| The company alleged that the judge had erred by holding that the company court didn't have the jurisdiction to stay criminal proceedings against it. |
| Escorts Finance, a non-banking financial company (NBFC), stated in the petition that it was facing acute financial constraints and was unable to repay around Rs 170 crore to its 65,000 fixed deposit holders (FDH) and secured creditors. |
| According to Escorts Finance, the company suffered from high cost of funds and poor economies of sale due to the advent of banking companies in the retail finance. |
| These companies were able to raise funds from the market at cheaper rates compared to NBFCs, it added that NBFCs didn't have the benefit of statutory mechanisms like debt recovery tribunals and other civil courts. |
| Escorts Finance further stated that its rating went below the investment grade in January last year and was unable to get loans from the banks and accept fresh deposits, leading to deterioration of its liquidity. |
| To regain its financial strength, the appellant said, it had to withdraw from car and truck finance business and concentrate on tractor finance business. Besides, it had undertaken non-funded business and insurance business to improve its financial viability, it stated. |
| According to the petition, the company had approached its promoter, the Escorts Group, which holds around 68 per cent shares in Escorts Finance, for assistance and had proposed a scheme of arrangement under Section 391 and Section 394 of the Companies Act. |
| The scheme provided liquidity options to the FDH in the form of equity shares/debentures in the Escorts group equivalent to 75 per cent of the total amount. |
| Escorts in turn had agreed to assign and transfer its sundry debtors and stock-on-hire to the Escorts Group. |
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