The Kolkata Bench of the National Company Law Tribunal (NCLT) has ordered for initiation of an ‘corporate insolvency resolution process’ against distressed rice exporting company, REI Agro, based on an application filed by an operational creditor..REI Agro has, in the past few years, faced litigation across multiple fora for not only having defaulted in the payment of its debts, but also for alleged fraudulent transactions..First was, in May 2014, the filing of winding up petition (under Sections 433, 434 and 439 of Companies Act, 1956) against REI in Kolkata High Court by United Bank of India for having failed to repay ₹224 crore loan it had borrowed from the Bank. Thereafter, in 2015, the UCO Bank invoked provisions of the SARFAESI Act, 2002 and moved the Debt Recovery Tribunal for recovery of debt due..Meanwhile, the Reserve Bank of India (RBI) had also, on multiple occasions red-flagged the loans given to REI Agro as being ‘fraudulent’ and pressed for further investigation. During the year of 2015 itself, the Central Bureau of Investigation (CBI) had also lodged a case of criminal conspiracy, cheating and forgery against REI Agro..In 2015, REI Agro had declared itself a ‘sick undertaking’ under the provisions of the provisions of the SICA, 1985. These proceedings before the BIFR stood abated upon enactment of the SICA (Repeal) Act of, 2003..In August 2016, RBI had questioned the 21-lender consortium led by UCO Bank on the staggering ₹5,262 crore loan to REI which was found to be involved in fraudulent activities. Out of 21 banks, 20 banks reported the account as fraud and one bank had sold the account to an Asset Reconstruction Company..The fraudulent amount in question is estimated to be around ₹3,814 crore..The consortium alleged that the company had defrauded them through conspiracy, cheating and forgery. CBI too in their enquiry found out that REI Agro was involved in fraudulent activities. The consortium of banks had formed a Joint Lenders Forum in 2014 as per RBI Guidelines, and the case was later in 2015 referred to the Strategic Debt Restructuring (SDR) Scheme, for obvious reasons..However, REI’s case was called ‘unfit’ for SDR since it was facing charges for fraudulent activities before the CBI..In an application filed by operational creditor Surendra Kumar Joshi under Section 9 of the Insolvency and Bankruptcy Code 2016 (IBC) , on account of not having been paid a sum of ₹10,20,437 in his capacity as an employee of the company, the NCLT has admitted the application..REI Agro, by its own admission has said that the company is badly suffering from financial crisis and due to various reasons, it has resulted in erosion of the company’s net worth..Given the aforesaid conditions, the NCLT admitted the application filed under Section 9 of the IBC, which allows admission of application if the corporate debtor doesn’t respond within ten days of being served a notice by the creditor under Section 8 of the IBC..Based on this order, an interim resolution professional has been appointed to dispose off his duties under Section 17 of the IBC and, a moratorium period is granted for the duration of the corporate insolvency resolution process – a development notified to both stock exchanges as well. As per this provision, the interim resolution professional takes over the management of the company and powers of the board stand suspended..Section 14 of the IBC, further, bars any other proceeding against such entity once the moratorium has been declared by the NCLT. Therefore, all other proceedings initiated against this company will now stand suspended till the time the resolution process is underway – a much needed breather for REI Agro?.(Read the order)
The Kolkata Bench of the National Company Law Tribunal (NCLT) has ordered for initiation of an ‘corporate insolvency resolution process’ against distressed rice exporting company, REI Agro, based on an application filed by an operational creditor..REI Agro has, in the past few years, faced litigation across multiple fora for not only having defaulted in the payment of its debts, but also for alleged fraudulent transactions..First was, in May 2014, the filing of winding up petition (under Sections 433, 434 and 439 of Companies Act, 1956) against REI in Kolkata High Court by United Bank of India for having failed to repay ₹224 crore loan it had borrowed from the Bank. Thereafter, in 2015, the UCO Bank invoked provisions of the SARFAESI Act, 2002 and moved the Debt Recovery Tribunal for recovery of debt due..Meanwhile, the Reserve Bank of India (RBI) had also, on multiple occasions red-flagged the loans given to REI Agro as being ‘fraudulent’ and pressed for further investigation. During the year of 2015 itself, the Central Bureau of Investigation (CBI) had also lodged a case of criminal conspiracy, cheating and forgery against REI Agro..In 2015, REI Agro had declared itself a ‘sick undertaking’ under the provisions of the provisions of the SICA, 1985. These proceedings before the BIFR stood abated upon enactment of the SICA (Repeal) Act of, 2003..In August 2016, RBI had questioned the 21-lender consortium led by UCO Bank on the staggering ₹5,262 crore loan to REI which was found to be involved in fraudulent activities. Out of 21 banks, 20 banks reported the account as fraud and one bank had sold the account to an Asset Reconstruction Company..The fraudulent amount in question is estimated to be around ₹3,814 crore..The consortium alleged that the company had defrauded them through conspiracy, cheating and forgery. CBI too in their enquiry found out that REI Agro was involved in fraudulent activities. The consortium of banks had formed a Joint Lenders Forum in 2014 as per RBI Guidelines, and the case was later in 2015 referred to the Strategic Debt Restructuring (SDR) Scheme, for obvious reasons..However, REI’s case was called ‘unfit’ for SDR since it was facing charges for fraudulent activities before the CBI..In an application filed by operational creditor Surendra Kumar Joshi under Section 9 of the Insolvency and Bankruptcy Code 2016 (IBC) , on account of not having been paid a sum of ₹10,20,437 in his capacity as an employee of the company, the NCLT has admitted the application..REI Agro, by its own admission has said that the company is badly suffering from financial crisis and due to various reasons, it has resulted in erosion of the company’s net worth..Given the aforesaid conditions, the NCLT admitted the application filed under Section 9 of the IBC, which allows admission of application if the corporate debtor doesn’t respond within ten days of being served a notice by the creditor under Section 8 of the IBC..Based on this order, an interim resolution professional has been appointed to dispose off his duties under Section 17 of the IBC and, a moratorium period is granted for the duration of the corporate insolvency resolution process – a development notified to both stock exchanges as well. As per this provision, the interim resolution professional takes over the management of the company and powers of the board stand suspended..Section 14 of the IBC, further, bars any other proceeding against such entity once the moratorium has been declared by the NCLT. Therefore, all other proceedings initiated against this company will now stand suspended till the time the resolution process is underway – a much needed breather for REI Agro?.(Read the order)