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.
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    COMMENTS

    Prakash Bhate

    2 months ago

    Dawood Ibrahim must be very jealous of Nitin and Chetan Sandesara. He is hiding in Karachi and cannot move around freely because he might be bumped off either by his rivals or RAW agents. Nitin and Chetan have no such fears. On the contrary, they are being helped by top-notch lawyers and senior bank officials so that they can legally return to India and legally siphon out another 10,000 crores. Nitin, Chetan, Vijay, Nirav, Ruias of Essar, Mehul, Kochhars, Ravi Narain, Chitra Ramakrishna, IL&FS gang (the list is never ending) are financial terrorists. They have collectively done more damage to the country than that done by Dawood, Masood and Co. Only when they are perceived and dealt with as terrorists will this rampant loot abate.

    Iyer Siva

    3 months ago

    It is atrocious on the part of the lenders to apply for withdrawal of partition from NCLT. Why couldn’t they show such prudence in Credit granting process when they allowed so much money lent to them and so huge amount still to come from group comp aids as well. NCLT also should not have allowed the petition to get withdrawn. Strict penal action to be taken against all the decision makers at the lending institutions. The very attempt to withdraw petition does show some favoritism and some money flow might be there to grease the palms of lenders for such action.

    Dr.Dhananjaya Bhupathi

    3 months ago

    https://www.moneylife.in/article/exclusive-vell-flo-a-nigerian-company-of-sandesaras-remits-settlement-money-for-sterling-biotech-promoters/57292.html

    1. It is unbelievably GOOD NEWS.

    2. Maybe, the Nigerian company, sandesaras, pioneered to foresee the future of a matured Indian democracy poised to grow.

    3. Once, the top-most fugitives of Indian origin, namely, Vijay Mallya, Nirav Modi & Mehul Choksi, etc., are deported to India, we can foresee inflow of stashed out Indian wealth preceded/followed by beeline of returning Indian fugitives.

    4. thereat.https://www.youtube.com/watch?v=T7fOf8rUrdw.

    5. SATYAMAEVA JAYATHE!!!

    AAR

    3 months ago

    At last someone responded to the Nigerian prince spam email and got the money transfer.

    S A Narayan

    3 months ago

    When banks lend a prospective businessman who later goes rogue, they are wrong. When banks dont recover on time they are wrong. When they get a pittance from liqudation, they are again wrong. When they cajole and threaten an OTS, they are once again wrong even if entire principal of lent money(public money) is recovered. If they are concerned only with recovering banks money , forget prosecution by other agencies, they are still wrong. When they push retail borrowers for repayment, who are in difficulty they are 'ruthlessly' wrong. When are they ever right for the media? They are damned if they do and damned if they dont!

    REPLY

    K V RAO

    In Reply to S A Narayan 3 months ago

    Well said.

    K V RAO

    In Reply to S A Narayan 3 months ago

    Well said.

    Ramesh Poapt

    3 months ago

    duniya zukti hai, zukane wala chahiye!

    SUNIL REBELLO

    3 months ago

    I hope the Jet Airways promoters are not allowed to escape India.
    Today all of us are suffering with the super air fares in this holiday season.
    How GOD brought the couple back to India, hope they remain here to solve the fate of the airline, the mess they made.

    Ramesh Bajaj

    3 months ago

    This is how people become rich and powerful in India. Sad.....We the ordinary people are just bystanders.
    ..

    Buying, Selling US Dollars? RBI Plans to Cut Charges Substantially via Spot Trading Platform
    The Reserve Bank of India (RBI) is working on an electronic spot trading platform for retail customers who need to buy or sell foreign currency like the US dollar.
     
    RBI is now open to allow retail customers to exchange any amount on this platform being developed by Clearing Corp of India (CCIL), says a news report. 
     
    The report from Business Standard, quoting Foreign Exchange Dealers’ Association of India, says customer registration will start on 1st July and trading will start on 5 August 2019.
     
    “The RBI and CCIL want to ensure there is enough customer onboarding for effective trading and so, registration will start a month in advance. The amount can be anything the RBI decides. The CCIL can settle transaction of even one rupee,” "the report says quoting a source. 
     
    Currently, the clearing corporation operates an interbank USD/Indian Rupee spot trading platform named FX-CLEAR. The same platform can be modified to allow retail customers of the member banks. This retail market platform will be separate from the one used for interbank market. 
     
    At present, a retail customer has to pay commission while buying or selling foreign currencies at the bank. For buying, the customer has to pay 2% premium, while for selling the banks charge 2% of the amount as discount. In both cases, the customer has to bear the cost of exchanging foreign currency (forex). In addition, if the customer use credit card for forex exchange, she is charges an additional 3% charge. 
     
    RBI's new initiative is a fallout of its discussion paper issued in October 2017. In the paper, RBI had proposed a mechanism for improving pricing outcome for retail user. Under this mechanism, client pricing is directly determined in the market by providing customers with access to an inter-bank electronic trading platform where bid and offers from clients and authorised dealer banks can be matched anonymously and automatically.
     
    "This is likely to provide transparency while enhancing competition leading to better pricing for all types of customers, without differentiating them on the basis of order size. Direct execution by the customer is likely to bring down the cost of transactions as there is no market risk to the customer’s bank apart from settling the inter-bank trade through the CCIL settlement system. Banks may charge their customers a fee towards processing expenses. Banks will be required to publicly declare such fees," RBI had said in the discussion paper.
     
    The central bank feels that direct execution by the customer would help bringing down the cost of transactions as there is no market risk to the customer’s bank apart from settling the inter-bank trade through the CCIL settlement system. Banks may charge their customers a fee towards processing expenses, it says adding banks will be required to publicly declare such fees.
     
    How will the forex exchange trading platform work?
     
    1. The customer registers for the forex trading platform facility on a specified portal and will share permanent account number and bank account details. The customer’s bank will set up the limit for forex trading, and share it with CCIL, which in turn will send login details to the customer. 
     
    2. The retail customer will access the platform through her authorised dealer bank and place bid (buy)/offer (sell). The system will display interbank rates prevailing at the time. However, since the retail orders would be processed in a lot of $500,000, the interbank rate for the currency may be different from what is displayed while placing the order.
     
    3. Customer can directly execute the trade up to the limit by placing bid/offer quotes. Trades will be executed by anonymous order matching on price-time priority.
     
    4. Buy orders on the retail platform will be matched against sell orders therein and vice versa. The system will have a functionality to aggregate customer orders at the same rate up to the minimum lot size of the interbank market (currently $5,00,000) and match it with the orders in the interbank market. This will ensure that prices in both the markets are in line.
     
    5. Each matched trade of the customer would result in two transactions i.e. one between the customer and its bank and another between the customer’s bank and the counterparty bank except in cases where the customer orders are executed between the customer and customer’s bank. The interbank deal (between the customer’s bank and the counterparty bank) will be settled as per the current CCIL settlement process while the customer deal will be settled bilaterally between the bank and customer.
     
    6. Once the trade is completed, a ticket showing interbank rate, mark-up and the net rate will be generated. The customer can opt for same day delivery (cash), next day deliver or spot delivery (trading+2 days or T2).
     
    7. In case of same day delivery, the customer can visit her bank and take delivery or deposit the foreign currency, she has traded through the platform. 
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    User

    COMMENTS

    Arjun Rodrigues

    3 months ago

    This would mean that the forex conversion rate on credit cards will come down, forex dealers will get less as more will go to banks.

    Housing Finance Sector Continues To Face Multiple Headwinds: Report
    Housing finance companies (HFCs) have slowed down their loan disbursements which can have a spill-over impact on retail home loan borrowers and property developers, says a research note.
     
    According to the report from India Ratings and Research (Ind-Ra), over the years, funding to developers has been significantly tightened. “If the tightening continues, there could be a material impact on construction progress, thereby putting asset quality pressure on HFCs in the medium term. Moreover, there could be a double whammy if HFCs have dual exposure to developers and home loan borrowers with common exposure to underlying projects,” it added.
     
    Multiple Challenged Faced by HFCs Are Still There 
     
     
    Ind-Ra says, “The housing finance sector has been facing challenges, which have led to a contraction in spreads, a rise in funding cost and an increased spotlight on their asset-liability mismatches. Such mismatches have resulted in constrained financing from both market-based sources, commercial papers and non-convertible debentures (CPs and NCDs) and banks for many players.”
     
    Rising Funding Cost of HFCs Shifts Competitive Benefit to Banks 
     
    According to Ind-Ra, systemic rise in market borrowings rate has affected the housing loan business. The borrowing cost for some large HFCs could be upwards of banks’ marginal cost of funds-based lending rate (MCLR), it says, adding, “This has led to the shrinking of margins in mid-to-large ticket housing loans, where banks are highly competitive. Furthermore, the ongoing challenges in the real estate and small and medium enterprise segments (MSME) and loan against property customers may lead to HFCs reassessing loan growth plans, thereby putting pressure on their margins.” 
     
    During FY16-17 to first half of FY18-19, to mitigate the margin risk, many HFC players expanded their non-housing books at a significantly higher rate than their pure housing loan books. The increase in the proportion of non-housing loan book could lead to asset quality pressure amid the current slowdown in disbursement to developers, the ratings agency added.
     
     
    During the third quarter of FY18-19, housing loan growth moderated to 14.0% on a year-on-year (y-o-y) basis and to 3.5% on a quarter-on-quarter (q-o-q) basis. The segment has witnessed moderation in growth from the historical compounded annual growth rate (CAGR) of 19.0% for the past five years. Incrementally, Ind-Ra says, risk perception has increased for low-rated HFC lenders, based on the duration of their asset book and funding profiles.
     
    Accentuated Impact of Duration Mismatch
     
    According to the rating agency, funding access for HFCs has been constricted, as risk aversion increases among lenders in the wake of rising concerns over asset quality and asset-liability tenor. Many HFCs had increased short-term funding to reduce funding cost, supported by benign liquidity conditions. During tight liquidity conditions, the varied nature of lending and funding duration could lead to a mismatch in the asset-liability tenor. 
     
    “HFCs lend for a long duration but their funding duration remains three-four years, leading to asset liability gaps. The management of such gaps could become even more challenging, if funding includes a sizeable amount of short-term borrowings with low tenors (CPs); this can accentuate refinancing challenges. The mismatch has come to the fore after September 2018 as liquidity and market borrowing got tighter to mobilise, along with the reluctance of banks to increase exposure to the housing finance industry,” it added.
     
    While assessing the liquidity strength of HFCs, Ind-Ra says it considers on-book liquidity, asset-liability tenor on a contractual basis, committed unutilised bank lines and granularity of assets (largely inflows). It says, “Behavioural asset-liability management, which factors in prepayments, residual asset tenor and liability on a contractual basis, may create the optical illusion of matched asset-liability tenors, which is vulnerable during stress periods as prepayments may not flow and residual tenor would expand.”
     
     
    Disbursement Slowdown To Lead to Dual Impact on Borrowers and Builders
     
    Loan disbursement in the four quarters ended September 2018 averaged Rs25,000 crore per month for large six HFCs players based on the preceding four-quarter average. However, following September 2018, per month average disbursement fell to Rs13,500 crore as a few large HFCs faced serious challenges.
     
    As per Ind-Ra, the current liquidity tightness in the housing finance sector has led to a large number of non-bank entities, HFCs and non-banking finance companies (NBFCs) curtailing loan disbursements, thereby creating a significant funding crunch in the sector. “Tight funding in the housing finance industry has not only impacted fresh loan disbursement, but also loans where disbursements are linked to construction, thereby impacting a large number of home buyers who could face challenges to service their commitments to property developers,” it added.
     
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