The Australia and New Zealand (ANZ) Banking Group has moved the National Company Law Tribunal (NCLT), seeking its intervention in the insolvency and bankruptcy proceedings against Mumbai-based edible oils manufacturer Ruchi Soya.
Appearing on behalf of ANZ Bank, senior counsel Zal Andhyarujina said that the bank had granted multiple forms of credit to Aavanti Industries, a palm-oil producer based in Singapore, including six bills of exchange and an export credit contract.
The bank hopes that it is classified as a financial creditor to Ruchi Soya, while Aavanti Industries is an operational creditor, claiming dues totalling Rs 14.2 billion from Ruchi Soya.
Ruchi Soya was admitted for the corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code (IBC) on December 2, 2017, after Standard Chartered Bank and DBS Bank of Singapore approached the NCLT.
While the 180-day deadline under CIRP comes to an end on June 12, last week the tribunal granted a 90-day extension so that the Committee of Creditors (CoC) could come up with a resolution plan.
In October 2013, Aavanti received $50 million from ANZ Bank in lieu of a export contract between the former and Ruchi Soya.
The $50 million was in the form of a pre-payment for goods to be delivered (of similar value) by Ruchi Soya over the next few years. On the same day, the export contract/facility was granted and an assignment agreement among the ANZ Banking Group, Ruchi Soya and Aavanti was signed.
Andhyarujina told the bench that there was evidence of a composite agreement as “Aavanti was a conduit” for Ruchi to receive the money.
Further, he argued, that despite the contract stating that Aavanti was termed as 'buyer' and Ruchi as 'producer', the credit facility extended included a 'time value of money' or interest and had a commercial effect on borrowings.
Under the contract, the $50 million of pre-payment credit was given by ANZ Bank to Aavanti, which in turn was paid to Ruchi Soya. Ruchi, under the contract, had to supply goods (of the same value) over time, according to specific payment schedules.
If the company could not supply the goods, the outstanding dues under the facility would have to be paid back.
Therefore, the total dues ANZ Bank and Aavanti expected to receive at the end of the contract was $64 billion, Andhyarujina told the NCLT. It had to be given either in the form of cash to service the debt or goods.
As Ruchi Soya did not meet its obligations under the contract, in August 2016, the ANZ Banking group terminated the contract.
Until May 2016, Ruchi had supplied goods worth $3.5 million to Aavanti, which meant that when the contract was terminated, the company (indirectly) owed the ANZ Banking group over $ 46 million, excluding interest.
By June 30, Andhyarujina said Ruchi Soya failed to meet its first and second payments schedule and even the shortfall amount of payments were not made.