EXCLUSIVE: VELL FLO, a Nigerian Company of Sandesaras, Remits Settlement Money for Sterling Biotech Promoters
Bankers, who are fighting to withdraw the bankruptcy petition they filed against Sterling Biotech, seem to have received the money from abroad, from the absconding promoters who are wilful defaulters and are facing multiple investigations and criminal charges by the CBI (Central Bureau of Investigation), SFIO (Serious Frauds Investigation Office) and ED (Enforcement Directorate) as well as extradition proceedings.
Documents accessed by Moneylife reveal that banks have already received a remittance on account of a one-time-settlement (OTS) through VELL FLO Limited which has its registered office at 252, Muri Okunola Street, VI, Lagos (Nigeria). In fact, T Deena Dayalan, assistant general manager, Andhra Bank, told a committee of lenders at their meeting on 22nd May that VELL FLO belongs to Nitin Jayantilal Sandesara, promoter of Sterling Biotech Ltd. The money was received through a SWIFT transaction, but the amount is received is not known.
It may be recalled that the Sandesaras—Nitin Sandesara, Chetankumar Sandesara, Dipti Chetan Sandesara—and Hiteshkumar Patel are absconding from India and have extradition orders issued against them by a Delhi court. CBI has initiated action against the all the Sandesaras as well as Rajbhushan Omprakash Dixit and Vilas Joshi, chartered accountant Hemant Hathi, as well as a former director of Andhra Bank, Anup Garg.
In a stunning development in early March, lenders of Sterling Biotech attempted to withdraw the insolvency petition filed before the National Company Law Tribunal (NCLT) through a decision that has the concurrency of over 90.32% of banks. It was learnt that the absconding promoters had offered to pay Rs5,500 crore as an OTS, which is just about 40% of their outstanding dues (but includes full payment of principal) for Sterling Biotech. They owe an equal amount to lenders in another group company, Sterling SEZ, where a similar offer was made and banks were keen to accept the deal.
Details of the meeting of bankers available to Moneylife make no mention of the sum that has been remitted through a SWIFT transaction. The document indicates that the details of the remittance have been submitted to NCLT as well as CBI. What is interesting is that banks seem to have a problem with the foreign inward remittance certificates and have sought legal advice on this.
Before going into details of the discussion at the lenders’ meeting on 22nd May, it is important to recall that NCLT had rapped bankers last month and stopped them from withdrawing their bankruptcy petitions of both, Sterling Biotech as well as Sterling SEZ. NCLT had charged banks with misleading the court and asked for action to be initiated against them.
Despite this stinging rap from NCLT, the consortium of lenders, led by Andhra Bank, has decided to challenge the court’s order. On 11th May
I had written how bankers (good to remember, they are employees of government-controlled banks) were in a ‘defiant mood’ and had decided to obtain legal opinion before deciding the next course of action.
At a follow-up meeting of all lenders to Sterling Biotech, on 22nd May at Andhra Bank in Cuffe Parade (Mumbai), the lenders had access to a legal opinion from Justice MG Gaikwad, former judge of the Bombay High Court. They had also called AK Mishra, senior partner of the law firm, MDP Partners, to explain the legal opinion and options to all lenders.
The legal opinion was that banks could appeal against NCLT’s order of 8 May 2019, which had rejected their attempt to withdraw the insolvency petition, to accept the absconding promoters’ settlement offer. According to the legal opinion, NCLT’s order interferes with the commercial decision of banks and they can appeal to NCLAT (National Company Law Appellate Tribunal) seeking a stay order against the order of the NCLT (Mumbai bench) asking them to liquidate the company.
It was reiterated that the withdrawal of the insolvency petition was in line with the guidelines of Indian Banks Association (IBA) and Reserve Bank of India (RBI). It was emphasised by banks and their lawyer that “criminal actions against the promoters of Sterling Biotech Ltd will continue.”
Anil C Raj, chief general manager of IDBI Bank, asserted that banks had every right to approach the appellate tribunal since they were getting a higher amount through the OTS. He, however, cautioned that KYC (know your customer) compliance had to be ensured for the inward remittance of funds.
The legal expert Mr Mishra told bankers that a “CBI letter cannot stop the lenders’ rights.” He also pointed out that the RBI counsel had not objected to the banks’ attempt to withdraw their insolvency petition against the company.
He also insisted that criminal proceedings against the promoters will continue and went into details about how SWIFT messages were submitted to the court for inward remittances and there was no need to submit the FIRCs (foreign inward remittance certificates).
This meeting reiterated that “lenders’ money is public money and all efforts need to be made for recovering maximum amount.” While the sentiment is highly laudable, it would have been made sense if a similar sentiment were at work when banks lent thousands of crores of rupees to the Sterling group and watched in silence when it was siphoned abroad.
There was no discussion at the meeting about whether the absconding promoters would return to India to take charge of the companies and to face criminal action. It is also interesting that none of the bankers seems to have raised or minuted this very important issue.
If the promoters do return, will they be considered ‘fit and proper’ to get charge of the management of a publicly listed company under SEBI (Securities & Exchange Board of India) rules and Companies Act rules? Clearly, the absconding promoters may have obtained legal opinion on how to beat these rules also. Maybe they will attempt to control management through a proxy; only time will tell how this will play out.
The lenders, however, are uninterested in the colour of the promoters’ remittance, although they are facing charges of money laundering under a draconian new law. The efficacy of this law itself will be tested by the Sterling Biotech case. But this did not come up for discussion at the lenders’ meeting.
On 26th April, NCLT had withdrawn its earlier order allowing the lenders of Sterling SEZ to withdraw the bankruptcy petition. It also directed government to take punitive action against the senior officials of the lenders for misleading the Tribunal with a withdrawal plea.
The ED had strongly opposed the banks’ move to allow the promoters to get away with a settlement. It remains to be seen how this case plays out, because this move has a direct bearing on hundreds of other cases, including those of Essar Steel and Kingfisher Airlines.