Firms resort to kidnapping, theft to game NCLT proceedings

Fifty-year-old Devendra Jain, a qualified resolution professional with nearly two decades of experience in stressed assets management, was appointed to resolve the investors' woes in two Ponzi schemes - the Royal Twinkle Start Club and Citrus Check.

While working on the case Jain was suddenly kidnapped on September 11 evening by a group of agents of these two schemes. About 13 lakh investors had invested in around Rs 5,000 crore in the holiday plans and Jain was devising ways to get back the money. He was waiting for his car at the Sun Mill compound in Mumbai's Lower Parel when three women came and asked him about these schemes. While he was talking to them a group of agents pulled him into their car and drove off before his own car could come. He cried for help but even the security gurards of the buildings looked the other way. If it was not for the timely action from the Mumbai police, Jain may not have escaped from their clutches.

Jain told DNA Money, "Since I was trying to get back the investors' money, a group of agents kidnapped me and took me to Nashik where I was held captive in a guest house. At midnight after 7 hours in captivity, I was able to call up home. Now that I am free, I will try and get back the people's money."

Banks are facing fresh hurdles while trying to resolve the cases through the National Company Law Tribunal (NCLT). These include kidnapping the interim resolution professional (IRP) to shifting out the entire plant and machinery lock, stock and barrel in a jiffy by the management. In some other cases, managements have siphoned off money from bank accounts and then filed FIRs in the local police stations to stop the IRP from taking control of the company.

Sameer Kakar, partner, Insolvency Professionals, said, "The Reserve Bank of India (RBI) and the finance ministry should sensitise law enforcement agencies like the police, CBI and the Enforcement Directorate not to interfere in cases that are being tried in the NCLT, which is a timebound process of 270 days. The police case will delay the process and shift the focus from the main agenda."

Punjab-based Hero Steel, an operational creditor, filed a case against Rolex Cycles, a company operating out of the industrial areas in Ludhiana, in NCLT. Bank of Maharashtra and Central Bank of India are the financial creditors. When the IRP visited the company premises, Ashwini Kumar Prabhakar, director of Rolex Cycles asked the resolution professional to come the next day.

However, when the IRP reached the company premises, the entire plant machinery and also employees had been shifted out. A chartered accountant was sent by the company there to say that he is not aware of anything. The management had even siphoned off all the company's cash into another account. After this, the management got the local police to file a FIR against the IRP, delaying the entire process.

A senior banker, who did not want to be identified, said, "Managements are trying to delay the resolution process through litigations and intimidation. But that is not deterring our process but it is certainly delaying the resolutions in many cases.But the NCLT courts are quick to give protection."

The stressed loans in the banking system are estimated at around Rs 11.5 lakh crore, or about 14 % of total advances, according to rating agency Crisil. The RBI is trying to push banks to resolve many of these cases through the NCLT courts under the newly-constituted Insolvency and Bankruptcy Code 2016.

The Chennai NCLT by its order on September 11 gave police protection to an IRP Venkataramanarao Nagarajan appointed to resolve the case of the Ashok Magnetics, a Chennai-based company. The financial creditors in this case are State Bank of India and Central Bank of India. The stiff opposition from the management forced the NCLT to give police protection to the IRP.

HURDLES GALORE

• The stressed loans in the banking system are estimated at around Rs 11.5 lakh crore, or about 14 % of total advances, according to rating agency Crisil
   
• The RBI is trying to push banks to resolve many of these cases through the NCLT courts under the newly-constituted Insolvency and Bankruptcy Code 2016