MUMBAI: Rolta India Ltd (RIL) and its key promoter owner Kamal K Singh and directors may have earned a place in the Book of the Dubious Records in the space of bankruptcy law of India as a company for having effectively managed to stall insolvency proceedings by its creditors including employees, banks, institutions, foreign investors for humongous debt for a record three times in five years. 

However, what may well be the final nail in the coffin for the promoters and the directors who have tried their level best to stall the debtors from recovering their dues (and had been successful) the company has been yet again put on track for the Corporate Insolvency Resolution Process (CIRP) as according to insolvency experts this time round they may not be able to hold back this process anymore. Simply because there is nothing left for them to scavenge off. 

In the case filed by Union Bank of India (UBI) for default of Rs 1,413 crore, a Mumbai bench of the National Company Law Tribunal (NCLT) the adjudicating authority under the Insolvency and Bankruptcy Code, 2016 (IBC) passed an order to this effect yesterday, dated 19-01-2023 and has appointed Interim Resolution Professional (IRP) Mamta Binani who will take over the entire operation of the company. With this, the powers of Singh and the board of directors are suspended forthwith and the IRP will be in total control to take over whatever is existing of the company, its assets and its business.

UBI had first initiated insolvency proceedings against RIL in September of 2018, however, it got out of bankruptcy as the case was dismissed by the NCLT in May 2019. The company took a reprieve from the Supreme Court, which had declared a February 12, 2018, dated circular of the Reserve Bank of India (under which UBI had approached the tribunal) as ultra vires meaning it was now beyond the legal power or authority of NCLT. The circular stipulated that any entity could be labelled as a non-performing asset (NPA) only if it defaulted to the tune of over Rs 2,000 crore and can be referred to NCLT after 6 months. 

This was further struck down by the Supreme Court on April 2, 2019, on a plea by a clutch of power producers, textile and sugar manufacturers and the shipping industry in the apex court. RIL was able to ride on this judgement to get UBI’s insolvency proceedings stalled.

In November 2019, NCLT admitted the plea of Value Partner Greater China High Yield Income Fund and Pinpoint Multi-Strategy Fund both based in the tax haven the Cayman Islands, who claimed a default of around Rs 1,060 crore and ordered insolvency proceedings against RIL, an IRP from consultancy firm E&Y was also appointed. But this time around Singh fought against it on technical grounds that the NCLT did not pronounce the judgement against RIL in an open court. The High Court in a landmark judgement ordered setting aside NCLT's insolvency proceedings considering the procedural lapse in delivering the judgement. 

In May 2021, NCLT passed an order in a case filed by a former employee and an IRP Vandana Garg was appointed who took over the management of the company and expeditiously began the process of CIPR in a bid to salvage whatever value that could be ascertained. RIL and promoter Singh filed a Special Leave Petition (Civil) in the Supreme Court of India which allowed it to set aside NCLT's order and thus the older management took back control.

Some of the institutional creditors we spoke to said that considering the defaults on loans from various banks and entities and accrued interest, they were expecting the claims under IBC to touch nearly Rs 20,000 crores both from secured and unsecured creditors, however, they painted a very dismal picture of chances of any recovery and on the current valuations of RIL as they fear the in the past few years the promoters and directors seem to have systematically stripped off everything of value. 

Along with UBI, RIL has substantially defaulted on borrowing from Union Bank of India (UBI), Central Bank of India (CBI), Bank of India (BOI), Bank of Baroda (BoB), Canara Bank and Syndicate Bank. Then there are several institutional creditors like Value Partner Greater China High Yield Income Fund and Pinpoint Multi-Strategy Fund, which are Chinese funds based in the tax haven the Cayman Islands and the collective claims are expected to be in the range of Rs 12,000 to Rs 15,000 crore. 

There are well over Rs 4,000 worth of claims in principal as well as interest from bonds (senior notes) from Citicorp International Ltd Hong Kong, Citibank NA London, Deutsche Bank Trust Company Americas New York, and DB Trustees (Hong Kong) Ltd Hong Kong who are all the trustee & security agent for these bonds. 

Then there are a number of unsecured creditors like tax and other government departments, various suppliers and vendors and wages not paid to workmen which form the other major chunk of creditors. 

One former banker who dealt with Rolta and keeps a tab on its current development said, "This man Singh is a cunning crook, he was known to cook the books of account and has managed to have hoodwinked and borrowed from around the world, USA, Europe or Asia. You never know who all will come forward to claim their dues, only when the IPR will kick off the due process will you know the exact figure." In the same breath, he said, "It does not appear that there will be any substantial recovery since everyone who has lent him money know that most of it has been siphoned and whatever of value was left has been stripped off."

A year ago we carried an exclusive report on how RIL had stripped off its key assets, selling everything from its premises to the last nail and in the process turning a once sprawling tech complex into a scrap yard. The current worth of the company can be gauged from the latest financials, during 2021-22 its revenues were Rs 7.5 crores and it posted a loss of Rs 606.14 crore, and as of now, there are no reporting of quarterly financials on any of the exchanges. (Read it here: Rolta India strips off its key assets, turns tech complex into a scrap yard)

So all in all there is absolutely no value proposition in RIL except for a very huge liability of negative cash flow and humungous accumulated loss. It appears Singh and the directors of RIL will be having the last laugh in this insolvency process. Maybe as we read this, the promoters and directors are toasting to this.