HC appoints provisional liquidator for First Leasing

The liquidation process of sick First Leasing Company Ltd was set in motion today with the Madras High Court appointing its official liquidator as provisional liquidator of the company and directing him to take charge of the assets immediately.
The directors of the company have been directed to to file the statements of affairs before the official liquidator within 21 days.
Justice M Duraiswamy passed the interim orders on a winding up petition filed by ICICI Bank Limited which said the First Leasing owed it Rs 50 crore.
According to ICICI, First Leasing owed a consortium of banks nearly Rs 1,200 crore and that the company had no asset enough to meet the liabilities.

The bank said a special audit undertaken by a consortium banks showed money lent by the banks had been siphoned off by the promoters, directors, employees, relatives of the directors and entities controlled by them.
"Financials have been cooked up by the company to avail itself of greater credit limits from the banks, including the ICICI. Only if the provisional liquidator takes charge can the court have jurisdiction to surcharge all those persons, employees, and directors for recovering money belonging to the company and fraudulently secreted by them," it said.

First Leasing admitted that it was in doldrums and said the Reserve Bank of India had frozen accounts of the company and intimated it that its funds were not to be utilised without the prior permission of the RBI.

The company has no funds of its own and payment of salaries to employees was being made belatedly and even statutory dues could not be paid for want of RBI approval, it said.
The court was also informed that an RBI show cause notice had stated that an inspection revealed "falsification of books of accounts, creation of fictitious assets, accounting of non-accrued income, booking of non-existent profits and portrayal of false positive net worth by the company. The company has been used by the erstwhile managing director and past and present employees in engineering fraud."
Justice Duraiswamy said "when the respondent (First Leasing) counsel admitted the malfunctioning of the company, I am of the considered view that in the interest of the applicant (ICICI) and also in the interest of the other creditors, it would be appropriate to appoint the official liquidator as provisional liquidator."

Directing the authorities to publish the details in two widely circulated newspapers, the judge posted the matter to September 15 for further proceedings.