10 April 2019: Five major stressed power producers are preparing to oppose insolvency proceedings on the grounds that lenders filed petitions against them as per a central bank circular on debt resolution that was recently quashed by the apex court, people familiar with the plans said.
The five power projects of Lanco Amarkantak, Avantha Power, KSK Mahanadi, Rattan India Power (Amravati project) and Rattan India Nashik Power (formerly Indiabulls) account for over Rs 50,000 crore of unpaid dues. Power Finance Corporation and Axis Bank filed the insolvency petitions in the five projects, though all major lenders are part of the consortia that provided the loans.
Lanco Amarkantak, which owns a 1,920 MW project in Madhya Pradesh, sought time from the National Company Law Tribunal on Wednesday to provide documents to support its contention that Axis Bank had initiated insolvency proceedings against it under the now-defunct RBI circular on stressed assets, the people said.
KSK Mahanadi, an operational project for which the Adani Group had bid and later backed out, cited the apex court ruling at the NCLT on Monday to argue its case for withdrawal from insolvency proceedings. Power Finance Corporation had initiated the insolvency proceedings in this case.
Avantha Power’s Jhabua project has also made a similar contention in the National Company Law Appellate Tribunal (NCLAT). Rattan India Power and Rattan India Nashik are likely to follow suit shortly.
The Supreme Court ruled on April 2 that the Reserve Bank of India’s circular of February 12, 2018, on the resolution of stressed assets was ultra vires, or beyond the scope of its legal authority. In its circular, the RBI called on lenders to identify assets “immediately on default,” starting with loans on which any amount was due from one to 30 days, and provided a six-month window to resolve the default or take the borrower to insolvency proceedings.
However, lenders are of the view that there is no scope for any restructuring in these projects and invoking corporate insolvency is the only way forward.
“We are awaiting fresh guidelines from the central bank on resolution of stressed assets, but in cases where there is no other way out, we will file an affidavit in court stating that they need to be resolved through the Insolvency and Bankruptcy Code,” said a senior executive with Power Finance Corporation.
He cited Rattan India’s Amravati project, where a one-time settlement offer was worked out, but the investor who had initially offered Rs 600 crore didn’t turn up later.
“In case of Avantha Power (Jhabua), already one of the operational creditors has approached the Kolkata bench of NCLT. So there is no going back on that as well,” he added.
Mails sent to Lanco group, Avantha, KSK Energy and Rattan India went unanswered.
“As a matter of policy, Axis Bank does not comment on client-specific matters,” a spokesperson said in response to ET’s queries.
The power producers have argued that their projects suffered from time and cost overruns and lack of adequate power purchase agreements with distribution companies as well as fuel supply issues. They sought government assistance to bail out the projects.
“In the light of the Supreme Court order, the RBI will take necessary steps, including issuance of revised circular as may be necessary for expeditious and effective resolution of stressed assets,” central bank governor Shaktikanta Das said on April 4.
A senior bank executive said state-run lenders will not be keen to go for further restructuring unless there is some government support, as in the case of Jet Airways. “Who will take that risk and be open to undue vigilance investigation? Going through NCLT is a clean and court-approved process,” he added.