In what seems to be a neat way of getting round the much-touted Insolvency and Bankruptcy Code, promoters of some companies facing proceedings before the National Company Law Tribunal (NCLT) are giving themselves executive powers so as to retain control even after the board is dissolved.

Promoters of Bhushan Steel and Alok Industries have re-designated themselves as Managing Director and CEO to ensure that the NCLT-appointed Insolvency Resolution Professionals (IRPs) depend on their advice to run the companies.

On July 6, Bhushan Steel promoter Neeraj Singal was made CEO, in addition to his responsibilities as Vice-Chairman and Managing Director.

The company’s whole-time directors Rahul Sen Gupta and PK Aggarwal were also named Executive President (Technical) and Executive President (Commercial), respectively.

NCLT had referred Bhushan Steel for insolvency on July 26, and the board was subsequently suspended.

Similarly, on July 17, the board of Mumbai-based textile company Alok Industries re-designated promoters Ashok Jiwrajka, Dilip Jiwrajka and Surendra Jiwrajka from whole-time directors to Executive Director and CEO (Home Textile), Managing Director and CEO (Apparel Fabrics) and Joint Managing Director and CEO (Polyester), respectively.

Interestingly, the following day, NCLT accepted proceedings against the company and dissolved the board.

The board of Delhi-based Era Infra Engineering has named as CEO its promoter and MD Hem Singh Bharana. NCLT has referred Era’s insolvency case to a larger bench as the company is facing over 14 winding-up proceedings in the Delhi High Court.

These moves breach the spirit of the law as the same board members report to the IRPs, said an official of a Mumbai-based company looking to acquire an insolvency company.

Related Topics
comment COMMENT NOW