Apex Court Starts Proceedings in Falcon Tyres Case

The Supreme Court has set the ball rolling on the bankruptcy proceedings against Falcon Tyres even as it has agreed to hear a plea by defaulter Pawan Ruia (in photo) who had claimed that the principles of natural justice is denied to him on the grounds that he was not given adequate time to respond to the lender’s notice.

In April, lenders led by Edelweiss Asset Reconstruction Company had approached National Company Law Tribunal (NCLT) to proceed under the Insolvency and Bankruptcy Code (IBC) on defaulting company Falcon Tyres after the ARC acquired 90 per cent of debt loans from banks.

Falcon Tyres did not respond to an email sent by ET.

Officials from Edelweiss ARC declined to comment on the matter.

“The series of developments highlights the kind of challenges that lenders would face in resolving a case under IBC.

But, as a major stakeholder, we are determined to do everything to make IBC successful,” said Siby Antony, CEO of Edelweiss ARC.

After the case was admitted before the NCLT for IBC proceedings, Falcon Tyres promoter Pawan Ruia objected that they did not get adequate time respond to the notice issued by lenders, which was in the form of advertisement in newspapers.

NCLT agreed to hear the borrower’s objection. But Ruias, instead of filing objections at NCLT, approached the Karnataka High Court seeking intervention.

KHC ruled in Ruia’s favour.

It said there is merit in the borrower’s case and set a hearing in June.

Further, in a big blow to the lenders, KHC directed NCLT not to take any decision until they hear the case. Edelweiss ARC then approached Supreme Court on the grounds that a delay of over a month will affect the resolution.

As per the law, lenders have to come up with a workable resolution plan to revive the company within 180 days of the case being admitted before the NCLT, failing which the assets of the company would be liquidated.

The Supreme Court ruled that the timeline set by NCLT is sacrosanct and therefore lenders can proceed with the insolvency process such as appointing interim resolution professional and arriving at a consensus with all creditors on recovering their dues.

However, the Supreme Court ruled that the borrower’s objection could be heard in June.

Edelweiss ARC has appointed consulting firm Deloitte as interim resolution professional.

Senior officials from banking circles said that Apollo Tyres, JK Tyres and Ceat Tyres have evinced interest in acquiring the Falcon Tyres.