ICICI Bank Ltd. has moved the National Company Law Tribunal to initiate insolvency proceedings against Mercator Ltd., seeking dues worth more than Rs 50 crore.
The bank had extended the amount under a credit facility to the dredging and transportation company, which also owes dues to Bank of India and Exim Bank.
On Jan. 15, Mercator's counsel informed the tribunal that the company wouldn't proceed with the sale of its assets during the pendency of the case. The NCLT had directed status quo till the matter was being heard.
Mercator's subsidiary raised over Rs 200 crore through loans from Bank of Baroda and debentures which were under the trusteeship of Axis Trustee Services. The subsidiary pledged merchant ships and oil and gas assets to the lenders as collateral against the loan.
Bank of Baroda and Axis Trustee Services, too, moved the tribunal, seeking its direction to ensure that the status quo doesn't extend to Mercator's subsidiaries. They have also filed a plea demanding that assets belonging to the subsidiary don't get clubbed with the insolvency process.
Here are the key arguments made by the parties...
What ICICI Bank Said
Rohan Rajadhyaksha, counsel representing ICICI Bank, made the following arguments:
- Being a financial creditor, ICICI Bank couldn't be restrained from proceeding against Mercator Ltd.
- Mercator was delaying hearing at the NCLT, which hampered the bank's prospects to recover money from the dredging company.
- Assets belonging to Mercator's subsidiary are a critical component of the sale process once the tribunal admits the petition. Prior stock exchange filings indicate that Mercator's consent would be required to dispose of any assets by the subsidiary.
- Subsidiary's assets are proposed to be sold just to repay dues to Bank of Baroda and Axis Trustee Services.
Bank of Baroda And Axis Trustee's Counter
Gaurav Joshi, counsel appearing for Bank of Baroda, and Axis Trustee's counsel, Ashish Piyasi, made the following arguments:
- Counsel for Bank of Baroda argued that ICICI Bank's application was a ‘mala-fide' application made to prevent other creditors from selling subsidiary's assets and recover their dues.
- Mercator's subsidiary pledged oil and gas assets to Bank of Baroda as collateral. The Oil Ministry may cancel or suspend the subsidiary's rights on the assets if the status quo order is extended.
- Assets belonging to a subsidiary cannot form part of a parent company's resolution process as per Sec. 18 (f) of the Insolvency and Bankruptcy Code.
Exim Bank's counsel informed the tribunal that regulatory authorities restrained it from proceeding with the sale of the subsidiary's pledged merchant ship due to the lack of clarity on the status quo order.
The tribunal has directed the parties to file replies and will hear the matter next week.
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