Eleven debt-ridden Habib Group firms seek liquidation

• The High Court accepted the liquidation applications on 29 March
• As per court's instructions, Wilmington Trust's lawyers published a legal notice in a national daily on 19 April
• Regent Airways defaulted on renting aircraft from Wilmington Trust
• 10 other Habib Group companies acted as guarantors for Regent Airways
• 11 companies applying for liquidation owe Tk3,000 crore to various organizations
• Court may appoint liquidator if liquidation can cover Wilmington Trust's dues
• Other parties with cases against the companies will also receive payment from liquidation funds

Wilmington Trust Company, a leading US business conglomerate, has filed applications for the liquidation of 11 debt-ridden companies belonging to the Chattogram-based Habib Group in an attempt to recover a substantial amount of outstanding payments.

The High Court accepted the liquidation applications on 29 March of this year, according to court officials.

Liquidation is the process of selling off assets and using the proceeds to pay off creditors and shareholders. It is triggered when a company is insolvent and is unable to pay its debts.

Lawyers involved in the case told The Business Standard that Regent Airways Limited, a sister concern of the Habib Group, had rented aircraft from Wilmington Trust Company on various occasions. However, the aviation company failed to make payments for a prolonged period, leading to it becoming a defaulter.

Additionally, 10 other companies belonging to the Habib Group acted as guarantors for Regent Airways at the time of the renting of the aircraft from Wilmington Trust.

Court sources said the High Court has accepted 11 separate applications filed by Wilmington Trust, seeking the liquidation of the 11 companies of Habib Group. And, as per the court's instructions, on 19 April this year, Wilmington Trust's lawyers published a legal notice in the names of the 11 companies in a national daily.

The notice invites anyone who wants to contest the case to file an affidavit in court.

The sources also said the 11 companies applying for liquidation owe approximately Tk3,000 crore to banks, non-bank financial institutions, customs bonds, and other organisations.

While Wilmington Trust's lawyers declined to disclose the exact amount of their outstanding dues, they conveyed the impression that the amount is quite significant.

A company law expert stated that the High Court has initiated preliminary proceedings to liquidate the 11 companies belonging to the Habib Group.

If anyone wishes to contest the case, she/he can apply to the court, he said, adding that the court will begin hearing the liquidation applications on the next scheduled day, whether or not any party applies to contest the petitions.

If the court determines that liquidating the 11 companies can cover the outstanding dues of Wilmington Trust, it will appoint a liquidator to carry out the process, he continued.

Subsequently, the High Court will arrange for the payment of Wilmington Trust's dues by completing other legal proceedings.

The legal expert clarified that Wilmington Trust will not be the sole recipient of the money obtained through the liquidation of the companies. If any other person or company has a case against the 11 companies belonging to the Habib Group, she/he/it will also receive payment.

An official of Habib Group, who spoke on condition of anonymity, confirmed to TBS that Regent Airways and 10 other companies of the group have applied for liquidation due to non-payment of aircraft rentals owed to Wilmington Trust Company.

Which are the 11 companies?

The companies earmarked for liquidation include Habib Steels Limited, Diamond Cement Limited, Legacy Fashion Limited, Regent Spinning Mills Limited, Regent Textile Mills Limited, Siam's Superior Limited, HG Aviation, MTS Re-Rolling Mills Limited, Anwara Paper Mills Limited, Regent Power Limited, and Regent Airways Limited, according to High Court sources.

Among them, the companies that owe the most to financial institutions include Habib Steels Limited, which owes Tk797 crore to 14 financial institutions, Diamond Cement Limited, which owes Tk409 crore to five institutions, and Regent Spinning Mills Limited, which owes Tk500 crore to seven institutions.

The other companies also owe significant amounts to various banks, non-bank financial institutions, and other organisations.

What lenders say?

Commenting on the matter, Exim Bank Additional Deputy Managing Director and Agrabad Branch Manager SM Abu Zaker told The Business Standard that because Habib Group owes money to Exim Bank, the bank is considering taking legal steps following the publication of legal notices regarding the winding up of several companies of Habib Group.

"We have reported the matter to the legal section. The bank will take legal action based on the advice of the legal section," he said.

Islami Bank's Executive Vice President and Agrabad Branch Manager Abdun Nasser told TBS that Habib Group's Regent Spinning Millis owes more than Tk100 crore to his branch.

"After our attention was drawn to the legal notice declaring the companies' liquidation, we informed the head office. Legal action will be taken based on the advice of the head office," he said.

Huge amount owed to govt as well

Apart from banks and NBFIs, the Customs Bond Commissionerate, Chattogram, also has Tk277 crore in dues with three companies of Habib Group. This amount is payable for evasion of duty by misusing the bond facility.

Among the three companies, Regent Spinning that has applied for liquidation owes Tk200 crore, while another two concerns of the group, Siam's Superior and Regent Textile, owe Tk76 crore and Tk27 lakh, respectively.

At the same time, several companies of Habib Group reportedly owe around Tk300 crore to the Civil Aviation Authority and about Tk200 crore to the National Board of Revenue.

Directors flee country leaving lenders in peril

Meanwhile, five high-ranking members of Habib Group, including the group's Chairman Yakub Ali, Managing Director Yasin Ali, and directors Mashroof Habib, Salman Habib, and Tanveer Habib, have left the country to evade arrest in court cases filed by lenders attempting to recover loans amounting to about Tk4,000 crore.

They left the country after the Chattagram Money Loan Court had imposed an embargo on their leaving the country on 11 September last year in a case filed by IDLC Finance, sources with the court and immigration police told TBS.

The fall of a business empire

It is worth mentioning that Habib Ullah Mia of Chattogram started Habib Trading, an import-export business of consumer goods, in 1947. His three sons, Yakub Ali, Mahbub Ali, and Yasin Ali, later joined the business, expanding Habib Group into garments, textiles, shipbreaking, steel, cement, and paper industries with a reputation spanning seven decades.

However, business expansion into the fertiliser, power generation, and aviation sectors in the last decade led the group to losses, with most of its 31 companies already ceasing operations, while a few others have been rented out to other businessmen.

Bankers told TBS that Habib Group became a business empire after starting its journey as a commercial company in 1947. The group's loan repayment track record was good, and lenders rushed to Habib Group to provide loans.

However, beginning in 2019, various companies of the group started defaulting on loans, leading to losses.

Of the 31 institutions of the group, only four are operational. More than 16,000 people used to work in companies under the group, but the number has now come down to below 1,000.

Cases piling up

National Bank filed the last loan case against the group's owners in September 2022, as the recovery of a Tk150 crore loan became uncertain. BASIC Bank, Eastern Bank, IDLC Finance, and Bank Asia have also filed money loan cases against the group's owners. At least 25 cases have been filed against the directors of the group under the Negotiable Instruments Act, including 15 by One Bank.

Advocate Naeem Bhuiyan, who is handling cases against Habib Group on behalf of three banks, explained that if a company goes for liquidation, its related creditors will appear before the court, and the court will decide on the winding up by coordinating the assets and liabilities of the company.