The National Company Law Tribunal has raised suspicion on the lenders’ acceptance of a one-time settlement offer from the absconding promoters of Sterling Biotech Ltd, a pharmaceutical contract manufacturer.
The bankruptcy court also asked the central government and investigation agencies for their views on the Andhra Bank-led consortium’s acceptance of the offer from the Sandesara family, which is embroiled in a bank fraud estimated to be more than Rs 5,000 crore.
In an 11 March order, the NCLT noted that the offer was signed by one Farhad Daruwalla on behalf of Sandesara group and that the offer didn’t specify whether Sterling had authorised Daruwalla to submit the proposal.
The court also said that the lenders’ decision to accept the offer “creates suspicion” when the promoters of Sterling were absconding and being searched by the Enforcement Directorate and the Central Bureau of Investigation.
“It is also important to point out that that the corporate debtor is Sterling Biotech and no proceedings under (the) IBC have been initiated against the Sandesara Group,” the tribunal said, referring to the Insolvency and Bankruptcy Code.
The order came after the lenders on 7 March decided to withdraw insolvency proceedings against Sterling Biotech, a day after rejecting a resolution plan and a liquidation plan. However, the NCLT noted that the lenders had not shared any details of the settlement offer either with the tribunal or the bankruptcy resolution professional. The NCLT will next hear the matter on 26 March.
The Gujarat-based company has total debt of Rs 9,035 crore while 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, meaning a 65% haircut to lenders. Almost 90.32% of the lenders approved the offer. People in the know told VCCircle that the resolution plan in the NCLT process was lower and even below the liquidation value.
Sterling Biotech is the flagship company of Sandesara Group. It produces gelatin and was founded in 1985. The group also owns Sterling Global Oil Resources Ltd, which is based in Nigeria.
The company’s promoters – Nitin Sandesara, Chetankumar Sandesara, Dipti Sandesara and Hiteshkumar Patel – have been absconding. Sterling Biotech directors Nitin, Chetankumar and Dipti Sandesara have been booked for a Rs 5,000-crore bank fraud. It is alleged that they created more than 300 shell companies in India and abroad.
The CBI has initiated action against all the Sandesaras as well as Rajbhushan Omprakash Dixit and Vilas Joshi, chartered accountant Hemant Hathi as well as former Andhra Bank director Anup Garg.
Investigating agencies have accused Sterling promoters and Garg of falsifying accounts to allow the company to raise much larger loans than it would have been able to otherwise.
The chairman and executive director of Sterling Biotech, Nitin Sandesara, is a chartered accountant-turned-entrepreneur who in the early 1980s started Sterling Tea by acquiring tea gardens with his younger brother Chetan. After a failed take-off, the focus shifted on Sterling Biotech and the group’s other units including Sterling Port Ltd, PMT Machine Tools Ltd and Sterling SEZ and Infrastructure Ltd.