Provisions) Act, 1985, and specifically under its section 22(1) under which creditors were prevented from taking possession of assets or disposing of them.
But as a reference under that Act was dismissed by the Board for Industrial and Financial Reconstruction, which has now been subsumed under the NCLT, Ramsarup in June file for insolvency and again sought protection under it.
Other non-bank lenders have been taking their own steps to recover their dues from Ramsarup including Indian Renewable Energy Development Agency (Ireda), which had financed some wind mills.
Ireda has auctioned off such assets to Suzlon after taking possessions under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.
...& ANALYSIS
- Non-bank lenders have been taking their own steps to recover their dues from Ramsarup including Ireda
- Indian Renewable Energy Development Agency Limited has auctioned off such assets to Suzlon
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