ET: Central Bank puts Rs 3,300 cr NPA on auction

2 March 2019: Taking a cue from the SBI, the Central Bank of India on Saturday put four big accounts of NPA worth Rs 3,300 crore on sale through the SARFAESI Act, though some of the assets are currently under the NCLT resolution process.

The accounts are Bombay Rayon Fashions Ltd, Alok Industries (Rs 1,251 crore), Bhushan Power & Steel (Rs 1,550.07 crore) and Essar Steel (Rs 423 crore).

Except Bombay Rayon, Alok Industries, Bhushan Steel & Power and Essar Steel are currently under NCLT process.

Frustrated over the inordinate delay in the ongoing insolvency proceedings, the State Bank of India (SBI) had put its Rs 15,431-crore exposure to the stressed assets of Essar Steel on the block. After not getting the desired response, it had to defer the date of final bidding.

“In terms of the bank’s policy on sale of financial assets in line with the regulatory guidelines, we place these accounts for sale to Banks/ARCs/NBFCs/ FIs on the terms and conditions. However, the sale will be subject to final approval by the Competent Authority of the Bank,” the Central Bank said in its notice.

The final bidding date of these assets is March 20.

These properties are on sale through the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (SARFAESI), 2002, on without recourse basis based on an existing offer of firm bid from an investor, who will have the right to match the highest bid, it added.

The Economic Times reported




ET: NCLT rejects Deccan Value Investors’ plea against resolution professional of metalyst forgings

2 March 2019: The National Company Law Tribunal (NCLT), Mumbai, has rejected Deccan Value Investors’ (DVI) plea for “seeking direction against the resolution professional” of Metalyst Forgings and undertaking transaction and forensic audits of the company by an “independent expert”, calling the plea “malafide” and meant to intentionally delay the approval of its resolution plan by the tribunal. 

Its wish to direct the resolution professional (RP) and committee of creditors (CoC) to furnish certain documents such as final transaction audit and forensic audit reports, cost audit reports, historical production data, etc., has also been turned down by the bench as “not tenable” with the argument that such documents should have been summoned before DVI submitted the resolution plan for approval with the CoC DVI is an US-based employee-owned hedge fund sponsor. 

It had successfully bid for Metalyst Forgings after the CoC approved its plan, but in December, it had filed an application wanting the NCLT to “cancel” its plan as being “vitiated” by “misrepresentation of facts”. It wanted such audits to take place to bolster its plea to cancel the plan. 

The Economic Times reported  

BS:IL&FS lenders to continue making provisions for loans to the group

2 March 2019: With limited prospects for recovery of loans to Infrastructure Leasing and Financial Services (IL&FS) and its subsidiaries in the near term, lenders will continue to make provisions for loans to the group.

In February, the National Company Law Appellate Tribunal (NCLAT) had ruled that lenders can’t treat loan exposures as non-performing assets (NPAs) without the appellate body’s permission.

A two-member bench, headed by NCLAT chairman Justice (Retd) SJ Mukhopadhyay, had ruled on an application moved by some of its lenders.

The order came after the NCLAT on February 11 said subsidiaries of IL&FS would be divided into three categories — Green (companies that can meet all debt obligations), Amber (firms that can meet some debt obligations) and Red (companies that can’t meet any debt obligation).

Senior public sector executives said some exposures were already declared as NPAs for the third quarter ended December 31, 2018, before the tribunal ruling. That status will continue.

Only the current earning flows should be used to make provisions and future cash flows should not be loaded with the obligation to make provisions.

Lenders have already been making provisions, given the uncertainly around the timing for resolution of IL&FS group companies, which can meet debt obligations.

Even when resolution happens, there is a high chance that the sale of asset will happen at a discount. So, lenders may never get back their full amount. Therefore, building provisions would reduce the burden at the time of settlement, said the chief finance officer (CFO) of a large public sector bank.

State Bank of India had an exposure of Rs 900 crore to holding companies of the IL&FS group treated as non-performing and the bank has made 50 per cent provision for it. The exposure of the bank’s Rs 2,200 crore to operating entities (special purpose vehicles) is being treated as standard.

The Business Standard reported

ET: NCLT rejects insolvency plea against Bhushan Steel

2 March 2019: The National Company Law Tribunal (NCLT) has dismissed a petition seeking to once again drag Bhushan Steel, which Tata Steel took over last year, to the insolvency court to recover unpaid dues of about Rs 18 crore. 

The NCLT principal bench said the petition filed by Vistrat Real Estate, an entity operated by Neeraj Singal, was non-maintainable. Vistrat is a related party of Bhushan Steel and its former promoters Brijbhushan Singal and Neeraj Singal, who were also “time and again authorised to act on behalf of the company” even though they were not on the board of directors, it said. 

“It can be safely concluded that the corporate debtor has substantive control in the petitioner’s company,” the bench observed in the order reviewed by ET. “Such transactions are liable to be gone into during the resolution process and deemed to be a preferential transaction.” 

The bench said that in any case, the petitioner’s claim of a default is the subject matter of serious dispute. 

Bhushan Steel was represented by senior counsel Gopal Jain and VP Singh, partner and head of litigation at AZB & Partners. Bhushan Steel was led to insolvency resolution by State Bank of India in 2017 for owing Rs 44,000 crore to lenders and was acquired by Tata Steel in May last year. 

Vistrat claimed the default on Rs 17.97 crore took place in June last year, arising out of a property leased to Bhushan Steel in 2015 for Rs 6 crore every month. 

The rental was subsequently found to be higher than the market value by the Bhushan Steel resolution professional, who paid Vistrat Rs 5.6 crore and terminated the agreement after Tata Steel took over the company in May. The premises were vacated in September last year. 

This was not disclose petition. 

The Economic Times reported

FE: NCLT annuls Ingen’s resolution plan for Orchid Pharma

2 March 2019: The Chennai bench of National Company Law Tribunal (NCLT) has annulled the approved resolution plan by the US-based lngen Capital Group for Orchid Pharma and ordered fresh corporate insolvency resolution process (CIRP) for the beleaguered pharma company.

The NCLT order came after Ingen failed to bring in the promised money, even after the stipulated time and despite the bench giving it an option to pay one-third of the amount to take the proceedings further.

The NCLT bench of SV Prakash Kumar, judicial member, and S Vijayaraghavan, member-technical, came down heavily on Ingen for failing to comply with the procedures after a resolution plan of the company was approved by the bench.

The tribunal observed that since there is no second resolution plan available, it ordered to undergo CIRP from the stage of invitation of expression of interest and complete it in another 105 days.

The resolution professional, who sought going in for fresh bid process yet again, informed the NCLT that he had received e-mails from Divis’ Laboratories, Gland Celsus Biochemicals and Fidelity Trading Corporation.

Apart from this, he submitted that he has received oral inquiries from ART Capital, Everstone Group, Aion Capital, Piramal Capital and Finquest group, expressing interest in proposing resolution plans in respect of Orchid Pharma.

The resolution plan by Ingen Capital Group was approved by the NCLT on September 17, 2018, after the committee of creditors (CoC) cleared it. As per the resolution plan, which was for `1,490 crore, Ingen was to infuse `1,060 crore within five days of the plan approval.
When the company failed to pay the amount, the resolution professional moved the NCLT and it on October 10, 2018, ordered Ingen to deposit one-third of the amount – `334 crore – into the financial creditors’ escrow account. Ingent appealed the NCLAT against this order, but the appellate tribunal remanded the case back to NCLT to pass appropriate orders.

When the RP as well as CoC realised that Ingen has no intention to implement the plan and it was difficult to manage the going concern (Orchid) running with 1,500 employees, the RP sought going in for fresh CIRP. Prior to this, the CoC had in April 2018 rejected three bids received when the lenders’ panel was not satisfied with the ‘quality of offering’, and subsequently authorised the RP to initiate fresh bidding process. Orchid has a total debt of around `3,200 crore from a slew of banks.

Admitting a petition filed by one of the operational creditors, Lakshmi Vilas Bank, the NCLT had in August 2017 issued an order to begin the process of insolvency of Orchid Pharma, once a key player in injectables and active pharmaceutical ingredients.

Orchid Pharma had been facing severe financial crisis with lenders and investors approaching legal fora for a remedy and was brought under the corporate debt restructuring scheme, initiated during 2013, for the revival of its operations.

The CoC has considered the resolution plan of Ingen Capital Group in its meeting on June 4, 2018 and the plan received an affirmative vote of 78.64% of the CoC by value in its favour.

The Financial Express reported