ET: More queue up in SC to recover dues from Anil Ambani

9 March 2019: More than half of the four-week respite given by the Supreme Court has passed. Reliance Communications (RCom) promoter Anil Ambani and his group are making their moves (including sale of group assets) to purge the contempt of court by paying up Rs 453 crore dues to Ericsson. But, to add to their troubles, more people have queued up before the Supreme Court under the contempt jurisdiction to claim their dues from RCom and its directors. Their petition is likely to be heard on Monday. As per the Supreme Court website, the case is tentatively listed for hearing on Monday, before the bench of Rohinton Nariman and Vineet Saran. 

A group of minority investors of Reliance Infratel led by Mauritius-based HSBC Daisy Investments has moved the apex court against Ambani, other directors of RCom and some companies of the group. The special leave petition is likely to come up before the bench headed by Justice Rohinton Nariman which passed the order in the Ericsson case on February 20. 

Apart from Ambani and RCom, the respondents to the contempt petition include RCom directors Deepak Shourie, Raj Narain Bharadwaj, Punit Garg, AK Purwar, Jayaraman Ramachandran, Manjari Ashok Kaker, Manikantan Vishwanathan, Ryna Karani, Chhaya Virani, Suresh Rangachar and company secretary Prakash Shenoy. 

Like the dispute with Ericsson, a vendor of Rcom, the tussle with the minority investors of the tower arm – which include HSBC Daisy Investments, Drawbridge Towers, Galleon Special Opportunities Fund and Quantum – has for long dragged along across different fora including the National Company Law Tribunal, its appellate body and the Supreme Court itself. The investors’ claim of about Rs 230 crore has also gone through a couple of attempts to settle out of court, which failed. 

As per the consent terms of the agreement between Reliance Infratel and HSBC Daisy and others, who together own a little over 4 per cent, recorded by the NCLAT in its order dated June 26, 2018, Reliance Infratel was to pay the amount in next six months. 

“Appellants (Reliance Infratel) agree and undertake that they shall jointly and/or severally pay a sum of Rs 230 crore to the respondents in the proportion as set out in Annexure A hereto within a period of 180 days… ,” said the consent term recorded by NCLAT in June. 

In a detailed article, ET Prime had explained the shrinking value of the towers business. 

This settlement depended on a deal between RCom and Reliance Jio, the telecom giant floated by Ambani’s elder brother Mukesh, to buy certain assets including towers and spectrum. However, as the deal fell through, RCom failed to honour settlement agreements such as the ones with Ericsson and the minority investors. 

On February 1, the company announced that it would seek debt resolution under the Insolvency and Bankruptcy Code (IBC). 

The latest move by the minority investors to the Supreme Court comes after the National Company Law Appellate Tribunal in an order on February 25 posted the next hearing on the matter to March 27 citing “paucity of time.” 

During the hearing on Ericssion matter, Ambani was present in the Court on February 11 and 12, along with Reliance Telecom Ltd. Chairman Satish Seth and Reliance Infratel Ltd. Chairperson Chhaya Virani. 

A controversy had come up after an order issued by the court on February 7 requiring personal appearance of Ambani was found to be tampered with.

The Economic Times reported

BS: NCLT approves RIL-JM Financial ARC’s Rs 5000 cr bid for Alok Industries

9 March 2019: The National Company Law Tribunal (NCLT) Ahmedabad on Friday approved the joint bid by Reliance Industries Ltd-JM Financial Asset Reconstruction Co Ltd for the insolvent textiles player Alok Industries Ltd. The RIL-JM Financial ARC combine had bid Rs 5000 crore for Alok Industries, close to the latter’s liquidation value of Rs 4000-4500 crore.

While reading the operative part of the order, the two-members bench, comprising adjudicating authorities Harihar Prakash Chaturvedi and Manorama Kumari said that the plan was being approved conditionally, The tribunal said that it could not grant certain reliefs and concessions sought by RIL-JM Financial ARC. “It is free to approach the appropriate authority who can grant such relief as per the law,” the tribunal said. 

Along with Essar Steel India Ltd. (ESIL), Alok Industries was one of the top 12 loan default cases in the country against which the Reserve Bank of India (RBI) had directed banks to initiate insolvency proceedings. 

The tribunal had initiated insolvency resolution process against Alok Industries in July 2017 based on a plea filed by one of the lead lenders State Bank of India (SBI).

In April 2018, Alok Industries was on the verge of liquidation with the only bid by RIL-JM Financial ARC failing to meet the 75 per cent threshold of financial lenders approval in the first round of bidding. The RIL-JMFARC bid had bagged only 72 per cent vote from the committee of creditors (CoC) of Alok Industries. 

However, with amendments in the Insolvency and Bankruptcy Code later bringing down the lenders’ approval threshold down to 66 per cent, the Ahmedabad bench of the National Company Law Tribunal allowed a second round of bidding, even as its 270-day deadline to complete the insolvency resolution process ended in April of 2018.

It needs to be mentioned here that the RIL-JMFARC bid of Rs 5000 crore will see banks taking a major haircut since Alok Industries total debt to 27 banks led by SBI is worth over Rs 30000 crore. The other major financial institutions and banks which had lent money to Alok Industries include Axis Bank, Corporation Bank, UCO Bank, Bank of Maharashtra, Life Insurance Corp of India, Allahabad Bank, Union Bank, Dena Bank, Oriental Bank of Commerce, and United Bank of India.

Earlier, Alok Industries’ employees union too moved NCLT seeking to avoid liquidation of the Ahmedabad-based company.  

With this approval, Reliance Industries-JM Financial is set to acquire four manufacturing facilities at Silvassa, Vapi, Navi Mumbai and Bhiwandi, which can manufacture 68,000 tonnes cotton yarn a year and 170,000 tonnes polyester per year.

The Business Standard reported

BS: Sterling Biotech lenders accept one-time settlement, agree to 65% haircut

9 March 2019: Lenders have agreed to a one-time settlement offer made by the controversial promoters of Sterling Biotech, who have defaulted on bank dues worth Rs 15,000 crore. The promoters, bankers said, have made an offer that entails a haircut of close to 65 per cent for the lenders.

In a statement to the stock exchanges, the company said, “The committee of creditors has approved the withdrawal of the Corporate Insolvency Resolution Process of the company with requisite majority.” 

Lenders had rejected a resolution plan by ACG Associated Capsules Pvt Ltd and also another on liquidation, the company had said on Wednesday. 

A senior public sector bank executive said the promoters Chetan and Nitin Sandesara have roped in an overseas investor to repay the loans and plan to pay part of the outstanding amount to show that their intention is to clear the debt. 
“The promoter has already deposited 5 per cent of the OTS (one-time settlement) offer to banks,” said the source. 

While going in for resolution, the Indian lenders have the option either to recover, rectify or restructure the account.

In this case there is no issue of restructuring and is a case of recovery by way of sale of assets or settlement, said a banker. Almost 90 per cent of the lenders have agreed to the OTS.

Lenders decided to withdraw the account from the National Company Law Tribunal after it was referred for debt resolution under the Insolvency and Bankruptcy Code (IBC), 2016 in June last year.

Bankers said the decision to take it out of NCLT was taken as the liquidation value would be far lower than the dues and the liquidation process will take a lot of time. Hence, in the CoC meeting held on March 4 and 5, lenders rejected a resolution to send the company for liquidation under the IBC. 

According to the annual report for March 2018, signed by its resolution professional (RP) in December 2018, the financial creditors have made claims worth Rs 14,939 crore against the company. Of this, the RP has admitted claims worth Rs 8,967 crore as on November 21, 2018. As on March 31, 2018, reported loans, borrowings and external commercial borrowings stood at Rs 7,564 crore.

The application for settlement was made under section 12A of IBC that gives an opportunity to promoters to make an offer for the firm if binding bids have not been submitted subject to 90 per cent of the lenders agreeing. 

In its annual report, the company said that it was under investigation by the Enforcement Directorate (ED) which undertook a search and seizure operation at its Mumbai and Vadodara office in August 2017. The company is also under investigation by the Central Bureau of Investigation and the Serious Fraud Investigation Office. On May 29, 2018, the ED has attached the properties of the company. The promoters of the company are based overseas.

Interestingly, on February 14 this year, the promoters of Sterling Biotech — Chetan, Chetan’s wife and Nitin Sandesara as well as Hiteshkumar Patel moved a Delhi court seeking cancellation of open-ended non-bailable warrants issued against them, PTI reported. The matter will be heard on April 2.

The case, according to PTI, relates to 249 companies incorporated in the country by promoters. Of this, 200 firms were found to be of ‘benami’ entities used to siphon off loan funds obtained from various banks. The agency had said from the investigation conducted so far, the total amount involved in the money laundering, which “was nothing but proceeds of crime” in the matter, has been quantified at about Rs 8,100 crore.

The charge sheet, filed under the various provisions of Prevention of Money Laundering Act, accused the company of taking loans from a consortium of banks led by Andhra Bank, which had turned into non-performing assets. It said the accused manipulated figures in the balance sheets of their flagship companies and induced banks to sanction higher loans.

The Business Standard reported

ET: Operational creditors benefit equally from IBC: IBBI

9 March 2019: The Insolvency and bankruptcy Board of India (IBBI) Saturday said both operational and financial creditors have benefitted alike from resolutions under the IBC. 

IBBI chairman M S Sahoo said that it would be undair to say that resolutions under the Insolvency and Bankruptcy Code (IBC) were tilted towards operational creditors, as is widely perceived. 

“Our data shows that after resolutions, recovery of financial creditors on an average have got 48 per cent of their claims. While, the operational creditors from the same resolution have got back 48.3 per cent, though marginally, they are better treated,” Sahoo said here on the sidelines of Calcutta Chamber of Commerce interaction on IBC. 

“NCLT (National Company Law Tribunal) does not approve a plan unless it balances the interest of all the stakeholders,” Sahoo said. 

In December, the NCLT had observed that operational creditors should have voting rights to have a bigger say in any resolution process. 

Sahoo, however, did not comment on it.

The Economic Times reported

ET: Era infra lenders get more time to assess fresh bids

9 March 2019: Lenders of Era Infra Engineering have got a 215 day breather from the National Company Law Tribunal (NCLT) after the court agreed to exclude those many days from the stipulated duration of the insolvency process in response to an appeal, which sources termed a ‘last ditch effort’ to prevent the company from going into liquidation. 

The lenders who received a lone bid from a consortium comprising Sun Pharma director Sudhir Valia’s Suraksha Realty did not even vote on the offer as no upfront payments were promised to them. 

The creditors approached the NCLT on the grounds that the insolvency process faced stumbling blocks on account of probes by income tax authorities which made it difficult for prospective bidders to examine the company’s books of accounts, which were in custody of the authorities. 

The construction contractor was amongst the first dozen accounts selected by the Reserve Bank of India for initiation of insolvency proceedings. A consortium of lenders led by Union Bank of India are owed Rs 12,000 crore by the company. 

Several options are now being examined including clubbing the insolvency process of some of the company’s subsidiaries with the parent in order to create a more valuable proposition for prospective buyers, according to sources.

The Economic Times reported

NIE: Telangana, AP engage in fresh row over dues by power utilities

9 March 2019:  A fresh war of words broke out between Andhra Pradesh and Telangana and this time with the power utilities as the focal point, with the TS officials refuting the AP claim that they have to pay Rs 5,000 crore to its power utilities and went on to add that it is the AP which has to pay Rs 2,406 crore to them.

APGenco, however, said the accounts of Northern Power Distribution Company of Telangana Limited (TSNPDCL) show that TS has to pay the amount.  

During the confrontation between the two States following the data theft case, AP leaders, including Chief Minister N Chandrababu Naidu, alleged that TS evaded payment of Rs 5,000 crore to AP power utilities. A day after their claim, TS Transco and Genco CMD D Prabhakar Rao said after the adjustment of dues between the two power utilities, TS would get Rs 2,406 crore from AP.

APGenco said Prabhakar Rao’s statements were totally false and baseless. As per their (TS) power utilities accounts, they are liable to pay Rs 11,728 crore to APGenco. The TSSPDCL accounts show that dues to APGenco are  Rs 8,274.23 crore. The balance is due from TSNPDCL, it said in an official release.

APGenco said that it had supplied power to TS Discoms after bifurcation of the State for which the TS Discoms had to pay Rs 5,732.4 crore towards sale of power after adjustments. As far as APGenco dues are concerned, the question was raised in Parliament as well as in the Chief Secretaries meeting. “They have agreed to clear the dues in monthly instalments of Rs 150 crore along with power  bill. However, they have not fulfilled the promise,” APGenco said.

With this, APGenco has no other alternative than moving a petition under Insolvency Act before the National Company Law Tribunal (NCLT), Hyderabad Bench. TS power utilities have approached the TS Electricity Regulatory Commission (TSERC) against the AP power utilities seeking APGenco not to approach NCLT for recovery of dues. “If there are no dues to APGenco, there is no need for TS Discoms to approach TSERC stopping us from approaching NCLT,’’ APGenco said.

Speaking to reporters in Hyderabad on Friday, Prabhakar Rao said Telangana was ready to reconcile the accounts with the AP within 24 hours if AP comes forward in this regard. He said perhaps the senior officials of AP power utilities failed to give proper information to the top AP government functionaries. Prabhakar Rao said though Telangana wrote several letters for the reconciliation of accounts between the two power utilities, AP had failed to come forward. Instead, AP approached NCLT.

“When any company is in losses, then a case will be filed before NCLT. It means that AP is intended to take over control of TS power utilities,” Prabhakar Rao commented.

“APGenco preferred legal recourse by approaching NCLT under insolvency and bankruptcy code, 2016 to settle the power purchase dues of TS Discoms ignoring the amount receivable from AP power utilities. In fact, TS power utilities have to get Rs 2,406 crore from AP. As pleaded before the NCLT by APGenco, if the petition is admitted and the NCLT appoints an insolvency resolution professional (IRP), the management of Discoms will be entrusted to the third party i.e., IRP,” he said.

According to Prabhakar Rao, post bifurcation of the State, the net receivable amount from AP power utilities to TS power utilities is Rs 2,406 crore.

The New Indian Express reported