10 April 2019: Public sector banks have decided to withdraw bankruptcy proceedings against a second Sterling group company — Sterling SEZ and Infrastructure — even as the fate of a similar one-time settlement (OTS) offer is yet to be decided by the National Company Law Tribunal (NCLT) in the case of Sterling Biotech.
The Mumbai Bench of NCLT will hear on Wednesday the lenders’ petition regarding the offer made by Sterling SEZ. The firm was referred to the NCLT in July 2018 for debt resolution under the Insolvency and Bankruptcy Code 2016.
In February this year, the NCLT had asked the Enforcement Directorate (ED) to hand over the assets of Sterling SEZ to the resolution professional, so that the value of the assets does not erode and they can be sold to repay the banks. This was after the physical assets of Sterling SEZ were attached by the ED, when the firm defaulted on bank loans and its promoters fled the country.
The ED had earlier informed the NCLT that the Sterling Biotech group also comprised Sterling International Enterprise, PMT Machines, Sterling SEZ and Infrastructure, Sterling Oil Resources, and Sterling Port, which were under investigations by multiple agencies.
It said the Sterling Biotech group obtained credit facilities of above Rs 5,000 crore from banks, and these loans turned into non-performing assets.
The banks conducted a forensic audit to ascertain the end-use of loans availed by the SBL Group. The ED received the audit report from Andhra Bank and State Bank of India, which showed the use of loan funds for non-mandated purposes, payments made to non-existent parties, and non-justificatory payments to directors, etc.
As on date, credit facilities to the extent of Rs 8,100 crore have been availed by the group and this has declared a fraud account by the concerned banks. It also said the CBI registered an FIR on October 25, 2017, against various the promoters of SBL group, on the basis of which the ED investigated the offences under the Prevention of Money Laundering Act.
As the investigation kept unfolding, the role of different accused persons and determination of various assets that were proceeds of crime/laundered money led to the attachment of properties involved in money-laundering.
These were proceeds of crime to the tune of Rs 4,274 crore, and resulted in the filing of different prosecution complaints, the last being filed on October 23 last year before the special PMLA Court, Patiala House, New Delhi. The PMLA Court issued non-bailable warrants against the accused persons/ promoters of SBL group on October 25, 2018. It said the promoters of the company had fled the country. A PTI report had earlier stated that the promoters had asked the court to quash these warrants.
In the case of Sterling Biotech, the NCLT’s Mumbai Bench had earlier asked for responses from almost all regulators, including the RBI, the CBI, the ED, and markets regulator Securities and Exchange Board of India, after lenders agreed to an OTS offer made by Sterling’s promoters. Sterling Biotech made an OTS offer of Rs 3,110 crore, amounting to a 65 per cent haircut for banks. The financial creditors had made claims worth Rs 15,000 crore against Sterling Biotech, according to the resolution professional’s statement to stock exchanges.