SEBI order no bar on initiation of CIRP: NCLT orders insolvency process against Pancard Clubs

The National Company Law Tribunal (NCLT) at Mumbai on Friday admitted a petition initiating the Corporate Insolvency Resolution Process (CIRP) against Pancard Clubs Limited. [Nitin Suresh Satghare v. Pancard Clubs Limited].The order was passed by a Bench of judicial member PN Deshmukh and technical member Shyam Babu Gautam on a joint petition filed by 100 shareholders. The Tribunal admitted Rajesh Sureshchandra Sheth as the Interim Resolution Professional (IRP)..The petition was filed before the NCLT on the ground that Pancard defaulted in repayment of monies to the tune of ₹1,55,12,880 invested by shareholders. The financial debt arose in respect of investments made by the petitioners in a collective investment scheme (CIS) operated by the company under the guise of a time share business.The Securities Exchange Board of India (SEBI) by way of order dated February 29, 2016 directed the company to refund monies amounting to ₹7,035 crore of the investors within 3 months of passing the order and wind up the CIS. This order was upheld by the Securities Appellate Tribunal (SAT)..Advocate Nausher Kohli for the shareholders stated that the above mentioned orders made it clear that the investments made by over 50 lakh investors were accepted by the company under the guise of a time share scheme for purchase of room nights in various properties and resorts owned by the company.SEBI opposed the plea, arguing that the initiating of CIRP would be detrimental to recovery proceedings already initiated by the regulator for violations of the SEBI Act..NCLT, however, did not consider this submission as it deemed that an order of SEBI did not bar initiation of CIRP against the company.It also concluded from the documents annexed to the petition that the company failed to honour the contract, hence the repayable amount is in default.“It is seen that the Financial Creditors have disbursed the money against time value of money which in the instant case means that the Petitioners were to receive a value higher than the invested amount, which has all the characteristics of Financial Debt. Further, the Petitioners have placed on record bank statements and financial contracts to prove the same,” the Tribunal held..The Bench found that the default by the company is in excess of the minimum amount stipulated under the Insolvency and Bankruptcy Code (IBC).“The debt and default stands established and there is no reason to deny the admission of the petition” the order concluded..[Read order]