Mumbai, Jan 21: The National Company Law Tribunal (NCLT) has initiated insolvency proceedings against the personal guarantors of Frost International Limited (FIL), a Kanpur-based company with its registered office at Bandra-Kurla Complex (BKC), following default in repayment of loans amounting to Rs 285.77 crore availed from Indian Bank.
The individual insolvency proceedings have been initiated against the company’s personal guarantors, Sunil Verma and Nipun Verma, holding them liable for the default committed by the corporate debtor.
Loan exposure and guarantees
According to the petitions filed by Indian Bank, the total sanctioned credit limit stood at Rs 328 crore against a total consortium exposure of Rs 4,047 crore involving multiple banks.
The credit facilities were secured through hypothecation of stocks and governed by the terms and conditions contained in the sanction letter dated December 15, 2016, along with execution of relevant security documents under the consortium arrangement.
The repayment of the facilities was further secured by personal guarantees executed by the promoters, including Sunil and Nipun Verma, through a deed of guarantee dated May 12, 2014.
Account classified as NPA
However, after the principal borrower failed to adhere to repayment obligations, the loan account was classified as a non-performing asset (NPA) on June 30, 2018. Subsequently, Indian Bank issued a demand notice on November 19, 2018, under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, calling upon the borrower and guarantors to clear the outstanding dues within 60 days.
In addition, a legal notice dated March 10, 2019, was issued by the bank’s advocate demanding repayment from the corporate debtor and its guarantors.
Resolution professional’s report
During the proceedings, the tribunal sought a report from the resolution professional on the maintainability of the insolvency application against both the personal guarantors. Resolution Professional Anuj Kumar Tiwari, in his report, affirmed that insolvency proceedings could be initiated against them.
“After examination of the individual application under sub-section (6) of Section 99, I hereby recommend acceptance of the applications filed under Section 95 of the Insolvency and Bankruptcy Code, 2016, for commencement of the insolvency resolution process against Mr Nipun Verma and Mr Sunil Verma, personal guarantors of Frost International Limited,” the report stated.
NCLT order
Accepting the recommendation, the NCLT observed that Indian Bank had issued a demand notice dated November 22, 2023, under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019, calling upon the guarantors to repay the unpaid debt.
“Upon perusal of the documents on record, it is clearly established that the corporate debtor has committed default in repayment of the loan amount granted by the financial creditor. The personal guarantors of Frost International Limited have also committed default after invocation of the personal guarantees. The petition filed by the financial creditor satisfies the requirements under Section 95 of the Code,” the tribunal held.
Earlier CBI case
Meanwhile, the Central Bureau of Investigation (CBI) had, in January 2020, registered a criminal case against Frost International Limited in connection with an alleged bank loan fraud of Rs 3,592 crore.
As per reports, the company and its directors allegedly used forged documents as genuine, diverted and siphoned off bank funds, and cheated lenders to the tune of Rs 3,592.48 crore.
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Company profile
According to the company’s website, Frost International Limited is engaged in the trading of diverse commodities, including minerals and metals, plastics, textiles, fabrics, agro commodities, equipment and other products. The website further states that the company has conducted business operations with over 25 countries across six continents.
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