BQ: ACG Capsules Seeks NCLT Relook At Its Bid For Sterling Biotech

25 April 2019: ACG Associated Capsules, whose bid for Sterling Biotech was rejected by lenders earlier, approached the National Company Law Tribunal on Wednesday asking them to reconsider the bid.

This comes amid lenders moving an application seeking to withdraw the bankruptcy plea on Sterling Biotech.

The tribunal had fixed April 26 as the next date of hearing on the plea seeking to take the company out of the bankruptcy proceedings but has not fixed a date for hearing the plea to reconsider the bid from ACG.

It’s not known how much ACG has agreed to pay for the crippled company, while the absconding promoters have offered to pay Rs 3,100 crore to an Andhra Bank-led consortium by June 2019 without interest and penalties on a debt of Rs 7,500 crore.

The bidder’s counsel said it is better for a company to remain operational than going for liquidation.

The lenders had rejected the resolution plan submitted by ACG and opted to send the company for liquidation earlier this month.

Sterling Biotech is the flagship of the Sandesara family’s Sterling Group and its four promoters — Nitin Sandesara, Chetankumar Sandesara, Dipti Chetan Sandesara and Hiteshkumar Patel — are absconding and are facing extradition.

Earlier in the month, the tribunal had observed that the application for withdrawing the insolvency plea against Sterling Biotech by Andhra Bank, one of its financial creditors, was filed on the last day of the statutory period and then the resolution professional filed the application for withdrawal after the statutory period.

The first withdrawal of insolvency plea was filed by the financial creditors but in violation of the extant rules, while the second was filed by the resolution professional after the completion of the statutory period, hence, the maintainability of the withdrawal application was questionable, the tribunal had observed.

It can be noted that at the last hearing on March 26, NCLT for the second time questioned the motive of the Andhra Bank-led lenders in withdrawing the bankruptcy plea against Sterling Biotech and to choose a one-time settlement with the absconding promoters.

The move came after the banks accepted an out-of-court settlement offered by promoters,the Nitin Jayantilal Sandesara and family, offering Rs 3,100 crore of repayments by June 2019 against a loan default of Rs 7,500 crore, excluding interest and penalties.

The Sandesara group owes over Rs 15,000 crore to lenders. Another group company Sterling SEZ is also under bankruptcy proceedings and owes over Rs 8,100 crore to its financial and operational lenders.

At the March 11 hearing also, the tribunal had questioned the one-time settlement by absconding promoters.

“Over 90 percent of lenders approved the settlement offer of around Rs 3,100 crore and under Section 12A of the bankruptcy code,” Nishit Dhruva, managing partner of MDP & Partners, who was representing the lenders in the case, had argued on March 11.

The lenders have already got a little over 5 percent of the default amount of Rs 179.67 crore from the outstanding amount on the day of default.

Apart from defaults, the promoters are also accused of fraud and are being investigated by the Central Bureau of Investigation, the Enforcement Directorate and the Serious Frauds Investigation Office for money laundering. They have reportedly attached assets worth Rs 4,700 crore.

The Bloomberg Quint reported

FE: Why Ericsson may be asked to return Rs 580 crore to RCom; all that happened so far, and what’s next

17 April 2019: Anil Ambani’s Reliance Communications, which recently had to pay Ericsson dues worth Rs 580 crore, saving its chairman from going to jail, may get the money back if it moves to insolvency proceedings, the NCLAT (National Company Law Appellate Tribunal) had said earlier last week. Since financial creditors get preference over operational creditors under the Insolvency and Bankruptcy Code of 2016, and Ericsson being an operational creditor, it will be expected to return the money it got in dues.

This is because the insolvency proceeding that Ericsson had initiated against RCom was put on stay by the tribunal, and the settlement between the two happened outside the insolvency provisions when the stay was in effect, said Daizy Chawla, a lawyer. Now, if the stay were to be vacated to allow the insolvency proceedings to resume, the settlement money paid in the interim would have to be returned, Daizy Chawla, Senior Partner, Singh and Associates, told Financial Express Online.

The NCLAT is expected to hear RCom’s application for vacating the stay on 30 April 2019.

What next for Ericsson?

When Mumbai NCLT had asked for insolvency proceedings against RCom, Ericsson should have gone ahead with it, Daizy Chawla told Financial Express Online. “Justice Mukhopdhyay agreed for RCom’s proposal of settlement, which was never in the provision,” she said. Now that RCom seems to have no other option, it wants to go ahead with insolvency proceedings, she added.

On the other hand, there was no application for withdrawal of insolvency petition. In RCom’s case, there is no Committee of Creditors formed yet, hence there is nobody to authorise the withdrawal. “Even if there was a committee, Ericsson would not have got the payment before financial creditors, nobody would have accepted that,” Daizy Chawla said citing the provisions of IBC.

Daizy Chawla’s firm represents one of the other operational creditors with dues pending from RCom.

Now, Ericsson needs to file an application for withdrawal of insolvency petition with NCLT. Meanwhile, RCom would be looking for the court to vacate the stay on the insolvency proceedings. Much would depend on whether the NCLAT allows RCom’s application for withdrawal of stay on insolvency, or Ericsson’s application for withdrawal of the proceedings. Daizy Chawla says that there can’t be a decision on withdrawal of the insolvency proceedings before the Committee of Creditors (CoC) is formed.

Meanwhile, Ericsson refused to comment on the reports that it may have to return Rs 580 crore in dues that it recently recovered from Reliance Communications, should the insolvency proceedings on the Anil Ambani-led company resume. When asked what would be Ericsson’s next step regarding the RCom case, Ericsson India head Nitin Bansal refused to comment stating that the matter is sub judice.

Ericsson-RCom case: Soured relations

RCom and Ericsson had begun their business transactions in 2013 to provide services for RCom’s networks. When RCom failed to pay Ericsson on time in 2016 and after several months of waiting and assurances, Ericsson was the first creditor to move NCLT in September 2017. NCLT allowed the initiation of insolvency proceedings for RCom, which was put on stay, with RCom promising to pay Ericsson about Rs 550 crore as settlement fees to avoid insolvency.

On 19 March 2019, RCom paid around Rs 580 crore to evade its chairman from going to jail after the matter had escalated to the Supreme Court.

The Financial Express reported

BS: NCLAT seeks Anil Ambani’s response in contempt plea moved by HSBC Daisy

17 April 2019: HSBC Daisy had moved the NCLAT alleging that Anil Ambani’s companies Reliance Infratel, Reliance Communications Infrastructure and RCom have breached a consent decree by not paying the Rs 230 crore settlement amount within 180 days of June 29, 2018 when the agreement was taken on record by the appellate tribunal.

Minority investors of Reliance Infratel had moved NCLAT alleging oppression and mismanagement after the company had allegedly not taken their consent for the selling the tower and fiber assets. They had moved the NCLAT in an attempt to thwart the then sale to Reliance Jio Infocomm, which had then forced Reliance Infratel to settle the issue with them.

Following the agreement, both the parties had submitted to the NCLAT their final consent terms after which the appellate tribunal had allowed both parties to withdraw their appeals. The said agreement amount, however, was never paid, HSBC Daisy has alleged.

This is the second such contempt petition moved against Ambani and his companies. Earlier on February 20, The Supreme Court had held RCom Chairman Ambani and two of his top executives guilty of contempt of court for wilfully failing to pay the dues to telecom equipment maker Ericsson.

The court had also directed Ambani, Reliance Telecom Chairman Satish Seth, and Reliance Infratel Chairperson Chhaya Virani to pay Rs 453 crore within four weeks or face a jail term of three months. It also slapped a fine of Rs 1 crore each for their “cavalier attitude” towards the court’s orders.

Ericsson India had in September 2017 moved insolvency petitions against RCom, Reliance Telecom, and Reliance Infratel at the Mumbai Bench of the National Company Law Tribunal (NCLT) for failing to pay their dues amounting to nearly Rs 1,500 crore. The petition was admitted by the NCLT in May 2018, following which the three Reliance group companies approached the NCLAT.

It was in the NCLAT that Ericsson India and the three Reliance companies had come to a settlement that the latter would pay Rs 550 crore within 120 days that is by September 30, 2018. The companies had failed to do so, following which the contempt petition had been moved by Ericsson India.

The Business Standard reported

ET: With just 5 planes flying, Jet Airways struggles to stay in sky; seeks Rs 400 cr emergency funds

17 April 2019: Crisis continued to deepen at cash-starved Jet Airways Tuesday as the airline flew just five planes and the management made desperate attempts to garner emergency funds worth Rs 400 crore to stay afloat even as the lenders remained undecided on extending the lifeline.

While the meeting of the ailing airline’s board in Mumbai that went on for over three hours remained inconclusive, officials at the lenders and the government maintained that efforts are on to revive the carrier. However, the carrier’s pilots union NAG Tuesday threatened to seek resolution under insolvency law as salaries dues remained unpaid.

As SBI Capital Markets vets the initial bids received for stake purchase in the struggling Jet Airways, the airline’s founder and former chairman Naresh Goyal opted out from bidding, sources said.

With uncertainty mounting over the future course for the airline, which has been in operation for more than 25 years, its shares crashed nearly 19 per cent during the day amid reports that the carrier might temporarily suspend operations.

Civil Aviation Secretary Pradeep Singh Kharola said the airline has sought emergency funds worth around Rs 400 crore from banks and that the matter is between the carrier and the lenders.

Briefing reporters in New Delhi, he said Jet Airways was operating only five planes.

Government officials said lenders are discussing ways to revive the crisis-hit carrier and fresh funds are likely to be infused shortly.

“Discussions for reviving the airline are underway and nothing has been finalised as of now,” Punjab National Bank Managing Director and CEO Sunil Mehta told reporters in New Delhi.

Representatives of various lenders to Jet Airways are also understood to have discussed issues related to Jet Airways with Financial Services Secretary Rajiv Kumar.

Jet Airways has a debt burden of more than Rs 8,000 crore.

SBI Capital Markets has the mandate for Jet Airways sale on behalf of the SBI-led consortium of the domestic lenders to the debt-ridden private carrier.

Earlier in the day, sources at the airline said all options would be explored before deciding on continuing with its operations.

Shares of Jet Airways plunged nearly 19 per cent during the day’s trade amid reports that the airline might temporarily shut down its operations. The carrier has already suspended international operations till April 18.

Jet Airways said it is awaiting “emergency liquidity support” from the SBI-led consortium of lenders to arrest further deterioration in its services.

Sources said that Jet Airways CEO Vinay Dube has written a letter to SBI, which is the lead lender, seeking immediate fund infusion of Rs 400 crore.

Dube has said that if funds do not come, then the airline would have to ground its entire operations, sources added.

In the morning, Civil Aviation Minister Suresh Prabhu called for a review of issues related to Jet Airways, including rise in airfares.

The civil aviation ministry, in a late evening tweet, said that as instructed by the minister, a review meeting was held under the chairmanship of the secretary.

“Airlines agreed to use lower price buckets for selling tickets in order to keep fares within reasonable limits,” it said.

NAG’s Vice President Aseem Vlianini said the union might approach the National Company Law Tribunal (NCLT) for a resolution.

Entities seeking resolution under the Insolvency and Bankruptcy Code (IBC) should have to first get the go-ahead from the tribunal.

The union, which has around 1,100 members, said the airline is only operating around 450 seats per day and that operations would have to be suspended if money does not come in.

Management has said that salaries are to be paid from the additional funding only but SBI has said that salaries would not be part of the funds, according to Vlianini.

“I think SBI is not serious (about funding),” he said.

An airline source said the number of pilots have reduced to around 1,300 after about 400 pilots left in the wake of the crisis.

“Tuesday alone 23 pilots left the airline,” the source claimed, adding that over 100-odd pilots have joined budget carrier IndiGo.

A government official said that approaching the NCLT for Jet Airways is not an option at this stage.

“Right now, the lenders are trying to resolve the issue by seeking bidders for investment. This is not the time for lenders to approach NCLT for resolution,” the official said.

The Economic Times reported

FE: Troubled power cos: At least 3 firms could see resolution in two months

17 April 2019: The resolution of at least three troubled power companies, including Coastal Energen, GMR Chhattisgarh and Jaiprakash Power Ventures, could be completed in the next two months, bankers have indicated to FE.

In the case of GMR Chhattisgarh, the Adani Group is expected to take control later this month following a nominal upfront payment. Lenders have agreed to the change in management and will continue to extend loans to the business.

Also, all lenders to Jaiprakash Power are expected to approve the restructuring with the existing promoter this week. An ICICI Bank-led consortium had been looking to restructure the business which has piled up a debt of over `20,000 crore;the company has plants at Vishnuprayag, Bina and Nigrie.

According to the plan, the promoters will make an upfront payment of 20% over the next one year and lenders expect to upgrade the account by quarter ending June 2020. The account, already an NPA (non-performing asset) on the books of most banks, has been classified in the D2 category with at least one large state-owned bank.

The lenders with exposure to the project are believed to have made provisions for anywhere between 40%-50% of the total exposure.

Lenders are also hoping to complete a one-time settlement with Ahmed Buhari-promoted Coal and Oil group for control of thermal power generation company Coastal Energen. The group that once owned the 1,200-MW thermal plant based in Tamil Nadu has offered to pay `3,000 crore. Lenders are awaiting 10% of the amount upfront either as cash or in the form of bank guarantees.

Bankers have been working to resolve stressed power assets outside the Insolvency and Bankruptcy Code (IBC) since September last year. This was after the Supreme Court asked Reserve Bank of India and others to desist from invoking insolvency proceedings against corporate defaulters per the February 12 circular.

Resolution to Prayagraj Power Generation Company (PPGCL), however, could stretch further, lenders aware of the developments told FE. Renascent Power Ventures, arm of Tata Power-backed Resurgent Power Ventures that acquired 75% in PPGCL is unhappy with the Uttar Pradesh energy regulator UPERC’s direction asking to offer a discount of 14 paise/unit on the fixed charges to the state power distribution entity (discom).

While Renascent Power Ventures has suggested that bankers appeal the UPERC order at the Appellate Tribunal for Electricity, circumstances indicate the process could see a 6-8 month delay.

Given the circumstances, PPGCL lenders are considering asking Renascent Power Ventures to comply with the UPERC’s directions or consider bankruptcy proceedings.

“For lenders, the consideration to appeal the UPERC it is a difficult decision since it could take several months. One interesting factor though is a certain clause within the power purchase agreement with the discoms that gives PPGCL the option not to have to comply with the direction on discount on fixed charges. However, the clause is only valid if 26% stake is with the promoter, which Renascent may not agree to.”

Around 34 stressed power assets are named in a Parliamentary Standing Committee report and 11 plants, with a capacity of around12-15GW, and a total debt of around Rs 80,000-90,000 crore are being resolved under SAMADHAN (Scheme of Asset Management and Debt Change Structure). Under SAMADHAN, banks are required to assess the sustainable debt of the units.

A majority of experts have observed that the apex court’s decision to declare the RBI’s February 12 circular ultra vires would bring relief to power and infrastructure companies. However, soon after the decision, bankers noted that even with the SC’s September direction against invoking insolvency proceedings in stressed power assets, there has been little progress in resolution. To date, the only successful resolution has been in case of SKS Power Generation (Chhattisgarh) that was taken over by Hong Kong-listed company Agritrade Resources.

The Financial Express reported

HI: Orders in Deccan Chronicle case deferred to April 20

16 April 2019: The Hyderabad Bench of National Company Law Tribunal (NCLT) on Tuesday deferred orders in the Corporate Insolvency Resolution Process (CIRP) case of debt-ridden Deccan Chronicle Holdings Limited (DCHL) to April 29, following objections raised by Suhani Trading and Investment Consultants Private Limited, a secured financial creditor, on some provisions in the Resolution Plan submitted by Vision India Fund of Kolkata-based Srei Multiple Asset Investment Trust (SMAIT).

The Plan was approved by the Committee of Creditors (CoC) and is now before the tribunal for approval.

Suhani Trading, which also gave its consent for the Resolution Plan, brought to the notice of the NCLT Court that the Plan has a provision which seeks waiver of third-party guarantees offered by DCHL. It filed an interim application (IA), saying such waiver was against provisions of Insolvency & Bankruptcy Code (IBC).

Following this, the NCLT Court posted the IA for hearing on April 29. It will also take up IAs filed by GST and others on the same day.

Besides, orders on the IAs filed by IDBI Bank and Indian Overseas Bank challenging lower allocation of funds for it in the Resolution Plan, which were scheduled to be delivered on Tuesday, would also be given on the same day.

On the same day (April 29), the Court will also give orders on the interim application (IA No.66/2019) which was filed for the approval of Resolution Plan.

The Hans India reported

MC: Banks have to mark IL&FS accounts as NPAs after default: RBI to NCLAT

16 April 2019: The RBI on April 16 told the National Company Law Appellate Tribunal that banks will have to classify the accounts of debt-ridden IL&FS and its group companies as NPAs in terms of its master circular and the Supreme Court judgement. It is the obligations of the banks to mark any loan as NPA after a default of 90 days, and they cannot be relieved from doing that, said the Reserve Bank of India, adding that it is a process which every bank has to follow.

Senior advocate Gopal Jain, representing the RBI, submitted before the NCLAT that true reflection in the books of the banks is important for fair accounting because it has early warning signals.

“The whole thing is to have a transparent and fair accounting system, so that the health of the institution is not affected.

“And whatever process, you are having for resolution in IL&FS, we are not on recovery and the resolution process, we are only saying banks has to record the position of NPA in terms of the master circular and the supreme court judgement, which recognises NPAs in the circular,” Jain said.

According to him, the job of the regulator is to have right policy for all the banks.

He further said that banks are finalising their accounts and need clarification from the NCLAT on this.

“There is obligations for the banks that after 90 days it has to show (as NPA) in their account,” said Jain, adding “banks can not be relieved of their obligations for bad loans from their account book”.

The NCLAT-bench headed by Chairman Justice S J Mukhopadhaya said it would hear the RBI on next date of hearing, which is on April 29.

The RBI has moved the NCLAT seeking modification of its order that restrained banks from declaring accounts of IL&FS and its group companies as NPAs.

According to the apex bank, there was an overlap of power.

Passing an order on February 25, the NCLAT had said : “We make it clear that due to non-payment of dues by the Infrastructure Leasing & Financial Services Limited’ or its entities including the Amber Companies’, no financial institution will declare the accounts of Infrastructure Leasing & Financial Services Limited’ or its entities as NPA’ without prior permission of this Appellate Tribunal”.

The appellate tribunal on Tuesday also took on record the information provided by IL&FS about the four amber listed group companies.

It has also asked the government and IL&FS to be ready with similar information for the remaining 9 amber companies.

During last hearing on April 9 the NCLAT had directed debt-ridden IL&FS to submit information over investment made by pension and provident funds in its four group firms, and also sought details of financial liabilities of those entities.

Under its resolution plan, the government has categorised IL&FS group entities into green, amber and red categories based on their respective financial positions.

Moneycontrol reported

LM: NCLAT adjourns IL&FS case hearing to 29 April

16 April 2019: The National Company Law Appellate Tribunal (NCLAT) on Tuesday adjourned the hearing on the matter of the debt-ridden Infrastructure Leasing and Financial Services (IL&FS) to 29 April.

During the hearing, the tribunal observed that IL&FS should distribute funds to smaller creditors, including the investments made by provident funds (PF) and pension funds, in a manner that 80% of their entitled amounts are paid.

The Reserve Bank of India (RBI) counsel Gopal Jain said at the hearing that banks’ non-performing assets (NPAs or bad loans) should reflect in the books of the banks.

The NCLAT had, in February, ordered that no financial institution would declare any account of the IL&FS group entities as an NPA without the tribunal’s prior permission. Last month, the RBI moved the appellate tribunal against its February order.

The LiveMint reported

BS: Jet Airways likely to get funding amid reports of temporary shutdown

16 April 2019: Funding for debt-laden Jet Airways is likely to come through, said a government official on Tuesday amid reports that the airline is likely to shut down temporarily.

Jet lenders, led by State Bank of India (SBI), met financial services secretary Rajeev Kumar as the airline’s share price fell by as much as 19%, Live Mint website reported.

Business channel CNBC TV18, citing unnamed sources, said Jet’s CEO has been authorised by directors at a board meeting to engage with its lenders one last time, and halt operations late Tuesday, if no funds arrive.

Separately, ET Now reported Jet’s management has proposed to suspend all operations as one option at Tuesday’s board meeting, or alternately continue with skeletal operations with any interim funds infused by SBI.

Jet Airways did not immediately respond to a Reuters request for comment.

Its banks tried to calm investors and hint at a rescue of the airline that is saddled with roughly $1.2 billion in debt.

“Lenders are committed to a revival plan for Jet Airways,” Punjab National Bank’s Managing Director Sunil Mehta told media on Tuesday.

“SBI is working on the emergency funding, everything is under discussion, nothing is finalised.” Mehta’s comments come after Jet informed all employees in a letter on Monday it was extending a suspension of international flights until Thursday due to a lack of funds.

Separately, a government official told media the funding for the airline was likely to come through and that the banks were not looking to take the airline to bankruptcy court.

The airline, which over and above its bank borrowings owes money to its lessors, staff and others, has been struggling for weeks after failing to receive a stop-gap loan of about $217 million from its lenders as part of a rescue deal agreed in late March. 

In a bid to rescue the 25-year old carrier, Jet’s lenders are attempting to bring in a new investor to buy a stake of up to 75 percent in the airline and initial expressions of interest were submitted last week.

The Business Standard reported (With inputs from Reuters)

LL: Shareholders Can File Application To Approve Settlement With Creditors Even After Appointment Of Official Liquidator : NCLAT

16 April 2019: The National Company Law Appellate Tribunal has held that shareholders/promoters of a company can file application for approval of settlement with creditors, even after official liquidator has been appointed.

This ruling was made while allowing an appeal filed against the decision of the National Company Law Tribunal, Mumbai bench, which had held that the application filed under Section 391 of the Companies Act 1956( corresponding to Section 230(1), Companies Act 2013) could not have been moved by the shareholders after the appointment of Official Liquidator.

The NCLT reasoned that only the Official Liquidator was entitled to represent the company under liquidation. Holding this to be erroneous after referring to judgments of Supreme Court and several High Courts., the Appellate Tribunal held :

“Liquidator is only an additional person and not exclusive person who can move application under Section 391 of the old Act when the company is in liquidation. Looking to these Judgements, we are unable to support the view taken by NCLT that the Appellant could not have filed the Petition under Section 391 of the old Act”.

In the present matter, the promoter- director had filed a scheme of compromise in winding up proceedings before the Hon’ble Bombay High Court where Liquidator was already appointed. But the matter got transferred to NCLT, Mumbai on the basis of notification dated December 7, 2016.

Having held that the promoter was entitled to move Section 391 application, the NCLAT had to decide where the proceedings should revive – whether at NCLT or High Court.

The NCLAT held that the proceedings should continue in High Court, based on the judgment of Bombay High Court in Sunil Gandhi and Ors. Vs. A.N. Buildwell Private Limited and Ors, which held as follows :

“In the proceedings relating to winding up, as in the present case, applications under the provisions of section 391 of the Companies Act, 1956, for the revival of the company in provisional liquidation, would constitute an exception, and would a fortiori fall outside the purview of independent proceedings which ought to be transferred to the National Company Law Tribunal, under clause 3 of the subject notification”.

The NCLAT gave liberty to the Appellant/ Promoter-Director to approach the Hon’ble Bombay High Court for appropriate orders.

The LiveLaw reported