AGS Transact Technologies Reported to be Insolvent Owing to Unpaid Dues

AGS Transact Technologies (AGST.NS), an Indian payments services company, announced on March 1 that a creditor intends to file for bankruptcy against the business for failure to pay debts. According to an exchange filing by AGS Transact, Maxwel Aircon India Private Limited, one of the business' operational creditors, has accused the company of nonpayment and requested that corporate insolvency be initiated in the National Business Law Tribunal. According to AGS Transact, the business is looking for the right legal counsel and will do everything in its power to safeguard its interests in the aforementioned issue. AGS Transact offers corporate clients and banks cash-based and digital solutions, including ATM services. After the ailing company fell behind on its payments in recent months, all four of its independent directors left, citing personal reasons, and at least two credit ratings were downgraded. According to exchange records, the business and a division that supplies cash to ATMs had fallen behind on debts totalling 7.26 billion rupees ($83.1 million).

Who Flagged Off the Default?

On February 4, the credit rating agency Crisil noted the default and reduced the company's debt rating; on February 5, India Ratings also downgraded the company's credit rating, suggesting that it might not be able to make its debt payments. A week following Crisil's downgrade, the firm revealed the default. Due to the company's inability to achieve service-level agreements with its clients, the agencies pointed to a delay in receivables. This resulted in a severe decline in liquidity, which caused the company to miss interest payments on term loans in December and January. AGS Transact also reported a loss for the December quarter as a result of the delay, and its auditor expressed concerns about the company's capacity to continue as a going concern. Its lenders include Federal Bank, State Bank of India, Bandhan Bank, HDFC Bank, Dhanlaxmi Bank, SBI Global Factors, Investec Bank, Aditya Birla Finance, IDFC First Bank, SBM Bank (India), and IndusInd Bank. Commentary from the lenders was not immediately available.

How NCLT Handles Corporate Bankruptcy Cases?

Under the Insolvency & Bankruptcy Code (IBC), NCLT plays a crucial role in managing the entire corporate insolvency resolution procedure. The NCLT assesses whether an insolvency petition is comprehensive and eligible for admission after receiving it. Following admission, the tribunal designates an Insolvency Resolution Professional (IRP) and starts the Corporate Insolvency Resolution Process (CIRP), in which the resolution specialist assumes control of the debtor's resources and business operations. With a 180-day period (extended by 90 days) for developing a resolution plan to bring the company back to life, the CIRP is designed to effectively address insolvency. The NCLT may start the debtor company's liquidation and supervise the fair division of assets among creditors if no workable settlement plan is accepted. The NCLT's decisions may be appealed to the National Company Law Appellate Tribunal (NCLAT).