LUCKNOW: In a first-of-its-kind case, a defunct UP public sector undertaking has become the only PSU in the country to be wound up under the purview of Companies Act through the National Companies Law Tribunal (NCLT). The case is unique as the closure did not happen under the Insolvency and Bankruptcy Code (IBC), the route which most sick or defunct PSUs take.
Wholly owned by the state government, UP State Mineral Development Corporation (UPSMDC) has managed to not only repay its loan to the government and banks but also a part of the interest amount and all employee dues before being legally wound up.
The PSU was registered with Registrar of Companies in 1974. It suffered losses after the closure of mining operations.
Although the decision to wind up this company was taken in 2000, the state government, the 100% shareholder of the company, granted permission for legally winding it up under Companies Act in May 2018. The balance sheet for 2017-18 was audited by CAG-appointed statutory auditor.
After this, UPSMDC moved a petition before NCLT under Companies Law to be wound up.
If this process to clear all liabilities, loans, litigations and employee dues was not followed, the corporation would have had to take the bankruptcy and insolvency route under for closure, making it difficult to protect the government’s interest in terms of valuation and disposal of assets. Properties and cash worth more than Rs 100 crore were restored to the government which is incidentally more than the company’s paid-up capital.
The closure can be an example for other PSUs of UP lying defunct after being declared sick. Some of these are UPTRON, UP Chalchitra Nigam Ltd, UP Auto Tractors Limited, UP Instruments Ltd and UP Spinning Mills.
The PSU had authorized Madhukar Singh, one its general managers, to carry out the entire process.
“The process to legally wind up UPSMDC is a model of efficiency and transparency. Usually, such defunct companies take the short-cut route of declaring bankruptcy,” said Devraj Gupta, company secretary and a certified insolvency professional, who had filed the petition in NCLT.
Source- Times of India.