HC orders winding up of Nimbus Communications for defaulting on Union Bank dues
Mumbai: The Bombay high court has ordered the liquidation of Nimbus Communications Ltd, in a major setback for the sports broadcaster that once secured a mega-deal to beam cricket matches to millions of homes in India.
The order came on a six-year-old lawsuit filed by Union Bank of India to recover its short-term loans and bank guarantees. The money was sanctioned in 2011 after Nimbus secured media rights from India’s cricket board to broadcast matches for seven years for Rs 2,000 crore.
“The fact that the company has defaulted even payments of statutory dues like income-tax and service tax etc. shows that the solvency of the company is questionable,” justice K.R. Sriram said in his order. “The accumulated losses have exceeded 50% of the net worth of the company. It would be worse had the company, not window dressed its accounts,” said the order, passed on 1 March and published on the court website on Friday.
The dispute has its origins in 2009 when Nimbus won the prestigious media rights from the Board for Control of Cricket in India (BCCI). The company was to pay the BCCI Rs2,000 crore across seven years, and tied up bank finances for the same. Among various banks that financed Nimbus in 2011 was Union Bank, which extended short-term loans of Rs35 crore.
Nimbus also secured bank guarantees worth Rs450 crore from various banks, including Union Bank which provided a Rs150 crore guarantee against a Nimbus fixed deposit of Rs82.5 crore.
Other banks which extended guarantees to Nimbus are Punjab National Bank and Indian Bank.
However, when Nimbus defaulted on paying its dues, BCCI in December 2011 scrapped the contract and invoked the bank guarantees. Following this, the bank moved the high court to recover its dues. Union Bank claimed that as of 31 December 2013, the amount due and payable under the term loan was Rs33.19 crore.
“The company’s financial status is absolutely precarious,” observed the court while passing an order to wind up the company and directed its official liquidator to attach the properties of Nimbus Communications.
Prakash Shinde, a partner at law firm MDP & Partners who was representing Union Bank, said the court was convinced that Nimbus is indebted to the bank, and is commercially insolvent.
“The court has acknowledged the fact that even after taking away merging money, the company owed substantial dues to the bank which the company has failed to pay,” adds Shinde.
Email queries and several phone calls to the company did not elicit any response till the time of filing the report.
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