ET: NBCC to deliver all Jaypee flats within three years

11 March 2019: NBCC India plans to deliver all Jaypee Infratech flats within three years. The commitment was conveyed in a meeting held between NBCC and home buyers at Scope Convention Centre on Monday.

The company in its initial bid submitted to the National Company Law Tribunal (NCLT) has given a timeline of 4-5 years depending on the project’s construction status. However, after meeting with home buyers NBCC plans to revise the timeline.

One of the buyers, Bidhayak Rakshit, joint general secretary, Aman Buyers’ Welfare Association, who attended the meeting informed ETRealty that NBCC has said that their prime goal is to complete and handover flats to buyers.

According to a source, Anoop Kumar Mittal, CMD, NBCC did a site survey of Jaypee projects last Sunday. Mittal declined to comment.

For now, NBCC has shared a project-wise schedule and has said that no additional charges would be levied on the home buyers for any incidental increase in super-area.

Home buyers however demanded that NBCC share a tower-wise schedule. “We demanded that all agreements, plans, designs entered between Jaypee and home buyers should remain unaltered,” said Rakshit.

NBCC has also shown commitment to honour the agreement of refund seekers with Jaypee, said the source quoted above.

Rakshit however objected to the completion schedule of March 2021 proposed by NBCC for Jaypee Aman project. “The project is 90% complete and only a few towers (3-4) are left for offer-of-Possession in Aman, it should not take more than three months to complete, whereas the time timeline indicated by NBCC seems unrealistic.”

The Economic Times reported

LL: Notice Of NCLAT Appeal Has To Be Served Regardless Of Supply Of Advance Copy of Appeal Paper Book: SC

11 March 2019: The Supreme Court has observed that stipulation of service of notice on the other side, pursuant to issuance of notice by the National Company Law Appellate Tribunal in an appeal, has to be complied with, regardless of supply of advance copy of appeal paper book prior to the issuance of notice by NCLAT.

The State Bank of India had approached the National Company Law Appellate Tribunal against an order passed by the National Company Law Tribunal, Calcutta. It set aside the NCLT order and directed to admit the application filed by the bank against Jai Balaji Industries Limited under Section 7, Insolvency and Bankruptcy Code. The company preferred appeal before the Apex court.

Senior Advocate Kapil Sibal, on behalf of the company, approached the Apex Court contending that principles of natural justice, was violated as the company was neither been served with notice of appeal before the NCLAT nor been given a hearing before it. On the other hand, Mukul Rohatgi, who appeared for the bank, submitted that the advance copy of the appeal paperbook filed by the Bank and was duly delivered by post at the registered office of the Company, wherein it showed intent to challenge the order of the NCLT.

The bench comprising Justice NV Ramana and Justice Mohan M. Shantanagoudar observed:

“Rule 48 of the NCLAT Rules clearly stipulates service of notice on the other side, pursuant to issuance of notice by the NCLAT in the appeal, regardless of supply of advance copy of appeal paperbook prior to the issuance of notice by NCLAT. Further, Rule 52 of the NCLAT Rules categorically states that the judicial section of the registry of the NCLAT shall record, in the “Notes of the Registry” column in the order sheet, the details regarding completion of service of notice on the respondents.”

Therefore, the court observed that, since no notice was served upon the company before the NCLAT as stipulated under the rules, and its right to be heard, audi alteram partem, has been violated.

The bench then set aside the NCLAT order and remanded the matter back to NCLAT with a direction to dispose of the matter as expeditiously as possible after affording an opportunity of hearing to the parties.

LiveLaw reported

 

ET: Former Essar Steel directors approach NCLAT against ArcelorMittal takeover

11 March 2019: Three directors of erstwhile board of Essar Steel on Monday approached the National Company Law Appellate Tribunal (NCLAT) against a lower bankruptcy court order that allowed takeover of the company by ArcelorMittal. 

The matter was mentioned before a two-member bench headed by Chairman Justice S J Mukhopadhaya, which asked it to be listed after the Ahmedabad bench of the National Company Law Tribunal (NCLT) posts its full written order. 

The three directors of Essar Steel are – Prashant Ruia, Dilip Oommen and Rajiv Bhatnagar. 

Standard Chartered Bank has also approached the appellate tribunal against the order. 

On Friday, the Ahmedabad bench of the NCLT had approved the lenders’ plan to let global steel giant ArcelorMittal take over the debt-idden Essar Steel. 

Passing an order, the tribunal had suggested that the payment of Rs 42,000 crore by ArcelorMittal be distributed among financial and operational creditors in the ration of 85:15. 

The detailed written order of the Ahmedabad bench is still awaited.

The Economic Times reported

LM: NHPC to bid for Rangit hydro project in Sikkim under IBC

11 March 2019: Buoyed by the winning bid for Lanco’s Teesta VI, state-owned NHPC will bid for Jal Power Corporation’s Rangit hydro project in Sikkim, which is undergoing insolvency proceedings, NHPC Chairman and MD Balraj Joshi said.

The Rangit Stage IV 120 MW project is a stressed asset and is undergoing insolvency proceedings in the National Company Law Tribunal (NCLT).

Earlier this month, the CCEA approved NHPC’s proposed acquisition of Lanco Teesta Hydro Power in Sikkim at a bid out price of  907 crore. The total investment approval for the project is 5,748.04 crore which includes  907 crore bid amount.

“We are also looking at another project which is also in Sikkim again. We are just waiting for the (commercial bid to open). This is a Jal Power project. This is also at the same status as Teesta VI. They are yet to call for EoI (expression of interest). NCLT will hear the case on March 15,” Joshi told reporters in a press conference.

NHPC Director Finance M K Mittal said this is the first time a public sector firm is buying a private entity through NCLT.

“We have been a frontrunner in buying one project through NCLT. No other PSU has been able to do so. We have been very aggressive,” Mittal said.

Sikkim government had awarded Rangit project to Jal Power on November 1, 2004. An agreement for setting up of Rangit Stage-IV was inked with the state on December 9, 2005 on build, own, operate and transfer (BOOT) basis.

The project envisages installation of three units of 40 MW each (3X40).

These proposed acquisitions by NHPC assume significance in view of its plans to achieve 10 GW installed generation capacity by 2022, up from 7071.2 MW at present.

Talking about the performance of NHPC, Joshi said the cumulative generation from all power stations for the current fiscal stands at 23,057 million units (MUs) (as on March 10, 2019) and shall surpass previous record of 23,404 MUs.

Joshi also told reporters that NHPC has been appointed as an aggregator under Pilot Scheme–II for procurement of aggregated power of 2500 MW for 3 years through PFC Consultancy Ltd, which is a nodal agency for that.

Now the process is for engaging generators to supply power under the scheme. The scheme shall involve transaction of electricity of around 18,615 MUs at 85 per cent plant load factor (capacity utilisation) of 2500 MW and turnover of more than of 7,000 crore on yearly basis.

The Livemint reported

LM: RBI may challenge NCLAT order on classifying IL&FS debt as NPAs

11 March 2019: The Reserve Bank of India (RBI) is likely to challenge the National Company Law Appellate Tribunal’s (NCLAT’s) order stating that the debt of all IL&FS group firms should not be declared as NPAs. The move is based on the view that the insolvency court’s decision is tantamount to judicial overreach.

In its order dated 25 February, NCLAT had said due to the non-payment of dues by Infrastructure Leasing and Financial Services (IL&FS) or its subsidiaries, no financial institution will declare the accounts as a non-performing asset (NPA) without the prior approval of the appellate tribunal.

RBI is likely to file a review application in NCLAT this week.

“The court’s order encroaches into RBI’s regulatory domain and this could set a precedent if left unchallenged. These issues fall under the ambit of RBI’s power as the regulator of the banking sector,” said a senior RBI official.

RBI has laid down the guidelines to classify an account as NPA under the Income Recognition and Asset Classification norms. Under these guidelines, any account which has missed payment beyond 90 days should be declared as an NPA. Separately, these norms also specify the amount of provisioning a bank has to set aside once it is tagged as an NPA.

Banks had been seeking relaxation in the classification of IL&FS NPAs, as repayments from IL&FS subsidiaries were not coming forth. This request was, however, turned down by RBI as it believed that such special dispensations will ruin the credit culture. Subsequently, NCLT lifted the moratorium on recoveries from special purpose vehicles, which are ring-fenced from the group, and entities that have cash flows coming in.

IL&FS group’s consolidated debt stands at  90,000 crore, of which it owes about  50,000 crore to banks.

In November, RBI deputy governor N.S. Vishwanathan warned it is not the job of banks to bail out borrowers. “Banks are not supposed to be shock-absorbers of first resort of the difficulties faced by their borrowers as banks do not have the luxury of delaying payments to their depositors.”

“While powers of…NCLAT to pass any order in interest of justice and for revival of corporates cannot be questioned, the moot question is can banks be forced to make payments even when the account has become NPA. Hence…the banks or RBI can challenge the order dated 25 February on various grounds and not necessarily on judicial overreach. It is for RBI or rather more particularly the banks to decide whether or not to challenge the order, not necessarily only on account of regulatory consequences and provisioning part, but primarily on basic legal issues,” said S.D. Kelkar, former chief general manager and head, law, State Bank of India.

The Livemint reported

LM: Jet Airways gets ₹2,050 crore loan from PNB

11 March 2019: Jet Airways (India) Ltd has secured fresh credit facilities of  2,050 crore from state-run Punjab National Bank (PNB) that could provide a temporary lifeline to the cash-strapped airline. The Mumbai-based airline has raised foreign currency term loans worth  1,100 crore and a non-fund based credit facility of  950 crore from PNB, according to loan documents, copies of which were reviewed by Mint.

Although the documents mention that Jet Airways will use the credit facility for its working capital needs, a person directly aware of the airline’s plans said on condition of anonymity that the money would be primarily used to pay rental dues to aircraft lessors and salary arrears.

If the loan proceeds are used to pay dues to lessors and pare the company’s debt, then this may improve Jet Airways’ credit rating and also help it resume flights it stopped after at least 49 leased planes were grounded since 8 February because of non-payment of rents.

A spokesperson for Jet Airways did not respond to an emailed questionnaire.

In an emailed response to queries, a spokesperson for Abu Dhabi-based Etihad Airways PJSC, which has a 24% stake in Jet Airways, said: “As a minority shareholder, Etihad continues to work constructively with the Jet Airways board, management team and other stakeholders.”

The credit facility has been raised in two lots through separate agreements with PNB. Under one agreement, Jet Airways received a credit facility of 1,050 crore, including a term loan in dollars worth  350 crore (at a notional rate of  67 per dollar) and a non-fund based facility of  700 crore. The second agreement, a credit facility of 1,000 crore, includes a term loan of 750 crore and a non-fund based facility of  250 crore.

“The loan has been raised in dollars at a stronger rupee as compared to the value of rupee now. So, there is a cost arbitrage, which could help the company to repay larger amounts of rupee loans,” said the person cited earlier.

Both the term loans have a five-year repayment tenure, although their interest rates vary. The  750 crore loan has been sanctioned at a rate of 12-month Libor plus 5%, with a yearly reset. The rate for the  300 crore term loan is 6-month Libor plus 3.5%, with a half-yearly reset. The loan agreement was signed on 14 January.

Jet Airways has an option to sell down as much as  250 crore of the term loan to other investors, according to the loan agreements with PNB. “The non-fund based facility can be later converted to current account credit facility and be used to fund operations or meet other dues,” said the person cited earlier.

As a precondition to availing the credit facility, Jet Airways has created a trust and retention account (TRA) by entering into a tripartite agreement with PNB and ICICI Merchant Services Pvt. Ltd. A TRA mechanism—popular in infrastructure projects—is structured to protect lenders against the borrower defaulting by sequestering the project’s cash flows. This is achieved by giving the TRA agent control over future cash flows.

The tripartite pact mandates the TRA agent to directly make all payments to lenders, without the borrower’s intervention, including managing the project’s operation and maintenance expenses, plus maintaining a debt servicing reserve and a separate cash reserve for meeting operational expenses. After meeting these obligations, TRA hands over the balance funds to the borrower.

According to the agreement, copies of which have been reviewed by Mint, TRA has the right to receive all the money coming to Jet Airways through its agent, ICICI Merchant Services.

PNB’s  2,050 crore credit facility to Jet Airways has been secured against its four flight training simulators, trade receivables coming to ICICI Merchant Services and any additional receivables coming to TRA by virtue of Jet Airways’ agreement with PNB or any other merchant services provider in the future.

As of 31 December, Jet Airways’ total outstanding dues, including loans and other payables, were  9,610.16 crore. The firm said it incurred a total loss of 3,208.23 crore in the nine months through December, with negative net worth of  10,370.24 crore.

“These conditions, together with four successive quarters of losses due to high fuel prices and fluctuating currency rates, coupled with tight liquidity conditions, pose a serious challenge to the company, indicating the existence of material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern,” the auditors of Jet Airways said in a note accompanying the company’s financial statement.

Ratings agency Icra Ltd downgraded Jet Airways’ credit ratings in September, October, December 2018 and January 2019. On 23 February, Jet’s board approved the conversion of some of its loans into equity, which will lead to founder and chairman Naresh Goyal’s stake dropping from 51% to below 20%.

The Livemint reported

LM: Tata Power unlikely to agree on lower tariffs for Prayagraj Power Generation

11 March 2019: Tata Power Ltd will not agree to lower tariffs for its proposed acquisition of Prayagraj Power Generation Co. Ltd as suggested by the electricity regulator in Uttar Pradesh,a company executive said on the condition of anonymity. 

The regulator recently said Tata Power would receive the plant without any associated debt and interest costs; so it can afford to reduce the power tariff by 40 paise once the transaction is completed.

During a hearing on 6 March, the UP Electricity Regulatory Commission observed: “There is no denying the fact that now with zero debt, the element of interest on loan, which would be part of the fixed cost, becomes zero. As a result, enough headroom is available for the new incumbent to share this saving with consumers… If power sector assets are sold by financial institutions at much less than the book value without a corresponding adjustment in tariff, it will create a perverse incentive to buy these assets at the cost of the public. This will also create a possibility of undue arbitrage.”

The commission also said a “reduction in fixed charge by a reasonable amount” is necessary to safeguard the consumer’s interest and directed State Bank of India the petitioner, to offer a nearly 40 paise/unit discount in tariff.

In November 2018, Resurgent Power—a joint venture of Tata Power, ICICI Bank and a few global investors—successfully bid for a 75.01% stake in Prayagraj Power, making a one-time settlement offer. Prayagraj Power owns and operates a 1,980 MW power plant in Uttar Pradesh’s Bara district. Resurgent Power agreed to pay around 6,000 crore to the plant’s lenders and give them 14% equity stake in the plant after the acquisition. It also agreed to settle tax dues and not pursue disputes with the state power distribution company.

In order to transfer the asset to Resurgent Power, SBI reached out to the electricity regulator in UP, which later suggested the tariff cut.

A spokesperson for Tata Power said, “The sale has happened under the IBC process and the regulator cannot intervene. It is for banks to take a call. The current petition is for an ownership change in the asset; we cannot modify the PPA. It is not within the purview of the regulatory commission to decide this.”

He said no stressed asset within the power sector will be resolved under the IBC process if PPAs are subject to modification. “We have made the offer to SBI; we will not change anything,” he said.

While a Supreme Court directive on 16 November gives interim relief to debt-laden power firms from bankruptcy proceedings, banks are hurrying to settle cases under one-time settlement offers.

The case will be next heard on 25 March.

The Livemint reported