Numerous finance professionals, interviewed by FPJ on Friday, have expressed profound astonishment at the filing of criminal charges against five officials from Edelweiss, on allegations of abetting the suicide of art director Nitin Desai. Desai tragically took his own life on August 2 within his Karjat studio.
Following demands from BJP MLAs, Deputy Chief Minister Devendra Fadnavis, who oversees the home portfolio, directed the police to initiate abetment cases against Edelweiss' chairman, Rasesh Shah, and other company officials, citing their alleged involvement in Desai's suicide. On the same day, Desai's wife, Naina, lodged a police complaint asserting Edelweiss' responsibility for her husband's death. Desai had initially borrowed Rs 150 crore on November 2, 2016, and an additional Rs 35 crore on February 23, 2018. When including interest, the total liability amounted to Rs 252,48,71,926.
A highly-regarded finance professional with close ties to the RSS expressed to FPJ that Fadnavis' decision "will send incorrect signals to India Inc. Is it a criminal act to demand loan repayment?" The professional emphasised, "Edelweiss ARC, as a law-abiding corporate entity, had approached the National Company Law Tribunal (NCLT), Mumbai bench, for loan recovery. Accusing them of abetting the debtor's suicide is far from reality. This trajectory might discourage finance companies from lending, given the potential risk of facing criminal charges. The whole situation appears absurd. It's baffling who advised Fadnavis to pursue criminal action against the company."
Another chartered accountant articulated, "At this pace, finance companies might opt to establish their firms in Gujarat, preferably within the emerging GIFT city, and ensure that any jurisdictional disputes fall under Gujarat's authorities." The accountant suggested, "Fadnavis should consider instructing the police to issue summary closure reports and absolve the accused individuals of charges."
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Six days into the nationwide pandemic-induced lockdown, ECL Finance Ltd, an Edelweiss Group-associated non-banking finance company (NBFC), declared the loan account of art director Nitin Desai's ND Art World Private Ltd as a stressed account.
On July 25, 2023, an NCLT bench led by H.V. Subba Rao (Member-Judicial) and Anu Jagmohan Singh (Member-Technical) ruled in favor of Edelweiss ARC Company, to whom the loan was assigned. The company had submitted an application under the Insolvency and Bankruptcy Code against ND's Art World Pvt Ltd. Senior advocate Mustafa Doctor represented Edelweiss, while Adv Amir Arsiwala represented ND's Art World.
Of significance, the Tribunal's verdict stated, "The corporate debtor (ND's Art World) dedicated a considerable portion of the reply affidavit to complain about the conduct of the financial creditor in initiating various proceedings before the Debt Recovery Tribunal (DRT) and measures under the SARFAESI Act, which are legitimate legal rights of the financial creditor. The corporate debtor, in several sections of their affidavit, openly acknowledged the existence of 'debt' and 'default' on their part. They also submitted a One Time Settlement (OTS) proposal on July 18, 2022, which the financial creditor rejected."
The Tribunal decreed that Edelweiss' plea be granted and mandated the commencement of a corporate insolvency resolution process against ND's Art World Pvt Ltd. Notably, the service tax issues of the latter entity might also come under scrutiny.
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