NCLAT gives Sterling promoters 30 more days to settle creditors' dues

The National Company Law Appellate Tribunal has granted 30 days more to the promoters of Sterling Biotech to settle dues of creditors, failing which liquidation process of the company will start.

A three-member bench headed by Chairperson Justice S J Mukhopadhaya also said the Enforcement Directorate will probe and ascertain whether the money paid by the promoters is not from proceeds of crime.

The promoters of the company include absconding Nitin Jayantilal Sandesara and Chetankumar Jayantilal Sandesara.

Clarifing its earlier order dated August 28, 2019, the NCLAT said if settlement under Section 12A is not given effect within a period of 30 days from the date of this order, in such case its order would be cancelled and order of liquidation dated May 8, 2019 passed by the National Company Law Tribunal shall stand restored.

"In view of the aforesaid position, we have allowed 'Resolution Professional' to continue till the process is completed under Section 12A for a period of another 30 days.

"In case the amount is not paid within 30 days as observed above and order of liquidation is restored, the Liquidator appointed by Adjudicating Authority will continue," the National Company Law Appellate Tribunal (NCLAT) said.

The appellate tribunal also said it has allowed 'Promoters' or 'Shareholders' and or 'Directors' to pay the dues in their "individual capacity from their respective account which should not be 'proceeds of crime".

"We direct them to disclose source of the funds to ED and 'Resolution Professional' before such payment," it said.

The NCLAT order came over an application moved by the liquidator Mamta Binani seeking clarification of the order dated August 28, 2019.

"We allow the ED to find out whether the said amount is being paid in the individual capacity of the 'Promoters' or 'Shareholders' or 'Directors' and not from the proceeds of crime," the NCLAT further said.

On August 28 order, the NCLAT had set aside the NCLT order to liquidate Sterling Biotech, and directed that the management should be handed over to its promoters if the dues of creditors are settled.

The NCLAT had said it will not come in the way of the individuals such as promoters and directors, if they pay back to the creditors in their individual capacity, and not from proceeds of crime.

Earlier, on May 8 Mumbai-bench of the National Company Law Tribunal (NCLT) had rejected Sterling's plea filed under section 12A of IBC to bring the company, which is facing a debt of around Rs 9,000 crore, out of insolvency proceedings.

The NCLT had also raised questions over the manner in which lenders of Sterling Biotech had agreed to settle their claims with the absconding promoters.

Section 12A of the Insolvency and Bankruptcy Code (IBC) allows a corporate debtor to settle its defaults and get the company out of insolvency proceedings after settling the claims of lenders after getting 90 per cent votes of the Committee of Creditors (CoC).