NCLT suspends Unitech board, allows govt to nominate interim directors; firm appeals...

Published On: 08, Dec 2017 | Source: Hindustantimes

The National Company Law Tribunal (NCLT) on Friday restrained directors of Unitech Ltd from acting as the board of the indebted real estate company while hearing a plea from the ministry of corporate affairs to take over the firm.

NCLT also issued notice to Unitech, which later appealed against the order, and sought a response to the government’s plea in four weeks. NCLT said the ministry can appoint 10 nominee directors to run Unitech in the interim. The tribunal will examine the names of the 10 government nominee directors on December 20.

Unitech later told the NCLT that a case against the company is being heard in the Supreme Court . There is a previous order by the apex court that restrains authorities from taking coercive action against the company, Unitech said.

The government has filed an application under Section 241 of the Companies Act, 2013 which allows for relief in cases of oppression, a Bloomberg report said. The section allows the government to apply to the tribunal if it feels that a company is operating in a manner prejudicial to public interest.

This is likely only the second time that the central government is seeking management control of a company after Satyam Computer Services a decade ago.

Unitech shares rose 20% to hit the upper circuit at Rs 7.29 on the BSE after the reports about the government’s move to take over the company emerged.

On October 30, the Supreme Court had directed Unitech, once India’s second largest developer after DLF Ltd, to deposit Rs 750 crore by December to secure bail for its director Sanjay Chandra who has been in jail in a case of alleged forgery lodged by buyers of its project in Gurgaon.

A total of 4,688 home buyers are claiming a refund of Rs 1,865 crore from Unitech in the Supreme Court over various projects undertaken by the real estate company.

Chandra’s counsel, former solicitor general Ranjit Kumar has consistently appealed for bail, requesting the court that he be allowed to come out of jail so as to facilitate the refund process.

Unitech owes a total of over Rs 7,800 crore to 16,300 home buyers in 61 projects.

India’s real estate sector is undergoing a major change after a prolonged slowdown along with protests by homebuyers. Insolvency proceedings have been initiated against promoters of many realty firms including Amrapali Group, after angry customers dragged the builders to court.

Last month, the government amended the insolvency and bankruptcy code to include home buyers as a class of creditors to real estate firms.