Sunil Hitech Engineers may face heat of insolvency code

Source: The Hitavada      Date: 06 Sep 2018 09:55:51


 

 

Sunil Hitech had not paid Rs 45 crore to American ExpressIt had taken loan of Rs 400 crore from Uco Bank which is one of the biggest lenders to the company

Business Bureau

City-based firm Sunil Hitech Engineers may go under the scanner of Insolvency and Bankruptcy Code. The petitioner, American Express has claimed that Sunil Hitech Engineers had not paid Rs 45 crore which it had availed for corporate credit cards.


American Express had dragged Sunil Hitech to the National Company Law Tribunal (NCLT) in July. Sources close to the development said, Sunil Hitech Engineers had sought 50 days to clear the payments and had promised to settle the matter out of the court. However, the company failed to pay the amount stating that it was facing financial problems and therefore was uanble to pay the amount. NCLT will now admit Sunil Hitech into bankruptcy proceedings.


Once admitted, an insolvency resolution professional (IRP) takes operational control from company’s promoters. The promoters get 270 days to find buyers for the company, a move that has to be approved by a committee of creditors (CoC). If it fails, the company will face liquidation.
It was learnt that Uco Bank which had given loan to the tune of Rs 400 crore is not leading the motion. According to reports in Moneycontrol, which had spoken to American Express about the matter, American Express wants that Uco Bank should come to the rescue of Sunil Hitech.


Other banks which had given loan to Sunil Hitech are Union Bank of India, Punjab National Bank, Oriental Bank of Commerce and ICICI Bank.


The Insolvency and Bankruptcy Code passed by the Parliament in 2016 is a welcome overhaul of the existing framework dealing with insolvency of corporates, individuals, partnerships and other entities. It paves the way for much needed reforms while focussing on creditor driven insolvency resolution. At present, there are multiple overlapping laws and adjudicating forums dealing with financial failure and insolvency of companies and individuals in India.


The current legal and institutional framework does not aid lenders in effective and timely recovery or restructuring of defaulted assets and causes undue strain on the Indian
credit system.


Recognising that reforms in the bankruptcy and insolvency regime are critical for improving the business environment and alleviating distressed credit markets, the Government introduced the Insolvency and Bankruptcy Code Bill in November 2015, drafted by a specially constituted 'Bankruptcy Law Reforms Committee' (BLRC) under the Ministry of Finance.


One of the fundamental features of the Code is that it allows creditors to assess the viability of a debtor as a business decision, and agree upon a plan for its revival or a speedy liquidation. The Insolvency and Bankruptcy Code creates a new institutional framework, consisting of a regulator, insolvency professionals, information utilities and adjudicatory mechanisms, that will facilitate a formal and time bound insolvency resolution process and liquidation.


The Enforcement Directorate (ED) had attached cash deposits worth Rs 25.44 crore of the company in a coal block case under the Prevention of Money Laundering Act (PMLA).


As per the company’s consolidated financial statements, as of March 2018, it had a total debt of Rs 1,785 crore as opposed to equity of Rs 641 crore.