An insolvency court admitted Pancard Clubs Ltd to the Corporate Insolvency Resolution Process (CIRP) on Friday based on a joint petition filed by about 100 shareholders and appointed Rajesh Sureshcandra Sheth as interim resolution professional (IRP).
The petitioners invested approximately Rs 1.55 crore in a holiday timeshare scheme offered by the company, called CIS Holiday Time Share Scheme. It is estimated that the company collected around Rs 7,035 crore under the said scheme.
In admitting the complaint, the Mumbai bench of the National Company Law Tribunal (NCLT) noted that the financial creditors had disbursed the money on the basis of time value, meaning that in this case, the Petitioners would receive a value greater than the amount invested, which is a sign of financial debt.
“It is established by the petitioners (investors) that the respondent (Pancard Clubs) has failed to honour the contract, hence the repayable amount is in default,” said the bench of Justice PN Deshmukh and a technical member Shyam Babu Gautam, in its 15-page order. “The debt and default stand established and there is no reason to deny the admission of the Petition.”
Before that advocate Nausher Kohli, appearing for the investors, argued that the modus operandi of the Scheme floated by the company was that an investor would part with certain money with an option to utilize room nights in the various holiday properties of Pancard Clubs or alternatively receive a return on the investment after a lapse of 3,5 or 7 years.
Opposing this plea, Sebi through its counsel argued that if the company gets admitted under the insolvency resolution, it will cause a delay in the recovery and auction of assets previously commenced by the capital markets regulator.
However, countering these arguments, counsel for the petitioners argued that Sebi can’t oppose the admission of this petition under the Insolvency & Bankruptcy Code (IBC) against Pancard Club Ltd because, in the case of conflict between two laws, the code prevails over Sebi laws.
Earlier, in February 2016, the capital markets regulator Securities & Exchange Board of India (Sebi) had directed Pancard Clubs to refund an amount of Rs 7,035 crores back to investors after holding that the scheme launched by Pancard Clubs is in the nature of a Collective Investment Scheme without appropriate registration with Sebi.