National Company Law Appellate Tribunal has set aside insolvency proceedings against Mack Star Marketing, saying that the loan Yes Bank provided to the company was an eye wash and collusive in nature. Quashing the proceedings, a two-member bench ruled the transaction didn't fall within the ambit of debt as defined under the Insolvency and Bankruptcy Code. NCLT initiated insolvency proceedings against the company in 2021.
NCLAT said that Rs 147.6 crore loaned to the company for the renovation of a two-year-old building Kaledonia was routed back to the Yes Bank within a few days.
"The chequered history of the loan transactions and collusive arrangements indulged by Yes Bank demonstrates that the Term Loans disbursed in the name of Mack Star is an 'eye-wash' and Yes Bank has disbursed these loans with an ulterior motive," said the National Company Law Appellate Tribunal (NCLAT).
The bench also set aside the Mumbai bench order to initiate insolvency proceedings against Mack Star requested by Suraksha Asset Reconstruction.
"We allow this Appeal and set aside the Impugned Order passed by the Learned Adjudicating Authority (NCLT, Mumbai Bench, Court III), on 20.09.2021," said the NCLAT.
The bench said the corporate debtor was released from the rigours of law and can now function independently.
Ocean Diety Investment Holdings, the company that holds 82.17 percent shares in Mack Star, had challenged the NCLT order.
NCLT had issued the order months after Enforcement Directorate arrested Yes Bank promoter Rana Kapoor for allegedly conspiring with HDIL to cheat Mack Star.
It was told by NCLAT that the loan was sanctioned by Yes Bank to renovate the building that was built just two years ago.
Moreover, Rs 100 crore was disbursed by Yes Bank to Mack Star even before any of the Related Loan Agreements were signed and a term loan of Rs 40 crore disbursed by Yes Bank in Mack Star's name was credited directly to HDILs Yes Bank account instead of being credited to Mack Star's account.