A former director of Sapphire Land Development Pvt. Ltd. (SLDPL), Lakhminder Dayal Singh, has filed a petition with the National Company Law Tribunal (NCLT) in Mumbai, accusing Suraksha Asset Reconstruction Company (ARC) of fraud and regulatory violations in the company’s insolvency proceedings. Singh claims that Suraksha ARC and Yes Bank colluded in the transfer of SLDPL’s loan, using “round-tripping” transactions to indirectly fund Suraksha’s acquisition of the loan. This practice, known as loan evergreening, is prohibited by Reserve Bank of India (RBI) rules.
Singh alleges that Yes Bank’s internal audit flagged the issue, and it was also referenced in a Central Bureau of Investigation (CBI) chargesheet. He disputes Yes Bank’s decision to classify SLDPL’s account as stressed, claiming that repayments were on track and that the move was intended to create default conditions that would allow Suraksha ARC to initiate insolvency proceedings.
The petition also questions the conduct of Resolution Professional (RP) Snehal Kamdar, alleging that Singh was denied access to company records and excluded from Committee of Creditors (CoC) meetings despite his rights as a suspended director under the Insolvency and Bankruptcy Code (IBC). Kamdar has declined to comment on the matter, citing that it is sub judice.
Singh has requested the tribunal to overturn the admission of the insolvency petition, remove Suraksha ARC’s status as a financial creditor, dissolve the CoC, and restore control of SLDPL to its board. He has also sought a stay on the ongoing Corporate Insolvency Resolution Process (CIRP). The outcome of the case, which is expected to be heard in the coming weeks, may have significant implications for how banks and ARCs structure loan transfers in future insolvencies.
The allegations made by Singh have brought Suraksha ARC under scrutiny, and the case has the potential to impact the broader insolvency landscape in India. The use of “round-tripping” transactions and loan evergreening practices raises concerns about the transparency and integrity of the insolvency process. The NCLT’s decision in this case will be closely watched, as it may set a precedent for future cases involving similar allegations of fraud and regulatory violations.