Microfin firms plead inability

 

The petitioner company claimed that it manages or provides investment management advice and finance to microfinance institutions all over the world, including India. It told the court that the respondent companies approached the petitioner company in the year 2009, for arranging financial help to expand its business and it has lent money to three companies and they were initially servicing their debt in accordance with the terms of the Facility Agreement. The company said that in 2011 a number of defaults occurred under the terms of the Facility Agreement and as a result thereof, the respondents breached their payment obligations. 

 

It was brought to the notice of the court that in view of its facing grave financial difficulties, the respondents entered into a Corporate Debt Restructuring Scheme with its creditors in June 2011 under which its creditors agreed to restructuring of the debts. While pleading their inability in paying debts due to the petitioner’s company, the respondents submitted that the government of AP introduced the AP Micro Finance Institutions (Regulation of Money Lending), Act, 2010, that with the advent of that Act the microfinance industry as a whole in the state of erstwhile AP was severely affected and recovery of loans was severely hampered.

 

After hearing the case, Justice C.V. Nagarjuna Reddy observed that the respondents have pleaded their inability in payment of debts as a result of which CDR schemes are being implemented in case of debts other than that owed to the petitioner. The judge said besides their inability to pay the debts, the respondents have gone to the extent of making a false denial of their liability having admitted their liability in categorical terms in the correspondence with the RBI and the petitioner.