Hyderabad: NCLT ticks off banks, endorses liquidator’s role

HYDERABAD: The Hyderabad bench of the National Company Law Tribunal (NCLT) brushed aside a petition filed by a consortium of lender banks seeking removal of a liquidator in the BS Company liquidation case. The company has Rs 3,000 crore loan dues.
A bench of judicial member K Anantha Padmanabha Swamy and technical member Binod Kumar Sinha pronounced the order after hearing the petition filed by IFCI, Bank of India, Punjab National Bank, IDBI, Canara Bank and Laxmi Vilas Bank.
The bench wondered as to why the banks were feeling aggrieved along with the defaulter at a time when the liquidator, Yadavilli Sai Karunakar, was trying to dig out the assets of the defaulter to restore to the banks a respectable portion of the Rs 3,000 crore loan arrears. BS Company provides technology and integrated IT solutions.
The bench, in its order, endorsed the functioning of the liquidator in the case. “Once the liquidation process is initiated, the lenders have no role to play. They have to remain as a mere group of claimants looking forward to the liquidator to determine their claims,” the bench said.
As a liquidator, Karunakar has got powers to seek a thorough probe into the loan fraud perpetrated by BS Company and its old management to unearth a gamut of issues ranging from complacency shown by the bankers and diversion of funds by the old management, the bench said. “The liquidator had a suspicion that the old management and the banks were hand in glove in the misuse of public money,” it said.
The Insolvency and Bankruptcy Code (IBC) of 2016 — under which the liquidator was appointed — was very clear about the role of the liquidator who enjoys the powers to ensure that maximum money is realised through the sale of assets of the company under liquidation. In this whole process, there is no provision that enables the lenders to seek the removal of the liquidator, the bench said. The bench also found no substance in the argument of the banks that the liquidator was crossing his brief and that he was incompetent.
The bench said the liquidator’s functioning was very much within the purview of the IBC. On one hand, these banks had written off debts of Rs 944 crore between 2016 and 2019 and, on the other, extended facilities like bank guarantees and letters of credit in the same period. The liquidator felt there was a need to examine these issues, the bench said, finding nothing wrong in his view.
Lender institutions were finding it inconvenient when the liquidator was raising questions about the due diligence supposed to be done by the banks at the time of granting loans. “Most of the loans are unsecured. The plant and machinery for whose purchase the loan was availed is non-existent today. The liquidator can take steps to maximise the value of the assets of the company under the liquidation process,” the bench added.