nds art world: Supreme Court dismisses appeal against ND Art’s insolvency

The Supreme Court dismissed a petition by Naina Desai, widow of late art director Nitin Desai, seeking a review of the National Company Law Appellate Tribunal (NCLAT) order allowing bankruptcy proceedings against their company. Nitin Desai had been found dead in his Karjat studio on August 2, a day after the NCLAT dismissed his plea against initiation of insolvency proceedings, prompting calls for an investigation.

“We do not find any good ground and reason to interfere with the impugned judgement and hence the appeal is dismissed,” a two-judge bench of justices Sanjiv Khanna and SVN Bhatti said in a short order Friday.

The apex court’s dismissal clears the ground for recovery proceedings against ND’s Art World Pvt Ltd, the company promoted by Nitin and Naina Desai, which owes Edelweiss Asset Reconstruction Co. close to Rs 300 crore in principal, interest and other dues.

“The recovery proceedings, which were already underway, though delayed, will now continue. The case is already in the NCLT and will now resume its normal course,” said a person aware of the process.
The Mumbai bench of the NCLT had commenced insolvency proceedings against ND’s Art World in July, almost a year after CFM ARC had approached the court to recover its dues. But in between the application being filed and getting admitted, CFM sold the loans to Edelweiss ARC, which is now pursuing the matter in court.The case came into the limelight after BJP MLA Ashish Shelar raised the issue in the Maharashtra assembly through a point of order and demanded an investigation. Deputy chief minister Devendra Fadnavis had also promised a thorough probe.A first information report (FIR) alleging abetment of suicide was filed against four Edelweiss Group officials including RK Bansal, CEO of Edelweiss ARC, and group chairman Rashesh Shah. Resolution professional Jitender Kothari was also named in the FIR. The Bombay High Court is hearing a petition for quashing of the FIRs.“With the Supreme Court order, now the case can move forward. All said and done, there are about Rs 300 crore of dues pending which have to be recovered,” said a second person aware of the process.

Edelweiss did not reply to an email seeking comment. Naina Desai could not be immediately reached.

The ND’s Art World studio and its accompanying land had been used as collateral for the loan.

“There is a potential value to the land and the studio accompanying it of about Rs 200 crore, which can help to recover dues. The current promoters can also arrange funds and look for a settlement,” said another person aware of the process.

The principal borrowed from Edelweiss subsidiary ECL Finance between 2016 and 2018 amounted to Rs 181 crore.

CFM ARC, which had bought the bad loan from ECL in December 2020, could not recover its dues through action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act and approached the NCLT for recovery through the Insolvency and Bankruptcy Code (IBC) process in July 2022. By the time the case was admitted in July 2023, the account had changed hands to Edelweiss ARC.

Earlier this month, the Mumbai bench of the NCLT allowed the application of the resolution professional in the case, Jitender Kothari, seeking immunity from any depreciation or damage to any property, premises and assets of ND’s Art World because of the prevailing circumstances.

Kothari had pleaded that he be permitted to continue with the resolution against ND’s Art “only after normalcy is restored.”