The National Company Law Tribunal (NCLT) on Friday allowed the government to appoint a new management for Unitech Ltd while hearing a plea from the Ministry of Corporate Affairs to take over the indebted real-estate company.
The Ministry filed an application under a provision of the Companies Act, 2013 that allows the government to apply to the Tribunal if it feels that a company is operating in a manner prejudicial to public interest — a section that has been used just once in the past.
The last time the Centre had moved a proposal seeking management control of a company was in case of Satyam Computer Services nearly a decade ago.
Unitech shares surged 20 per cent to hit the upper circuit at Rs 7.29 on the BSE after reports regarding the government’s move to take over the company trickled in.
The Ministry’s petition against Unitech — once the country’s second-largest real estate firm — hinges on allegations of fund diversion adversely affecting public interest. The Tribunal concurred with the ministry’s plea and issued notices to Unitech’s 10 directors, who are now restrained from acting as board members. The two-member bench said the government can appoint 10 nominee directors whose names it will examine on December 20.
The NCLT also issued notice to Unitech, which later appealed against the order, and sought a response to the government’s plea in four weeks. A case against the company is currently being heard in the Supreme Court.
Unitech’s lawyers were not present during NCLT proceedings even as Additional Solicitor General Sanjay Jain, appearing for the government in the case, told the court that an advance copy of the petition was sent to Unitech but the company had refused to accept it. “We want to avoid insolvency of this company, otherwise the 19,000 home buyers will be left high and dry,” he said.
Unitech lawyers approached the tribunal later in the day contesting the order and said that a case against the company was being heard in the Supreme Court and claimed that there was a previous order by the apex court that restrained authorities from taking coercive action against the company.
The Tribunal, however, declined to keep in abeyance its order and said that the new directors of Unitech would comply with all the orders of the Supreme Court. “This order, already passed shall be subject to compliance of all orders of Supreme Court,” said the NCLT bench headed by Chairman Justice M M Kumar. The tribunal also directed Unitech Managing Directors Sanjay Chandra and Ajay Chandra to file their replies.
Sanjay Chandra and Ajay Chandra were arrested by the Economic Offence Wing of Delhi Police for allegedly failing to develop a project despite receiving money from homebuyers. 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. Unitech owes over Rs 7,800 crore to 16,300 home buyers in 61 projects.
In 2009, the government had stepped in to take over Satyam Computer Services Ltd. and a related firm citing mismanagement by promoters. The takeover came after founder Ramalinga Raju admitted to inflating the software company’s assets by about $1 billion.