State-Run Utility Providers Cannot Hinder Liquidation Of Insolvent Company’s Property, Rules NCLT
Recently, the Supreme Court had to persuade the power distribution company to continue supplying electricity to two of Amrapali’s projects in Noida. Owing to outstanding bills to the tune of Rs 2 crore, the discom had severed supply to these two projects. While asking the insolvency-hit builder to pay the amount, the top court said homebuyers should not be made to suffer for a fault of the builder.
Last year, the Noida Authority had filed a claim for Rs 650 crore land dues on Amrapali Silicon city housing project before the interim resolution professional (IRP) appointed by the National Company Law Tribunal (NCLT). The group owes about Rs 3,000 crore to Noida and Greater Noida authorities.
That brings us to a question, can authorities or state-run utility providers stake the claim and stop liquidation of assets owned by a distressed company? What happens to the claims of private lenders such as homebuyers and banks?
A recent order passed by the Allahabad Bench of the National Company Law Tribunal (NCLT) shows the way. In its verdict given in the case of insolvency-hit Raman Ispat, the NCLT has ruled that state authorities cannot hinder the sale of land by a liquidator that they might have previously attached owing to unpaid dues. A land parcel owned by Raman Ispat in Uttar Pradesh’s Muzaffarnagar was attached by the district administration over the company’s failure to pay Rs 4.32 crore to Pashimanchal Vidyut Vitran Nigam.
Through its liquidator, Raman Ispat had challenged the district authority’s move.
Setting aside an order by the district collector who had ordered the attachment of the property and prohibited the company to transfer the title through sale or donation, the NCLT has cleared the path for liquidation of the asset.
“We allow this company application and pass an order to the district magistrate and tehsildar Muzaffarnagar for the immediate release of the attached property in facur of the liquidator,” the Bench said. It also said the sale proceeds be divided among different claimants “with the relevant provisions”.
Days after this ruling, the NCLT has asked the Enforcement Directorate (ED) to free attached assets of an insolvent company. The ED had attached properties of rice processor REI Agro on charges of money laundering. The NCLT has now asked the ED to detach the properties, which are worth Rs 100 crore, since they are not mortgaged.
“It is for this tribunal to decide how the properties and assets of the corporate debtor under liquidation can be appropriated,” the Kolkata Bench of the tribunal said while delivering the verdict.