First Leasing Company goes into liquidation

CHENNAI: The liquidation process of First Leasing Company -- jointly promoted by AC Muthiah and Farouk Irani in 1973 -- started on Thursday, when Madras high court appointed its official liquidator as provisional liquidator of the company and directed him to take charge of the assets of the firm. The ex-directors of the company are to file their statements of affairs before the official liquidator within 21 days.

Justice M Duraiswamy passed the interim orders on a winding up petition filed by ICICI Bank, which said First Leasing owed it Rs 50 crore. According to ICICI Bank, First Leasing owed a consortium of banks nearly Rs 1,200 crore and that the company had no assets enough to meet the liabilities.

The bank said a special audit undertaken by a consortium banks revealed that money lent by the banks had been siphoned off by the promoters, directors, employees, relatives of the directors and entities controlled by the directors and their relatives. "Financials have been cooked up by the company to avail itself of greater credit limits from the banks, including ICICI. Only if the provisional liquidator takes charge, can the court have jurisdiction to surcharge all those persons, employees, and directors for recovering money belonging to the company and fraudulently secreted by them to the detriment of the creditors of the company, which are banks," the petition said.

First Leasing admitted that it was in doldrums and said the Reserve Bank of India had frozen accounts of the company and intimated it that its funds were not to be utilized without the prior permission of the central bank.