Altico Capital, AU Small Finance Bank Propose Settlement

Altico Capital Ltd. and AU Small Finance Bank Ltd. on Tuesday told the Bombay High Court that they have agreed to the settlement terms after the non-bank lender defaulted on loan repayments to the bank.

The high court has directed the parties to file the signed consent terms on Wednesday.

Pradeep Sancheti, the counsel for Altico, informed the court that the parties have entered into the following preliminary consent terms:

• AU Small Finance Bank can appropriate amounts that become due and payable to it in accordance to the facilities agreement from Altico’s fixed deposit with the bank.
• AU Small Finance Bank will not encash Altico’s fixed deposit prematurely.
• Altico will not make any promise or issue any security or lien against its fixed deposit with the bank for making payments to any other lender or third party.

Altico had moved the Bombay High Court seeking an injunction against the bank to prevent it from declaring an “event of default” under the facility agreement.

That came after Altico failed to make payments against loans taken by it from banks and financial institutions. As per the petition filed by Altico in the high court, the bank had extended a loan facility amounting to Rs 100 crore which was to be disbursed over a span of three years.

Separately, Altico had placed a fixed deposit of Rs 52 crore with the bank. After Altico’s default, the bank had recalled the moneys advanced by it and had sought to recover Rs 62.87 crores owed to it by Altico under the facilities agreement. To do so, it had sought to adjust the dues against the balance of Rs 50.5 crore in the fixed deposit account by debit freezing the fixed deposit account.

Altico, however, contended that it had not committed a default which would lead to a “material adverse condition” under the agreement. It had also sought reclassification of the fixed deposit account so that it could continue to generate interest during the pendency of the case at the high court.