NCLT admits Canara Bank's insolvency plea against Deccan Chronicle group

An interim resolution professional to be appointed to resolve the matter

Ending a five-year long wait for the lenders of the Deccan Chronicle Holdings Limited (DCHL), the National Company Law Tribunal (NCLT) on Wednesday ordered the appointment of an interim resolution professional(IRP), besides imposing a moratorium on the liquidation of the debt-laden media company.

The Hyderabad bench was hearing an insolvency petition filed by the Canara Bank under section 7 of Insolvency and Bankruptcy Code(IBC), 2016. The public sector bank based its plea on claims that the firm had an outstanding loan of Rs 723.75 crore.

Except in a handful of cases where the lenders were able to take possession of certain properties of the company by invoking the Sarfaesi Act, the Rs 4,000-crore debt taken from a large number of banks and financial institutions remained largely unpaid ever since the company's existing management disclosed the magnitude of its financial obligations for the first and the last time in 2012.

On July 13, the NCLT bench comprising member(judicial) Rajeswara Rao Vittanala and member(technical) Ravikumar Duraisamy admitted Canara Bank's petition seeking the appointment of an IRP and the imposition of a moratorium on liquidating the company.

DCHL management had filed a counter affidavit in which it had requested the NCLT bench to reject the insolvency petition on various grounds. The media group had even cited an ongoing winding up case against the company in Hyderabad High Court but to no avail.

The bench declined its request stating that there was a prima facie case in what the lender had been claiming.

As per the provisions of the IBC, 2016, once the application filed by a financial creditor under IBC code was admitted by the NCLT, and orders for the appointment of IRP was issued, the interim resolution professional will take control of the defaulting company's board till the resolution process is completed.

Meanwhile, Canara Bank senior counsel Deepak Bhattacharjee confirmed the development.

When asked if the company would be approaching the appellate authority against the today's orders, a DCHL's lawyer refused to make any comments. "We will be able to take a view only after going through the order copy, which is expected to be given tomorrow," he said.

After some of its lenders started looking for a legal remedy for the recovery of loans from the company, the DCHL management admitted in an annual general meeting that it has more than Rs 4,000 crore loans to be repaid. Unable to trace the flow of funds and their utilisation in the company's books in a forensic audit, Canara Bank subsequently filed a criminal complaint with the CBI against the management in 2013.

Despite losing all their share-holding in the company on top of facing the cases, the existing promoter group continues to control and run the management of the company. Now the NCLT orders will end their control. ICICI Bank and Srei Infra Finance emerged as the two largest shareholders after converting a part of debt into equity in the company.

DCHL continues to publish its popular English daily Deccan Chronicle among other publications.

Deccan Chronicle promoters went for an IPO in 2004. However, the trading of its shares remained suspended from September 2015 after the company stopped filing the financial information.