ICICI bank: NCLAT rebukes ICICI Bank for moving a default application against Starlog Enterprises at NCLT

MUMBAI: India’s Bankruptcy Code, billed as the panacea for banks saddled with bad loans, could well backfire if the lender fails to correctly utilize the law.

The National Company Law Appellate Tribunal (NCLAT), New Delhi, has rebuked the country’s biggest private lender, the ICICI Bank, for moving a default application against Starlog Enterprises at the National Company Law Tribunal, Mumbai Bench, with misleading claims. The Appellate has imposed a Rs 50,000 fine on the lender for the incorrect claim.

“Showing an incorrect claim, moving the application in a hasty manner and obtaining an ex-parte order from the ‘adjudicating authority’ that admitted such an incorrect claim, the Financial Creditor cannot disprove its mala fide intention by stating that the claim submitted is the correct amount,” Justice S J Mukhopadhaya, chairperson of New Delhi Appellate Tribunal and technical member Balvinder Singh said in the order last week.

Simultaneously, the ruling it is seen as a major setback for the lenders, as NCLAT has overturned the ruling by NCLT and declared the appointment of interim resolution professionals as illegal in at least two cases.

According to Sameer Kakar, director at Kakar Assets Advisors Pvt Ltd, “This code is similar to the Brahmashtra. Lenders will have to be careful in exercise their rights. The procedural aspect will have to be diligently observed.”

In two cases – Starlog Enterprises versus ICICI Bank, and Kaliber Associate versus Tripat Kaur – the NCLAT has returned the companies back to the defaulting promoters: The rulings have, therefore, raised the question whether they would negate the very purpose of the new recovery law.

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On February 17 this year, the NCLT Mumbai bench admitted the petition moved by ICICI Bank for a default case. Starlog Enterprises, formerly ABG Infralogistics Limited, is engaged in crane rental.

The company operates in chartered hiring and operations of cranes, including loading and unloading services on a period basis, or on a job-work basis. In the past one month, the company shares have fallen15%, compared with a 4% rise in the broader index.

An ICICI Bank spokesperson said: “The company’s outstanding was indeed Rs 29 crore when we filed the petition with NCLT, Mumbai. This included a default amount of around Rs 10 crore.

The order is under review by our legal counsel.”

The company pointed out to the court that the bank asked the company on February 6 to repay Rs 10.02 crore of outstanding loan. However, at NCLT, the bank claimed that the company has defaulted on a sum of Rs 29.8 crore.

NCLT admitted the defaulting companies Starlog Enterprise and Kalibar Associate independently for IBC proceedings, and the IRPs were appointed in each case. Soon after, both companies independently approached the Appellate Tribunal on grounds that natural justice was denied to them.