The National Company Law Appellate Tribunal (NCLAT) has stayed the order of a lower bankruptcy court which had referred debt-laden pharmaceutical company Sterling Biotech Ltd for liquidation.
The stay comes in response to two separate petitions filed by Sterling Biotech employees and lender Andhra Bank, a person familiar with the development told VCCircle.
On May 8, the Mumbai bench of the National Company Law Tribunal (NCLT) had called for the liquidation of the Gujarat-based pharmaceutical company after rejecting the lenders’ petition to withdraw the firm’s insolvency proceedings.
The appellate tribunal has now stayed the liquidation until further notice while stating that the liquidator will ensure that the company remains a going concern.
While staying the tribunal's order, the NCLAT gave two weeks’ time to the lenders and the resolution professional of the company to file their reply and posted the matter for further hearing on July 16.
“The bank account(s) of the corporate debtor [Sterling Biotech] be allowed to be operated for the day-to-day functioning of the company such as for payment of current bills of the suppliers, salaries and wages of the employees’/workmen, electricity bills etc,” the NCLAT bench was quoted as stating by The Economic Times.
The lenders’ decision to withdraw insolvency proceedings with a majority of 90% votes came after a one-time settlement offer from the promoters of Sterling Biotech, the Sandesara family, who will pay about half the dues.
The pharmaceutical company had total outstanding dues of Rs 9,035 crore as of February 2019. The entire Sterling Group, which has other businesses as well, owes more than Rs 12,000 crore to lenders. The settlement offer was for around Rs 3,100 crore, translating to a 65% haircut for the lenders.
However, Sterling promoters Chetan and Nitin Sandesara are currently absconding and believed to be in Africa. Indian agencies are probing allegations of the brothers’ involvement in fraud worth than Rs 5,000 crore.
While the CoC said that the withdrawal and one-time settlement would not affect any investigation and criminal proceedings, the NCLT had questioned the source of funds for the one-time offer.