Insolvency process: NCLT asks bank officials to appear in Sterling SEZ

It also asked the bank executives to be present at the tribunal for the hearing of the matter or else the tribunal would direct an inquiry against the Committee of creditors

The National Company Law Tribunal (NCLT) on Thursday asked the committee of creditors (CoC) to file an affidavit in 24 hours, detailing the reasons for their acceptance of one-time settlement (OTS) offer from the promoters knowing that they were absconding and were involved in fraudulent activities.

It also asked the bank executives to be present at the tribunal for the hearing of the matter or else the tribunal would direct an inquiry against the CoC.

The Ministry of Corporate Affairs (MCA) had earlier objected to the tribunal’s decision accepting the withdrawal of insolvency plea against Sterling SEZ by Srei Infrastructure Finance but had later stayed the decision as MCA is of the view that Section 12A of the Insolvency and Bankruptcy Code (IBC) cannot be applicable to an absconder.

The judges observed it was irresponsible on the part of the CoC to accept an OTS offer from the promoter who is absconding.

“The Bench will not hesitate to take action against banks if they fail to be present in the NCLT. CoC should have informed the Bench about all frauds conducted by Sterling Biotech founders,” the judges said. 

The ED is trying to declare Nitin and Chetan Sandesara, promoters of Sterling group, as fugitives under the Fugitive Economic Offenders Act.

Gujarat-based Sterling SEZ is a subsidiary of Sterling Group, which owes over Rs 8,100 crore to its financial and operational lenders. 

Srei Infrastructure had filed the insolvency plea against Sterling SEZ for a default of Rs 337 crore in July 2018.

A similar case is pending before at another Mumbai NCLT Bench where Andhra Bank wants to withdraw the insolvency plea against Sterling Biotech.

The tribunal in that matter had also questioned the motive of the lenders who accepted the OTS offer and were attempting to withdraw the insolvency plea against the company under Section 12A of the IBC.

The tribunal has further sought views from the government, the Enforcement Directorate, Income Tax department, Securities and Exchange Board of India, Reserve Bank of India and Central Bureau of Investigation on this matter.

The Sterling SEZ matter has been listed for April 26. Moreover, Sterling matter is also listed on April 26.