Zenith Info moves SC against BNY Mellon

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: Sep 27 2013, 08:51am hrs
Mumbai-based software firm Zenith Infotech on Thursday moved the Supreme Court seeking stay on the Bombay High Court order that appointed an administrator to take possession of the Zenith Infotechs property, books of accounts, statutory records and other documents after the company defaulted on payment of $83 million to The Bank of New York Mellon, London (BNY Mellon). It also sought stay on publication of a winding up notification.

BNY Mellon, an asset management and securities services provider, is the trustee holding the bonds in trust for the bondholders.

A bench headed by Justice RM Lodha while continuing the stay granted by the Bombay HC till Monday asked Zenith to give a proposal for payment of the outstandings dues to the FCCB bond holders.

It suggested that if the company was serious about repayment, it can upfront pay R 50 crore.

Zenith Infotech had offered convertible bonds worth $ 33 million at 3% coupon rate in September 2006, due for repayment or redemption in September 2011. In August 2007, Zenith offered another tranche of convertible bonds worth $50 million at the same coupon rate, due for repayment or redemption in August. As Zenith Infotech defaulted on payment, the bank filed a suit for the recovery of the outstanding dues under the two series of bonds and also a winding up petition in the HC.

Challenging the appointment of an administrator, Zenith argued that the HC in a winding up petition can appoint a provisional liquidator, but not an administrator.

Senior counsel AM Singhvi and counsel Jay Savla, on behalf of Zenith, contended that an administrator should not have been appointed as Zenith is not a sick firm but is commercially viable with one thousand employees on its roll.

The effect of appointing an administrator would be to bring the business to a standstill, and would impede the carrying on of business, they added.

However, senior counsel Harish Salve, appearing for BNY Mellon opposed Zeniths appeal, saying an amount of $36.141 million and $53.915 million was due.

According to Zenith, it has a turnover of Rs 66 crore as on June 30, 2013 and had paid its outstanding taxes and its creditors, except the BNY Mellon and there was no siphoning of of the funds by its promoters, following the sale of the MSD division.

Earlier the HC had restrained Zenith from disposing of, alienating or transferring its interests in its Cloud Computing Business and other property in Mumbai, pending a suit filed by BNY Mellonfor payment on convertible bonds of $33 million and $50 million.