ED Seeks More Time From To Intervene In Sterling Case

The Enforcement Directorate (ED) has sought permission from the Mumbai bench of the National Company Law Tribunal (NCLT) to intervene in the insolvency resolution pleas against Sterling Group companies Sterling International Enterprises as well as Sterling SEZ & Infrastructure whose promoters are absconding.

In June 2019, the ED had attached properties of more than Rs 9,700 crore owned by the firm’s now absconding promoters, Chetan Sandesara and Nitin Sandesara who are believed to be holed up somewhere in Africa.

The ED told the NCLT that it needs more time to file its response challenging the Sterling promoters’ move to pay lenders to the two group companies to withdraw the insolvency resolution plea so that the promoters can take back control of their companies.

The NCLT has adjourned the matter to be heard on March 23.

Incidentally, the ED, the Central Bureau of Investigation (CBI) and the Income Tax Department are looking into the dealings of its absconding promoters Chetan Sandesara and Nitin Sandesara, whose Sterling Group stands accused of defaulting on loans worth about Rs 15,000 crore which were allegedly diverted.

The ED’s lawyer told the NCLT that the ED’s primary contention is that as per the National Company Law Appellate Tribunal (NCLAT) order in the Sterling Biotech case, which had clarified that promoters can’t pay from proceeds of the crime, legal proceedings against the promoters must continue under the Prevention of Money Laundering Act (PMLA).

It may be recalled that in August 2019, the NCLAT had allowed the promoters to take control of Sterling Biotech after making full payment to the lenders, setting aside an NCLT order to liquidate the company.

The Sandesaras are now looking to do the same with Sterling International and Sterling SEZ.

More than 90% of lenders to the biotech firm had approved the settlement offer of around Rs 3,945 crore against total dues of over Rs 8,100 crore and withdrawal of the insolvency case under Section 12 (A) of the Insolvency and Bankruptcy Code (IBC).

However, in its order, the NCLAT had observed, “In so far asset of the corporate debtor (Sterling Biotech) is concerned, if it (the resolution offer) is based on the proceeds of the crime, it is always open to the Enforcement Directorate to seize the assets of the corporate debtor and act in accordance with the Prevention of Money Laundering Act, 2002 (PMLA)”.