MUMBAI: The National Company Law Tribunal’s (NCLT) Mumbai bench has ordered insolvency proceedings against Rolta India Ltd (RIL) and appointed Vandana Garg as the Interim Resolution Professional (IRP) to initiate the insolvency resolution process.

Although the NCLT adjudicated the matter on May 13, however, apparently, considering the pandemic situation, it took some time for the detailed order to be uploaded and the IRP could make a public announcement only on May 25, 2021, of the insolvency proceedings against RIL and two of its fully owned subsidiaries Rolta Bi & Big Data Analytics P Ltd (RBBDA) and Rolta Defence Technology Systems P Ltd (RDTS).

Through the public notice, Garg has called on creditors of the three companies to submit their claims within 15 days (by June 9, 2021), post verification of which the process under the ​Insolvency and Bankruptcy Code (IBC) like constituting Committee of Creditors (CoC) etc kicks in, however, the first step is superseding the present management led by founder, chairman and managing director, Kamal K Singh and taking charge of the operations.

As per the order, the insolvency proceedings were initiated on the application of a former employee of RIL who had petitioned that he was not paid his dues in salary and other perks of Rs 16.25 lakhs since 2018.

Apart from the fact that RIL has a lot of other creditors including PSU banks, institutions and foreign bondholders to whom it owes several thousand crores as dues, there are hundreds of former employees like the petitioner who have not been paid wages and other dues, even statutory payments like TDS, EPF, Provident Fund etc, though deducted has not beenpaid to the government.  About half of the 300 odd have approached NCLT.

The case of RIL, technically might not have a parallel in the IT industry among those who had the advantage as early movers and starters since many of them have either merged or been bought over by bigger companies. Some who remained stuck to redundant and legacy domains have somehow managed to remain afloat in non-primary business and functions as third-party provider providers. 

RIL which had its own heydays is however is staring at a bleak future, as in reality, it is embroiled very deep in unpaid debt. An old time consultant who worked with Rolta said, “The current scene is indeed bleak, very sad for a company that had potential to compete with its peer groups had it not been a myopic view of the management.”

After a failed business of steel ingots in the late '70s, Singh enlisted a former IBM employee and started Rolta as a database management services company and in due course migrated into a variety of IT services like developing financial accounting packages, banking software and even ventured into the distribution of hardware like Dell personal computers.

In between other ventures like an internet service provider and computer-aided designing and manufacturing projects, Singh saw a major opportunity in the digital mapping sector after he came in touch with senior officials of the mapping agency of the country, Survey of India (SOI), the oldest scientific department of the government (set up in 1767) which came under the Department of Science & Technology.

The company forged a partnership with an American software major, Intergraph Corporation which was founded by a former IBM engineer couple and was a leading player in computer-aided designing, 3D graphics, geospatially powered software and geographic information system (GIS) for capturing and analysing data related to positions on the earth's surface. Intergraph was acquired by Sweden based IT giant, Hexagon AB in 2010.

As is the hallmark of Singh, he retained a large number of retired people from SOI in the teams (later when he ventured into defence technology business he retained several hundred retired and short commission officers at astronomical salaries) developing a business segment of digital mapping. Naturally, Rolta was a big beneficiary in the segment related to digitizing surveying information and it paid rich dividends.

In the 90's governments of US, UK and other developing nations in Europe began digitising their records and data conversion, although high labour intensive job came as a big opportunity. In 1992, RIL sent its number two into the company, the former IBM employee to start an arm in Huntsville, Alabama, which was home to Intergraph's headquarters and began procuring data conversion jobs, sourced back to the parent company in India for execution.

This required large man force and facilities to house them, so rather than leasing them out, RIL starting investing in real estates and big towers. It started with a 50,000 square foot facility in Mumbai's industrial zone and later bought own real estate in many cities and countries.  

Subsequently, RIL ventured into developing solutions in the turnkey engineering sector and soon expanded into Europe and the Middle East and made several acquisitions.  It raised a subsidiary network of over a dozen active companies to own and manage businesses in these countries. 

The Kargil war between India and Pakistan in 1999 opened a new area of opportunity for RIL. In the new millennium, wars would be fought on the back of technology. RIL which was already into GIS and geospatial services and a separate division for defence business was formed.

As is the speciality of RIL it recruited the who’s who from the Indian defence establishment and the division was teeming with dozens of colonels and brigadiers. Even today when there is hardly any active employee in the company the management consists of two people, Singh himself and retired Lt. Gen. K T Parnaik.

The army of former defence personnel in RIL gave Singh easy access to the military’s top brass and initially few smaller projects did come its way, although they were mired in controversy, like the suicide of a high ranking officer after a lady officer blew the lid of the alleged scandal involving defence purchases from Rolta to the tune of Rs 300 crore.

However, the colonels and brigadiers assured him of the ambitious big defence project of the battlefield management system (BMS) to be worth more than Rs 50,000 crore coming its way. But it never did, the Congress UPA regime was replaced by Narendra Modi led NDA and the BMS project was put in cold storage. Eventually, the deal would be totally shelved and with it the prospects of RIL resurrecting itself also sank in the deep sea.

Singh was borrowing heavily for bankrolling the company. Since credit, especially from banks and foreign funds was easy to come RIL ended up biting more than it could chew, which led to debt in balance sheets and wide-scale default.

In 2006, 2013 and 2014 the international subsidiary of RIL raised several million dollars in Senior Notes (Bonds) at an unheard of coupon rate (interest rate) and has since defaulted in paying it back.

At the end of March 2020 it had an outstanding due of Rs 3,762 crores against these bonds and some of the big bond- holders have filed petitions in the NCLT.

Meanwhile RIL was also borrowing heavily from domestic PSU banks. Union Bank of India to the tune of Rs 1,456.12 crore, Bank of India of Rs 808.70 crore, Bank of Baroda of Rs 635.15 crore, Central Bank of India of Rs 1,045.16 crore and Syndicate Bank of Rs 363.14 crore, totally Rs 4,308.27 crore in bank debt.

(Click to read - How Rolta's creditors were stonewalled against insolvency proceedings)

In all this, there is one very interesting aspect that would not have missed the attention of every single creditor, lender, entity and people connected with RIL, and that is one company that is repeatedly finding mention in all its statements.

On May 11, 2019, RIL filed with the Stock Exchanges at Bombay Stock Exchange and National Stock Exchange announcing an investment of Rs 5,500 crore by the international group 'The Streamcast Group.'

The announcement also said, "Further in conjunction to this, the company (RIL) executed Definitive Restructuring Services Agreement (RSA) with the 'Streamcast Group' on August 6, 2019 under the terms of which, Streamcast Group will assist Rolta India Ltd in repayment and restructuring its liabilities (including providing financial assistance) commencing with immediate effect.

This generated a renewed interest among the borrowers and creditors who hoped to recover their dues, since the management said the deal would conclude the so-called 'restructuring of liabilities' in 6 to 8 months’ time. However it’s been over 24 months, nothing has happened. The above statement of May 11, 2019, however, continues to appear and reprinted ever since, in balance sheets, in most of the company's quarterly, half years etc, financial notes and even in the auditor's notes.

The point is the whole business with the 'Streamcast Group' was never going to happen, a matter of fact is, there is no 'Streamcast Group' existing at all anymore.

The 'Streamcast Group' existed in a very loose form as a one page website with makeshift address in  Valletta the capital city of Malta, a small island country in the Mediterranean Sea just like the archipelago of Lakshadweep with a population of about five lakhs.

The so-called ‘Streamcast Group’ was incorporated in Malta by two Indian promoters (One being a young Chartered Accountant hailing from Pune and the other one being a senior practising advocate from Mumbai) and as reported in Maltese media they made announcements of projects worth several million Euros in Malta in partnership with Maltese government-owned companies in setting up data centres.

The group was apparently helped by some Maltese politicians who later on came into scrutiny and investigation for their role in money laundering.

After a few weeks since the promoter advocate from India held a couple of conferences in Malta and made announcements of millions of Euros some local media found things amiss and smelt a rat.

As they began digging they found that apart from a single page website (which had no details of promoters and their background, business plan, financials, even an office address), this ‘Streamcast Group’ and its promoters began to appear like non-entities. There were no investments bought in, nor was there any data centre coming up in Valletta.

Very soon they disappeared from Malta and it was then, the partner companies accused them of fraud for not paying rent and other charges. They have since filed several cases in Malta courts and numerous court summons have been issued to both the promoters but they fled and came to Mumbai.

(Click to read about 'Streamcast Group' its promoters, historyin Malta and affairs in India)

Once in India the two again registered several companies in India and called it the 'Streamcast Group' of companies. Again this group was only a single page website (which had no details of promoters and their background, business plan, financials, even an office address), and boasted of envisaging investments worth crores in India.

And this is the same group RIL had signed a Rs 5,500 crore in May 11, 2019 assuring the stake-holders that it would resurrect it of all troubles which has not materialised till date even though the statement keeps on appearing till now in all its communications.

So, even as RIL lands into the IBC, the question is was Singh trying to pulling the wool over everyone’s eyes, or was it one of the biggest corporate ‘Hoaxes’ pulled up by the 'Streamcast Group' in which a distressed and gullible promoter fell prey too.

We are trying to seeking as much information as we can, and will come up with more exposes soon.