The Bankruptcy He Didn't Want

Sant Singh Makes His First Appearance

One day, Sant Chatwal Singh might thank his stars for this costly catharsis. But that astrological day is not here yet – for now, this is the bankruptcy he didn't want, or, as they say in legalese, an involuntary petition. Three Indian banks owed over $22 million put him into this undesirable arena.

Last week, the cool and confident Chatwal Singh appeared for his hearing in front of the United States Trustee, Yann Geron. On such a day, the creditors have an opportunity to examine the debtor's assets and his recent actions with respect to all his holdings, properties, or business activities.

As solemn and judicial as it sounds, the trustee, in such personal bankruptcies, typically cannot devote more than fifteen to twenty minutes to each case at this type of a hearing. Within this limited time schedule, the trustee will ask the usual questions – to which the debtor will give the usual answers, if he has been properly coached by his lawyer. Reputedly, Sant's attorney, A. Mitchell “Mitch” Greene, is savvy, experienced, and very well paid.

Richard Last Grills Chatwal

At these uneventful hearings, creditors are assigned very little time for their grievances. Here and there, though, an angry creditor or two will demand to set the record straight. On this day last week, it was Richard Last, the attorney who is representing State Bank of India, Bank of Baroda, and Bank of India.

Essentially, Mr. Last targeted Sant Singh on two points. First, why do you dispute the amount of our debt despite the judgments against you? Second, how do you explain the fact the Bombay Palace restaurants are opening up all over the world right after the one here is closed in bankruptcy?

Not showing the least sign of apprehension or nervousness, and without giving any other explanations, Sant admitted that he was indeed disputing the sums owed to the Indian banks. And so to the second point, Sant did not have any answers although he admitted that his brother might be involved in some way. And that's about it.

What Happens Next?

As daunting as the title U.S. Trustee sounds, in reality, a trustee in such bankruptcy actions is little more than a gate- keeper for the bankruptcy court. He marks the beginning of time for the creditors, over a hundred twenty in Sant's case, to start any adversary complaints. In effect, they have 60 days after this date to officially accuse Sant Singh of any wrongdoing and to commence pre- trial proceedings which include the right to questions him about nearly everything and the right to ask him to produce all related documents.
After this date, all the cases will be heard in front of a judge who will have to decide all the issues. At this point, it is hard to tell how many of Sant's creditors will start specific litigation against him in the next 60 days. Knowing that there are no assets in a Chapter 7 case, most creditors usually abandon their claims.

Is There Any Hope For Indian Banks?

It's not that Sant is shy about bankruptcies – almost all of his businesses have gone bankrupt. If Sant had wanted to file for personal bankruptcy, he could have done it a long ago, but he didn't. Instead, three frustrated Indian banks owed over $22 million recently put him into this federal arena, and the question is why? Possible reasons could be the ability to consolidate all the litigation, the power to strike state- wide, and sometimes the capacity to reach internationally if the costs are worth it.
There are two general directions for the banks or other creditors to take. One is to stop the leakage of debtor's assets that have been preferentially or fraudulently transferred to someone else, or that are about to be. Two is to prevent the discharge of particular debts because of fraud or willful injury. Neither task is so simple or fruitful.
The first obvious challenge for Richard Last and other creditors will be to identify the assets from the millions that Sant borrowed. Atleast so far, there appear to be none in Sant's case. And according to sources familiar with Sant's modus operandi, no assets are likely to be found in his name. Secondly, fraud is very difficult to prove because it has to be committed knowingly. Even when successful, assuming Sant is not discharged from his debts, what's the point of then putting him into bankruptcy?
The only hope for the Indian banks will be to use the bankruptcy court to locate Sant's dissipated millions in somewhat accelerated fashion. Again, even if Sant's allegedly hidden loot is found, it would probably first go to federal, state, and city authorities – unless, of course, a deal is worked out amongst the surviving creditors.

Sant Predicts It Will Be Over In 90 Days

On the balance, it might appear that the scales will tip in favor of Sant's eventual discharge – but it won't be easy. The creditor will have the right not only to query him about his lifestyle but also to examine all his bank statements as well as his personal IRS, state, and city tax returns for the last several years. If nothing else, the existing government tax liens, possibly as high as $30 million, will follow him and his estate the rest of his life unless a settlement is made.
All this not withstanding, in an upbeat telephone conversation with India Monitor last week, Sant Chatwal Singh was sure that his legal headaches will be behind him after 90 days. However, an attorney familiar with Southern District bankruptcy matters ridiculed this proposition, “He'll be lucky if its over in 18 months.” Perhaps, it's time for a numerologist to decide.

The Rocky Road Ahead

A $100 million bankruptcy can never be an easy thing – not for Chatwal, not for anyone. The photographs with luminaries and dignitaries won't count for anything. Here it will be lawyers versus lawyers. In this respect, Sant has made a good choice in “Mitch” Greene who has the reputation of being a slick street fighter. By comparison, Richard Last has been described as “a gentleman boxer.” No doubt before this is all over, other attorneys will jump into the fray, and who knows what can happen.
It therefore is a disadvantage in Sant's case, it is likely to be the no nonsense judge, Hon. Cornelius Blackshear, who has also presided over Sant's earlier Chapter 11 bankruptcies. In each and every case, the liabilities vastly exceeded the assets. And in each and every case there were no potential profits to fund any reorganization. The result was that the business quickly went from having some hope to having zero hope.
In the beginning, Sant Chatwal Singh was assigned to Judge Tina L. Brozman. But as soon as human being realized what the court computers had done, he was re-assigned to Hon. Blackshear, in an order date August 7, 1995, which is bound to add to Sant's woes. This is one reason for the considerable delay in the time it took to bring Sant in front of a United States Trustee, and that is what finally happened last week. The creditors now have 60 days to decide how to tackle S.S. Chatwal, the name of Bombay Palace fame.

Source: India Monitor
Volume VI….No.282
New York
Sunday
January 14,1996
Part 3