As per the broadly agreed upon settlement terms, both parties have now agreed that AU can appropriate amounts as they become due and payable against the NBFC’s fixed deposit and no premature encashment will be made by the bank.
Stressed non-banking financial company Altico Capital and AU Small Finance Bank on Tuesday proposed settlement terms before the Bombay High Court (HC). This was in relation to the suit filed by Altico Capital in the Bombay HC early last month, seeking to prevent AU Small Finance Bank (AU) from declaring the non-banking finance company a defaulter. This petition was filed by the crisis-ridden Altico prior to its first instance of default on September 12.
The Bombay HC asked the parties to file signed consent terms and that it will hear the matter on Wednesday. Jaipur-based AU Small Finance Bank had dues worth around `62 crore recoverable from the beleaguered Altico Capital.
Altico also had a fixed deposit account with the bank. According to the small finance banks’s counsel, the NBFC had breached some terms of the agreement between the two parties, which allowed AU to adjust the amount from the fixed deposit account against the overdue amount.
AU had extended two term loan facilities to Altico in 2018 to the tune of `100 crore. During the last hearing, Altico’s counsel had argued that there was no agreement between the two parties for appropriation of the fixed deposit against the loans. The court on Tuesday asked both parties to come to an agreement regarding the overdue amount. Justice AK Menon told AU to “participate [in Altico’s resolution] in the right spirit, please.”
As per the broadly agreed upon settlement terms, both parties have now agreed that AU can appropriate amounts as they become due and payable against the NBFC’s fixed deposit and no premature encashment will be made by the bank. In turn, Altico cannot make any promises to any third party (or other lenders) with respect to the amount in the fixed deposit with AU.
“As and when amounts fall due, they can be withdrawn from the escrow account,” Pradeep Sancheti, Altico’s counsel informed the court. The crisis-ridden Altico first defaulted on September 12 to the tune of around `20 crore. The NBFC reportedly has a total outstanding of over `4,000 crore.
Altico has been in talks with strategic investors who are understood to be interested in acquiring a controlling stake in the NBFC. FE reported on September 28 , the company was also expected to get some short-term funds to the tune `2,000 crore by way of sale of some its existing loans and assets. According to sources, the NBFC has stopped issuing fresh loans about 10-11 months back, and current business entailed funding the existing commitments of the borrowers. The company has reportedly been instructed not to carry out any related party transactions or allow any third party involvement without attaining prior consent from lenders.