Indian court says government can take control of Unitech (updated)

Unitech

08/12/2017 14:53

* Court allows government to replace 10 existing directors 
    * Bans existing directors from raising loans, selling assets 
    * 19,000 buyers await delivery of apartments 
    * Unitech owes about 7.24 bln rupees to 51,000 depositors 
 
 (Adds details) 
    By Manoj Kumar 
    NEW DELHI, Dec 8 (Reuters) - An Indian court on Friday 
allowed the government to take over management control of the 
debt-laden property developer Unitech Ltd  UNTE.NS , a rare 
intervention that the government said was to protect the public 
interest. 
    A government lawyer said it wanted to prevent Unitech 
becoming insolvent and protect 19,000 home buyers who have yet 
to be handed apartments they had bought. 
    The government sought permission from the National Company 
Law Tribunal (NCLT) to appoint new directors to the board of 
Unitech, citing mismanagement and siphoning of funds. 
    Unitech owed about 7.24 billion rupees ($112.34 million) to 
51,000 depositors who had placed funds with the company to earn 
higher interest rates than typically available in banks, 
government lawyers said. 
    Justice M. M. Kumar passed an interim order on Friday 
allowing the government to take management control of Unitech, 
replacing the 10 existing directors. 
    The court banned Unitech's existing directors from selling 
assets or raising loans on their personal and company assets. 
    Unitech, which has opposed the government takeover, said it 
had been hit by tough market conditions but had been working 
hard to deliver projects as promised and to repay depositors. 
    "The company and its existing directors are working day and 
night to monetise assets," the firm said in a statement. 
    Lawyer Ranjit Kumar, representing the company and its two 
managing directors, told the court that Unitech would file its 
reply to Friday's ruling within a week. 
    The next hearing is on Dec. 20. 
    Unitech's two managing directors, Sanjay Chandra and Ajay 
Chandra, who are also the firm's owners, were arrested this year 
for failing to deliver the apartments and the Supreme Court 
demanded they deposit funds to secure bail. 
    A lawyer at a law firm that will represent Unitech and all 
the directors as the case proceeds told Reuters a response to 
all charges would be submitted during the Dec. 20 hearing but 
said he could not comment before that. He asked not to be named. 
    A government lawyer said home-buyers risked losing millions 
of rupees if Unitech was declared insolvent. 
    "We want to avoid insolvency of this company, otherwise the 
19,000 home buyers will be left high and dry," said additional 
solicitor general Sanjay Jain. 
    India's companies law allows the federal government to make 
a case before the companies tribunal to take over a company if 
the firm is found to be acting against the public interest. 
     
    ($1 = 64.4450 Indian rupees) 
 
 (Reporting by Manoj Kumar; Writing by Nidhi Verma; Editing by 
Edmund Blair) 
 ((nidhi.verma@thomsonreuters.com; +91 11 49548031; Reuters 
Messaging: nidhi.verma.thomsonreuters.com@reuters.net)) 
 
Keywords: INDIA UNITECH/