Showing posts with label National Company law Tribunal. Show all posts
Showing posts with label National Company law Tribunal. Show all posts

Sunday, June 10, 2018

Govt to launch fresh drive against shell companies

Over 225,000 companies and 7,000 limited liability partnerships (LLPs) face the threat of being struck off official records, with the government launching a fresh drive against companies defaulting on filing statutory returns.
The identified companies include entities with no economic activity, called defunct companies, as well as those used for financial irregularities, or shell companies.
A total of 225,910 companies and 7,191 LLPs have been identified for regulatory action due to non-filing of financial statements for the two years starting FY16, the corporate affairs ministry said in a statement. The fresh crackdown will be launched this financial year.
The identified entities will be given an opportunity to be heard and action will be taken after considering their response, said the statement.
In an earlier drive launched in the last financial year, the Registrar of Companies (RoCs) had struck off a total of 226,000 companies for having failed to file their financial statements or annual returns for a period of two or more successive financial years.
More than 300,000 directors were also disqualified for non-filing of annual returns by the companies for three years. Disqualified directors will not be in a position to sit on the boards of other companies.
About 14,000 companies got relief under the ‘condonation of delay scheme, 2018’ which was in force for four months from 1 January for regularization of returns.
The removal of the large number of defaulting entities from the records will clean up the system. However, only a small part of the entities struck off from records may have actually been involved in financial fraud.
A task force set up in 2017 to identify shell companies listed 16,537 entities as “confirmed shell companies”. It also listed 16,739 other entities having common directorships with the confirmed shell companies. The task force has also zeroed in on more than 80,000 suspected shell companies. The agencies use certain parameters to identify shell firms, including identifying persons of no means sitting on the board of directors and finding discrepancies between the volume of transactions done by a company and the profits reported.
Regulatory agencies will pursue cases against officers who are in default of statutory obligations even if the company is no longer in existence.
The crackdown highlights the importance of closing down a company as per law as many defaulting firms may actually be cases of entrepreneurs abandoning their venture and not bothering to close down the company as per law, which makes them defaulters for not filing returns in subsequent years. Also, many entrepreneurs open new companies just to hold their intellectual property rights such as trade marks but miss filing the annual returns as such companies have no operations.
“The government expects that its efforts to clean up the registry will create a transparent and compliant corporate ecosystem in India, promote the cause of ‘ease of doing business’ and enhance the trust of the public,” the official statement explained.
Pavan Kumar Vijay, founder of consulting firm Corporate Professionals, said that entities that are in default should be granted the opportunity to rectify the omissions through a simple procedure. This would ensure that struck off entities will not approach company law tribunals which are already overburdened, Vijay added.
The exercise of combing through records to find defaulters as well as those resorting to suspicious transactions has been a key part of the authorities’ strategy to identify instances of black money generation and money laundering.
According to industry observers, businesses often under-report their income or inflate expenses through bogus transactions involving companies that exist only on paper.
Over the last few years, successive governments have taken steps to curb tax evasion as well as funds that are moved out of the country coming back in the form of foreign direct investment. One key step in this regard is the renegotiation of India’s tax treaty with Mauritius.

Friday, May 25, 2018

With IBC norms changed, Jaypee homebuyers to rerun case


Hopeful of getting a fair treatment after reclassification as financial creditors, the homebuyers of Jaypee Infratech are planning to approach the court to rerun the ongoing resolution process under the amended Insolvency and Bankruptcy Code (IBC).

The government on Wednesday approved changes in the IBC through an ordinance that gives homebuyers the status of financial creditors at par with banks in the insolvency resolution process. "Once the ordinance is promulgated upon getting President's assent, we will approach the National Company Law Tribunal (NCLT) to rerun the resolution process,".

Jaypee has failed to deliver 25,000 flats to the buyers citing lack of funds. The realtor had raised around Rs 12,000 crore from the buyers for its Wishtown housing project in Noida in the National Capital Region.

Rerunning the case would mean starting the process from the stage of invitation of fresh bids and reconstitution of the Committee of Creditors (CoC). So, even if the changes are prospective, it would not matter in this case, Rai said.

Currently, the resolution process is heavily tilted in favour of banks, whereas homebuyers have little say in it, homebuyers and lawyers feel.

Even as their contribution in most real estate projects is more than that of banks, homebuyers are unable to participate equitably, leave aside preferential treatment, rue lawyers and homebuyers.

Jaypee raised about Rs 12,000 crore from homebuyers in instalments and booking amount which was much higher than Rs 8,276 crore raised by it from the banks. However, homebuyers were offered only 30% as compared to banks which were offered 70% of the bid price of around Rs 10,000 crore earlier quoted by a company during the resolution process.

With better representation on the CoC, homebuyers hope to get this order reversed.

"This is likely to get reversed if the new bids are invited. Given that Rs 3,500 crore is required to complete the remaining 60% construction in the project, the homebuyers are likely to get 4-5% of the principal amount as delay compensation," Rai said.

However, even in this scenario, the homebuyers are looking at 20% haircut on an average instead of 42% expected earlier, experts point out.

Classification as financial creditors will allow homebuyers to have a greater say in the resolution process and protect their rights. Homebuyers will have voting rights and can now participate in the CoC meetings. Till now, they had no voting rights and were sitting outside the CoC.

A total of 66% members of the CoC can decide on a resolution process. This will allow homebuyers to insist the bidders to include delay compensation in the resolution plan.

However, "placing thousands of homebuyers on CoC could be tricky. Some of them may not come to vote, while others may have a different opinion,", one of Jaypee homebuyers.

Homebuyers will be treated at par with banks during the insolvency resolution process. However, if the resolution process fails and the company is forced into liquidation, homebuyers will be placed after the banks as realtor has given land assets as collateral.

http://www.dnaindia.com/business/report-with-ibc-norms-changed-jaypee-homebuyers-to-rerun-case-2618540

NCLAT admits banks’ petition over Jaypee Infratech land

The National Company Law Appellate Tribunal on Thursday admitted a petition filed by banks against the NCLT order which had directed Jaiprakash Associates to return nearly 760 acres of land to its subsidiary Jaypee Infratech.

A two-member bench headed by Chairman Justice S J Mukhopadhaya also issued notices to the resolution professional (RP) of the company over the petition filed by three lenders -- Axis Bank, Standard Chartered Bank and ICICI Bank. The bench fixed July 13 as the next date of hearing.

During the proceedings, the appellate tribunal observed that the adjudicating authority (NCLT) does not have jurisdiction to declare any instrument illegal.

NCLAT was hearing the appeal over the order of the Allahabad bench of the National Company Law Tribunal (NCLT), which had asked debt-ridden Jaiprakash Associates Ltd to return nearly 760 acres of land to its subsidiary Jaypee Infratech, declaring the transfer of the land as “fraudulent” and “undervalued”.

NCLT had directed JP Group’s flagship firm Jaiprakash Associates Ltd (JAL) to release and discharge interest created over the land to lenders including ICICI Bank.

The order had come on a petition filed by Jaypee Infratech’s resolution professional (RP) Anuj Jain in the NCLT seeking direction over transactions entered into by the company’s promoters creating mortgage on 858 acres of land to secure debt for JAL.

Sunday, May 13, 2018

NCLT suggests IBBI review insolvency code regulations


The National Company Law Tribunal (NCLT) has suggested to IBBI that there is a need to review the insolvency code regulations to ensure that they are not "misused or misinterpreted". 

It also said that the resolution professional (RP) should be competent and independent so that there are no interruptions in the process which lead to delays in disposal of insolvency cases. 

Besides, it has said the claims of operational creditors are neglected or ignored as the Committee of Creditors (CoC) has supremacy of the financial creditors (banks and financial institutions) who have control over the entire process. 


Nobody is taking care of operational creditors' claim, said the NCLT Kolkata Bench in its order passed last week on the Binani Cement.

"It is time to recognise their voice also in the committee of creditors," it said, suggesting changes to the Insolvency and Bankruptcy Board of India (IBBI). 

In the 60-page order, the tribunal has also raised concern about the functioning of RPs, saying it has been receiving several pleas from stakeholders on issues such as transparency, arbitrariness and delays in the process. 


"The adjudicating authority (NCLT) is facing too much interruption from various stakeholders. Till date we have never come across any frivolous application. All come with a genuine grievance. All challenge the independence of the resolution professional and lack of transparency, competency and arbitrariness in the matter of resolution process," said NCLT. 

While citing Binani Cement case, the tribunal said: "In the case in hand, 12 applicants came forward ...for not following the process mandated under the code by the resolution process. The arbitrary way of dealing with the cases has always led to interruptions and also caused delay in disposal of cases." 

According to NCLT, while there is a need for reforming the regulations of the insolvency code to ensure that it is not misused or misinterpreted, there can not be any question that independence and competency of RPs are essential for preserving the objective of the code in a transparent manner leaving no room for interruption from any corner. 

The NCLT Bench of Member-Judicial Madan B Gosavi and Jinan K R said: "Hopefully, we believe that IBBI take note of all the above observations and do the needful review of the code and regulation." 

Referring to the Binani Cement case, NCLT said here the RP is a CA by profession and he failed to take business decisions to run the corporate debtor on his own. He managed to run the company by appointing about 22 representatives, who are from his own partnership. 


A resolution professional, like the RP in a case of this nature, needs some basic training for handling the resolution independently, efficiently and tackle the multiple questions from different stakeholders, said NCLT order, passed on May 2. 

"Whenever a question arises, even if answerable by the RP independently or with advice from his advisors, he comes to adjudicating authority... He shifts that burden too to the adjudicating authority," the bench said. 

https://economictimes.indiatimes.com/news/economy/policy/nclt-suggests-ibbi-review-insolvency-code-regulations/articleshow/64052545.cms

Thursday, December 8, 2016

AskMe Ashok Rajagopal gets interim bail

Ashok Rajagopal, former director of defunct e-commerce firm AskMe who represented the majority investor Malaysia’s Astro on the board, got interim bail on a case filed by one of the online sellers My Limo Trading Company. The seller had accused AskMe of not paying the company the money the latter had collected on its behalf from buyers for goods sold on the e-commerce platform.

Though Rajagopal was not in charge of day-to-day affairs at AskMe, My Limo filed a case against him since he had represented Astro, the 98.5% stakeholder in Getit Infoservice Pvt Ltd, the company that ran AskMe. Rajagopal had sought anticipatory bail in this case in the court of district and sessions judge, Patiala House, New Delhi, after a first information report (FIR) was registered against him on complaints filed by My Limo Trading Company.

My Limo claims AskMe owes the former around Rs 1.5 crore.

The court has ordered not to take any coercive action against Rajagopal till 8 January, when the bail application would again be considered. Rajagopal and Astro spokesperson did not respond to queries regarding the legal proceedings.

The legal imbroglio involving Astro and AskMe is getting more complex with another FIR being registered against former AskMe board members on a case filed by My Limo’s affiliate company EBiz International seeking Rs 2.5 crore of defaulted payments.

AskMe suspended operations and top management led by CEO Sanjiv Gupta left the company in August when Astro stopped funding the company. A number of sellers are now filing cases against former directors while Gupta and the investor Malaysian conglomerate Astro are slugging it out at the National Company Law Tribunal (NCLT).

NCLT has scheduled for hearing on the winding down petition moved by Astro along with several other petitions related to this matter for 12 December.  Various parties including hundreds of online sellers and 4,000 unpaid employees of AskMe are awaiting the conclusion of the legal battle that was set off end-August following the collapse of talks regarding a management buyout.