Liquidation process in respect of REI Agro under the provision of the Insolvency and Bankruptcy Code (IBC) has commenced following an order of the Kolkata bench of the National Company Law Tribunal (NCLT) that the company is to be liquidated as no resolution plan has been received during the stipulated time.
In a letter to the Bombay Stock Exchange, the liquidator in the matter of the city-based company, Anil Goel, partner, AAA Insolvency Professionals LLP, informed the bourse earlier this week that, “We hereby intimate your good office that liquidation process has commenced in respect of REI Agro under the provisions of insolvency and bankruptcy code, 2016 by an order of the National Company Law Tribunal, Kolkata Bench, w.e.f. August 24.”
Goel, in the letter, said as per the provisions of the IBC, the powers of the board of directors and key managerial personnel of the company ceased to have effect and such powers shall be vested with him.
The Basmati rice exporter owes lenders close to Rs. 8,600 crore. The company allegedly cheated 14 consortium member banks, led by Uco Bank, through diversion of funds, showing high cost of false capital expenditure, suspected investment in related companies, falsely inflating debtors and sale at higher price to doubtful parties, among others. In the month of May this year, the Central Bureau of Investigation (CBI) had arrested the company’s promoters Sandip and Sanjay Jhunjhunwala in connection with the alleged bank loan fraud to the tune of Rs. 3871.71 crore.
In March, the NCLT had ordered for initiation of the Corporate Insolvency Resolution process in respect of the company. Pursuant to filing of an application by Surendra Kumar Joshi, an operational creditor of the company, the NCLT had ordered for initiation of the Corporate Insolvency Resolution process vide its order dated February 27.
However, during the stipulated time of 180 days, after the initiation of the corporate insolvency resolution process, no resolution plan for the company has been received by the NCLT.
Passing an order in the case on August 24, the division bench of the tribunal, comprising justice Vijai Pratap Singh and justice Jinan KR, said the company was to be liquidated and, Goel, who had been appointed as the resolution professional, should perform the liquidation process.
“In this case, 180 days is going to expire on August 26, and till date not a single resolution plan has been submitted by anybody and resolution professional has admitted a claim of Rs. 8,593.96 crore of creditors. The CBI and Enforcement Directorate have also taken possession of assets of corporate debtor. The CBI is also investigating the matter. Therefore, there is no justified reason for extending the period of resolution process…From the records, it appears that even after the extending the time, ultimate result will end in liquidation,” the bench observed.
Uco Bank had filed a recovery suit in the debt-recovery tribunal (DRT) nearly two years ago on behalf of the group of banks over a whopping unpaid debt. Another city-based public sector lender, United Bank of India, had filed a winding up petition against the company in the Kolkata High Court in 2014 for failing to repay Rs. 224 crore loans it had borrowed from the bank.
REI Agro has been under financial stress for some time now. Net worth of the company had fully eroded due to the losses suffered by it from time to time. It had earlier applied to BIFR for adopting measures for revival and rehabilitation.