BS: IBC cases admitted over RBI circular to continue: Sahoo

15 April 2019: Although the Supreme Court has quashed the RBI’s February 12, 2018 order on non-performing assets (NPA), the cases admitted for resolution process based on the order would continue, as the NCLT admits cases only if it is sure of the default irrespective of any circular, said the Insolvency and Bankruptcy Board of India (IBBI) on Monday.

The apex court had on April 2 struck down the Reserve Bank of India (RBI)’s circular whereby the central bank had mandated lenders to initiate resolution or restructuring of loans worth Rs 2,000 crore or more even if the default was recorded for a single day.

“I think the proceedings are admitted by the National Company Law Tribunal (NCLT) on being satisfied of default, not whether it was initiated by the direction of somebody. The test is whether there is default or not. IBC proceeding is admitted if there is a default,” Sahoo told IANS, implying that the cases admitted due to the RBI order would continue as the NCLT found default.

“IBC proceeding is admitted if there is a default. NCLT would have satisfied itself that there was a default… NCLT does not consider whether SBI came and applied on its own or on the direction of somebody else.”

The IBBI Chairman also said that he is not aware of the specific cases admitted following the RBI order.

Earlier, IANS had reported that the lenders have decided to file an affidavit in the NCLT to continue insolvency proceedings against stressed power projects that were referred to the bankruptcy court on the basis of the February 12 circular of the RBI.

The Supreme Court’s April 2 order raised questions over the fate of about eight power projects including 3,600mw KSK Mahanadi Power Co Ltd, 1,920mw Lanco Amarkantak Power Ltd, 600mw Avantha Power, 1,350mw Rattan India Power Ltd, 550 MW RKM Powergen, and the 700 MW Bharat Utkal.

These projects were referred by a consortium of lenders including the Power Finance Corporation to the NCLT as per the provisions of the February 12 RBI circular, which said that it would be mandatory for projects in default to be referred to the NCLT after 180 days from start of the resolution period. As 180 days for these projects ended in August, they were referred to the NCLT.

RBI Governor Shaktikanta Das told reporters after the monetary policy meet on April 4 that the central bank will take take necessary steps including the issuance of a revised circular “as may be necessary for the effective resolution of stressed assets”.

The Business Standard reported

ET: ArcelorMittal executives join Essar Steel monitoring panel

15 April 2019: ArcelorMittal — whose Rs 42,000-crore resolution proposal for the Gujarat-based flat steel manufacturer was approved by the insolvency court last month — has nominated its representatives to the monitoring committee even as a couple of senior executives close to the previous management exited the firm, said a person close to the company.

The monitoring committee was put in place on National Company Law Appellate Tribunal’s directive. It consists of three executives from ArcelorMittal, three representatives from the banks, namely State Bank of India (SBI), ICICI, IDBI and Edelweiss, and Satish Kumar Gupta, the resolution professional who is also the chairman of the committee.

ArcelorMittal’s representatives are Sanjay Sharma, CEO for ArcelorMittal China & India, Kalyan Ghosh, CFO at ArcelorMittal India, and Vijay Krishna Goyal, vice president at ArcelorMittal, said the person cited At the same time, Suresh Jain, CFO of Essar Steel, gave his resignation last week. Under the new reporting structure, Jain would have had to report to Alvarez & Marsal that is acting as a mediator between the current management and the monitoring committee, and that was not acceptable to him, the source said.

Jain could not be reached for comments.

He has been associated with Essar group since 2008 when he was appointed the CFO of Essar Oil and then moved on to becoming Essar Steel’s CFO when the oil refinery was sold to Russian oil giant Rosneft in 2017.

Ghosh may be considered for the post of CFO when ArcelorMittal takes over officially, the person said.earlier.

Earlier in March, Jatinder Mehra stepped down as chief executive of the company after a 12-year stint. “My contract came to an end on March 31 and I chose not to renew the same. This has nothing to do with the ongoing (IBC) process,” Mehra told ET in an emailed response.

Mehra, 79, has been associated with the Essar Group since 1997 in various capacities.

To be sure, empirical practice in M&A deals suggests mostly the acquirer brings in his own management into the company once the deal closes.

The Supreme Court on Friday, though, stopped ArcelorMittal from paying the lenders and ordered status quo in the insolvency case until the bankruptcy tribunal decides on the proportion of amount to be paid to financial and operational creditors.

ArcelorMittal declined to comment.

Alvarez&Marsal said as a policy it did not comment on existing or potential client engagements.

National Company Law Tribunal (NCLT) Ahmedabad had given its nod to ArcelorMittal’s Rs 42,000 crore offer to lenders of Essar Steel on March 8.

Last week, NCLAT had said it may ask ArcelorMittal to deposit the amount offered by it in one or two accounts in the next hearing scheduled to be heard on April 23.

Under the insolvency resolution that has now been going on for 20 months now, Essar Steel’s capacity utilisation peaked to almost 80% at the end of March when the company crossed the 6 mt per annum production mark out of nameplate capacity of 8.4 mt.

The improvement has been driven by better operational performance as well as an overall upswing in the steel industry with both consumption and prices increasing.

A recent Indian Steel Association forecast said steel consumption in the country is set to cross the 100 mt mark this fiscal year.

“It was good to see large operating assets attracting intense competition between incumbents and new strategic majors,” said Anjani Agarwal, partner and national leader, metals and mining at EY. “While the steel industry demand should stay robust for a long time in future, the return on the investment made by new owners will always be a factor of how sustainably the assumptions on capacity utilisation, brownfield expansion and margins play out.”

The Economic Times reported