7 September 2019: The National Company Law Appellate Tribunal (NCLAT) on Friday set two preconditions — clean money certified by the Enforcement Directorate (ED) and timely payment to the creditors — for the absconding promoters of Sterling Biotech to wrest back control of the insolvent firm. Failing which, the firm with a debt of over `9,000 crore will be sent back to liquidation.
NCLAT’s latest direction comes days after it termed “uncalled for” the National Company Law Tribunal (NCLT), Mumbai bench’s order of liquidation of Sterling Biotech on the ground that an application to take the company out of the insolvency process filed under section 12A of the Insolvency and Bankruptcy Code (IBC) has got nothing to do with a promoter’s eligibility under section 29A provided the proposal has the backing of over 90% affirmative votes of the lenders.
“The order (on August 28) is a conditional one. We may also revert to liquidation if the amount is not paid. Liquidation order may be restored. You (promoters) will have to get the verification done as to whether the money is genuine or not. Only ED will say that, not bank. Our order is very clear that it should not be the proceeds of crime,” the three-member NCLAT bench, headed by its chairperson SJ Mukhopadhaya, said.
The bench, hearing an application moved by the liquidator of Sterling Biotech seeking clarification over the order passed by the NCLAT on August 28, said the ED has to be satisfied that the money the promoters deposit is clean money and not from the proceeds of crime.
While setting aside the NCLT’s May 8 order, the NCLAT had on August 28 said even if the corporate debtors’ assets are proceeds of crime, it does not bar the promoters to settle the matter with the creditors if they put in the money out of their own pockets.
“We want clean money to come back to India, the money which will come from personal sources,” the bench said.
The NCLAT also issued notice to Andhra Bank, lead banker to Sterling Biotech under whose plea corporate insolvency petition was admitted, asking it to state as to why its August 28 judgment be not clarified in view of the fact the promoters or shareholders or directors “have been allowed to pay in their individual capacity from their respective accounts and not from the proceeds of crime”.
“A clarification is required to be given as to what would be the steps to be taken, if section 12A application is not given effect within the time-frame, say 30 days from the date of order and whether to revert to the stage of liquidation for failure of compliance,” the bench said.
The bench directed that the liquidator be appointed by the adjudicating authority to function until further orders. It has asked ED’s counsel to remain present in the court on the next hearing, scheduled on September 23.