HC disallows parallel proceedings in NCLT and debt recovery tribunal

Some months ago, SBI moved DRT against the company and its individual guarantors. NSEBSEState Bank Of IndiaLoading data…

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    ChartsValuation & Peer ComparisonCommunity BuzzPEER COMPANIES An Allahabad High court ruling involving troubled automaker LML has put the spotlight on the need for neat sequencing of recovery initiatives by lenders, with both banks and company managements often rushing to dedicated tribunals to start bankruptcy proceedings.

    The court barred parallel proceedings in the National Company Law Tribunal (NCLT) and the Debt Recovery Tribunal (DRT) in a case between the State Bank of India (SBI) and an individual guarantor for Kanpur-based LML that had defaulted on Rs 73 crore in loans.

    SBI was the largest lender in the deal that involved the twowheeler company. The petitioners, including Sanjeev Shriya, a director of the company, and Deepak Singhania, chairman and director, were the guarantors for the defaulter.

    About a month ago, Shriya moved the Allahabad High Court against SBI, seeking relief from an earlier DRT case where the lender secured a court order that mandated the sale of guarantors’ mortgaged assets to help recover unpaid dues.

    The company later moved NCLT Allahabad as it sought to start bankruptcy proceedings admitting its default -a move that borrowers are seen trying when a re covery is in sight through the DRT courts. Some months ago, SBI moved DRT against the company and its individual guarantors.

    «Even the liability has not been crystallised ei ther against the principal debtor or uarantors mortgagors at present… The proceeding, which is pending before the DRT, Allahabad, cannot go on,» said Mahesh Chandra Tripathi, the High Court judge. «The same is stayed until the finalisation of corporate insolvency resolution process or until the NCLT approves the resolution plan…»

    An admission under Insolvency and Bankruptcy Code provides any defaulting company a moratorium that stops attaching company assets. «While the company moved the NCLT on its own seeking to obtain this ‘moratorium’, the guarantors found it an alibi to seek relief from the earlier DRT case,» said Richa Saraf, assistant legal advisor at Vinod Kothari Consultants.

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