UB Engineering’s tax issue and liquidation procedure in the event of a pandemic

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Four years after a court ordered the liquidation of Vijay Mallya’s UB Engineering company, its creditors have so far received around Rs 50 crore from the liquidation proceedings, according to sources close to the professional in the resolution process.

This is less than half of the company’s liquidation value of Rs 106 crore. UB Engineering, which included Axis Bank, YES Bank, Corporation Bank, IDBI Bank and Laxmi Vilas Bank among its lenders, owed them over Rs.450 crore. The company, which was first sent to insolvency court for resolution, was later forced to liquidate after failing to find a buyer under the Insolvency and Bankruptcy Code.

Its liquidation process has taken longer than usual due to a tax issue and lockdowns induced by the pandemic, the sources said.

“I think in infrastructure business, especially in dormant businesses, liquidation should not take more than a year,” said Nilesh Sharma, a New Delhi-based insolvency practitioner, adding that the liquidator might consider selling the assets of the business through auction to speed up the process.

IBC’s latest newsletter for the July-September quarter showed that 39% of liquidation cases had lasted for more than two years and 29% for 1-2 years.

“There were barriers like tax liens on services that were not lifted from property. Now that has been erased. It helps us to complete the liquidation, ”said a source familiar with the liquidation proceedings.

The source added that only UB engineering’s secured creditors would receive their due.

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