The National Company Law Appellate Tribunal (NCLAT) has ruled that depositors of Chennai-based Nathella Sampath Jewellery Pvt Ltd cannot be treated as financial creditors (on par with likes of banks and home buyers).
In April, Nathella filed for voluntary insolvency, which was admitted by the Chennai bench of National Company Law Tribunal.
The Nathella Depositors Welfare Association moved the NCLAT against the Union Ministry of Finance, stating that the depositors in the company should be treated as financial creditors and not as operational creditors.
Citing a Supreme Court verdict in the ‘Chitra Sharma vs. Union of India’, the depositors said they should be treated as financial creditors.
However, the NCLAT said the plea could not be accepted, as the amount deposited by them with Nathella, did not come within the definition of financial debts under section 5(8) of the Insolvency and Bankruptcy code.
Financial creditors get priority in terms of settlement in an insolvency process and they also have the right to represent on the committee of creditors, which takes the decision of accepting the resolution plan for the company or its liquidation.
A maximum of 270 days is given for finding a resolution plan for the company under the insolvency process. If no resolution is found, it goes into liquidation.
Total debt
Nathella has defaulted a sum of ₹385.37 crore to 58 financial creditors (banks), ₹67.25 crore to 62 operational creditors (vendors and suppliers) and the other payable expenses include ₹8.32 crore. The total amount it owes comes to ₹461.40 crore. In addition, the firm has dues of ₹63.7 crore, towards advance received from customers for supplies to be effected at a future date in the form of cash, gold and include amounts received on instalment basis to be repaid within 11 months.
The NCLAT said since a large number of depositors had deposited the amount with Nathella and they come within the meaning of creditors, the committee of creditors should ensure that the resolution applicant makes provisions for the depositors in accordance with law.
