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M.Subhan Ali Baig (Querist)
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20 May 2014 Attention friends...... Can anybody provide me solution to end the problem that i actually came across.............. There is a individual who invested all his assets in a Rice Mill of worth Rs.8 crores (approx.) in the year 2011.Then the business continued for 1.5 years continuously. Suddenly the business lacks working capital due to abscondance of cash by the person involved in construction, who was the friend of the individual in the 2013. There is no specific evidence to prove the fraud. Thus, the business discontinued. On the other hand, as there is no profits, the bank debts (neither the principle sum nor interest) of Rs.4 crores(approx.)could not cleared as there is no cash availability. As the business organisation is not paying any sum to bank. The bank considered the debt as NPA and is going to conduct auction on or before 06.06.2014.All the assets were struck in the bank as securities for the loan whereas the individual has Rs.4 crores of bank loan and Rs.2 crores of unsecured loan. Banker valued the mill value for Rs.1.63 crores and other securities for Rs.60 lakhs only whereas the valuation report by the Approved valuer valued the mill for Rs.5.35 crores (approx.). There is a heavy pressure from the creditors as the auction amount does not cover their debts. Please provide a probable and suitable solution for the above query.................

Nikhil Kaushik

Nikhil Kaushik (Expert)
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20 May 2014 Dear Baig,

the valuations differ because when it comes to recovery it only happens in white whereas the valuations provided by valuers are often the real market value which includes black component too.

you stated that there is no specific evidence to prove fraud...does that mean that fraud was there but cannot be proved!!!

regardless, there is little you can do and what matters is not the valuation but the amounts that are received in auction. If you believe you can make someone your own to bid in the auction at a lower price, you might be able to retain the assets (albeit indirectly) and then sell it later on to satisfy dues to the creditors.

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