NCLAT halts liquidation process of debt-ridden Sterling Biotech till further orders

New Delhi: The National Company Law Appellate Tribunal (NCLAT) has stayed the liquidation process of debt-ridden Sterling Biotech till further orders.

A two-member NCLAT bench headed by Chairman Justice SJ Mukhopadhaya stayed the operation of 8 May, 2019 order of the Mumbai bench of National Company Law Tribunal (NCLT) directing liquidation of the company.

"Until further order, the operation of impugned order dated 8 May, 2019 so far as liquidation is concerned shall remain stayed. However, the Liquidator will ensure that the company remains a going concern," the bench said.

"The bank accounts of the ‘Corporate Debtor' (Sterling Biotech) be allowed to be operated for day-to-day functioning of the company such as for payment of current bills of the suppliers, salaries and wages of the employees/workmen, electricity bills etc," it added.

 NCLAT halts liquidation process of debt-ridden Sterling Biotech till further orders

Sterling factory in Gujarat. Pic courtesy: Sterling Biotech website

NCLAT also directed listing of two matters on 16 July "for admission". One plea is filed by Andhra Bank, which is leading the consortium of lenders to Sterling Biotech and another filed by Shweta Vishwanath Shirke and others against the Committee of Creditors (CoC) of the debt-ridden firm.

NCLAT has issued notices to the CoC and resolution professional of the company directing them to file their replies in next two weeks.

Sterling Biotech, whose promoters Nitin Jayantilal Sandesara and Chetankumar Jayantilal Sandesara are absconding, has a total debt of over Rs 9,000 crore.

NCLT on 8 May while rejecting Sterling's plea filed under section 12A of the Insolvency & Bankruptcy Code (IBC) said "since no resolution plan has been approved within the statutory period of 270 days, therefore we are passing the order of liquidation of the company."

The Mumbai bench also raised questions over the manner in which lenders agreed to settle their claims with the absconding promoters under 12A and withdraw insolvency plea.

Section 12A of the IBC allows one more chance to the corporate debtor to settle its defaults and get the company out of insolvency proceedings after settling the claims of the lenders.

However, it requires 90 percent votes from CoC.

"CoC was interested in getting their money bit without verifying the source of funds. If such a plan is approved in the guise of section 12A, then this will defeat the statutory provision of section 29A and promoter will get the control of the company at a discount of approximately 64 percent, a sum of Rs 3,110 crore as against a total claim of Rs 9,053 crore," NCLT had said.

Section 29A bars defaulting promoters from bidding for a stressed company.

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Updated Date: Jun 07, 2019 18:27:02 IST