Can a bank allow a company under insolvency to withdraw cash? – The Economic Times–06.11.2017

Can a bank allow a company, which is facing corporate insolvency resolution proceedings under Insolvency and Bankruptcy Code and has non-performing assets (NPAs) attached to it, to pull out money?

In an embarrassing case, Amtek Auto (corporate debtor) managed to withdraw money from its account in Indian Overseas BankBSE 0.19 %‘s (IOB) Hosur branch although loans taken from the bank’s Rajiv Circle branch in New Delhi had turned NPAs. The withdrawal took place even after the appointment of an interim resolution professional (IRP) for Amtek Auto under IBC.

“There is total violation of the mandate of law by the key managerial persons of the corporate debtor (Amtek) in this case,” National Company Law Tribunal‘s (NCLT) Chandigarh bench observed after the IRP moved it against IOB — after the bank appropriated the amount lying in Amtek’s current account “by way of setoff” for its existing dues. The NCLT said that IOB cannot even adjust the amount lying in the credit of Amtek’s account after the initiation of resolution proceedings.

Amtek Auto president John Flintham said that he was not aware of the NCLT judgement. While attempts to reach the IRP Dinkar T Venkatsubramanian were not immediately successful, a questionnaire sent to IOB remained unanswered.

IOB’s Rajiv Circle branch learned that the company had an account in its Hosur branch only after the IRP brought it to notice. “The corporate debtor opened the account with a false declaration that it was not enjoying any credit facility with any other bank or any other branch of the respondent bank. This fact was not known to the respondent before receiving email from the applicant (IRP),” IOB told the NCLT.

“The corporate debtor has routed about Rs 27.07 crore through that account (Hosur) after the account became an NPA from 29.05.2016,” the bank found after scrutinising records. “The letter written by the interim resolution professional was received by the Hosur branch of the bank on 05.08.2017 and thereafter no withdrawals were permitted,” IOB said.

(This article was originally published in The Times of India)

via Can a bank allow a company under insolvency to withdraw cash? – The Economic Times

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