Sterling Biotech in talks with lenders to settle its loans outside IBC

Sterling Biotech was admitted for insolvency proceedings under the Corporate Insolvency Resolution Process (CIRP) on 11 June

Sterling Biotech, the Gujarat-based pharmaceutical company, is with talks with lenders to settle its loans outside the insolvency and bankruptcy code (IBC). The firm was admitted for insolvency proceedings under the Corporate Insolvency Resolution Process (CIRP) on 11 June. 

The legal representative of the committee of creditors (CoC) told the National Company Law Tribunal (NCLT’s) Mumbai Bench that the company had deposited Rs 30 billion in an escrow account to settle dues. Around 85 per cent of the members of the CoC have approved of the offer, the counsel said, and would need a few more days to get the requisite votes for withdrawing the case against Sterling Biotech. 

According to the IBC rules, a minimum of 90 per cent of the CoC members need to vote in favour of the out-of-court settlement offer made by a defaulter, in this case Sterling Biotech. After which the insolvency case can be dropped. As the firm was admitted under CIRP in June, the resolution professional has to publish an expression of interest (EoI) inviting bidders or resolution applicants. 

Counsel for the CoC asked the NCLT to direct the resolution professional to not publish the EoI this week as lenders are evaluating the OTC offer made by the company. The NCLT Bench of Justice Duraiswamy and Justice Shrawat on Tuesday said the arrangement and details of the OTC offer needed to be explained to the adjudicating authority. Further, the bench said they would have to determine the applicability of Section 29A of the IBC in light of the OTC offer. 

The NCLT directed the RP to not publish an EoI until its next hearing, scheduled on September 28.

As of December 2016, Sterling Biotech defaulted on loans of Rs 54 billion. 

Back in October 2017, the Enforcement Directorate (ED) began probing into alleged money laundering activities by the company and its promoters, Nitin and Chetan Sandesara. Similarly last year, the Central Bureau of Investigation (CBI) filed an FIR against Nitin Sandesara for a Rs 53.8 billion bank loan fraud. 

It has been alleged that several companies belonging to the Sandesara brothers obtained loans worth Rs 53.83 billion on the basis of false and fabricated documents. Further, the Sandesaras are said to have set up over 300 shell and ‘benami’ companies in India and abroad for diversion and misuse of funds.

These loans were sanctioned by a consortium of banks led by Andhra Bank and comprising UCO Bank, State Bank of India, Allahabad Bank, and the Bank of India and have since turned into non-performing assets (NPAs). 

In January, the ED arrested a former Andhra Bank Director Anup Prakash Garg in connection to a diary seized by the Income Tax Department in 2011. 

The diary, it is said, contains details that the Sandesara brothers paid "Mr Garg, director, Andhra Bank" Rs 15.2 million in 2008 and 2009. On June 1, the ED attached assets worth Rs 47 billion. This includes immovable properties of 4,000 acres, plant machinery, bank accounts of various companies, and those belong to the promoters, shares worth Rs 66.7 million, as well as high-end luxury cars.  

On Monday, the CBI, said they had no information on the whereabouts of Nitin Sandesara. However, reports suggest that he and other family members, including his brother Chetan, are believed to be hiding in Nigeria.