On May 5, 2019, National Company Law Tribunal (NCLT) had requested the liquidation of Sterling Biotech, a debt-ridden pharmaceutical company. This order is a disappointment for its lender as they were expecting that they could pull back the bankruptcy procedure and acknowledge a one-time settlement (OTS) from the promoters.
The tribunal observed that by acknowledging a withdrawal of indebtedness procedures (under section 12A of the Insolvency and Bankruptcy Code), the company would basically return to the promoters, who are escaping and have been declared as wilful defaulters.
OTS offer of the promoters has been approved by the committee of creditors by a 90 percent majority. The Company owes Rs8, 100 crores to the banks; Sterling Group itself owes Rs15, 000 crores. The other group company, Sterling SEZ, has likewise gone into liquidation.
Acknowledgment of 90 percent of lenders is required whereas in this case, only 89 percent were up for it. NCLT was unaware of this fact and scolded RP for the same. One of the lenders, Madison Pacific Trust challenged the 90per cent approval by saying that their consent was not taken by the resolution professional (RP) and the fact is that they hold over 10 percent of the voting right n the committee of the creditors.