Why Are Mutual Funds Marching To The National Company Law Tribunal?
By Team / 2017-06-11

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Back in 2011, Wockhardt Ltd. ’s unsecured bondholders made history by getting the court to put them almost on a par with the company’s secured creditors. The winding-up petition filed by the bondholders forced Wockhardt to repay their dues.

With India Inc’s continuing debt woes, now, it’s Mutual Fund Asset Management Companies (AMCs) that are choosing to take pre-emptive measures and are upping the ante against companies they have exposure to. In what marks a first, two mutual funds have taken a company to court for defaulting on maturity proceeds on its debt instruments.

Recently, Taurus Mutual Fund took Avantha Holdings Ltd. to the National Company Law Tribunal (NCLT) when its subsidiary Ballarpur Industries Ltd. (BILT) failed to repay Rs 100 crore in commercial paper debt issued to the fund house . IDBI Mutual Fund too moved the tribunal in Mumbai against BILT for delay in interest payment, a person involed in the litigation told BloombergQuint.

While IDBI Mutual Fund did not respond to BloombergQuint’s queries, IDBI Trusteeship Service’s half-yearly report dated April 11, 2017 offers some insight on the default. The report mentions a default of Rs 150 crore categorised as default in interest payment on a secured debenture issuance by BILT.

-The Company (BILT) has not paid interest to debenture holder for quarter ended January 12, 2017. The lenders of the company have former JLF (joint lender forum) and opted for SDR (Strategic Debt Restructuring). Further, the company informed the debenture holder that the JLF has called for standstill and hence it will not be able to pay further payments till the finalization of Strategic Debt Restructuring Scheme.

IDBI Trusteeship Service, Half Yearly Report, April 11, 2017


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