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

BQ: Videocon Group: Why India’s Largest Insolvency Case Is Still In Limbo

16 April 2019: It is one of India’s largest insolvency cases and is also proving to be among the most complex to resolve.

The Venugopal Dhoot-promoted Videocon Group, whose flagship Videocon Industries was part of the first list of firms to be referred for insolvency in June 2017, has seen no progress in resolution, according to bankers and lawyers in the know. The case was admitted for insolvency proceedings 10 months ago and has stretched well beyond the 270-day deadline set under the Insolvency and Bankruptcy Code.

Claims filed against two of the largest Videocon Group companies — Videocon Industries and Videocon Telecommunications — add up to Rs 88,000 crore. However, actual claims may be lower once an overlap of debt facilities between the two entities is weeded out.

Why The Delay?

Resolution has been delayed because lenders want group firms to be consolidated before a resolution plan is worked out, said two people familiar with the case.

While the resolution professional for Videocon Industries had initiated the process for inviting expressions of interest, the process was stalled after lenders approached the Mumbai bench of the National Company Law Tribunal for a stay.

Lenders argued that in many cases these entities took on debt collectively as ‘co-obligors’ and, hence, it would be better to finalise a resolution plan for the group as a whole. A co-obligor is one who is bound with another to fulfill an obligation.

On October 5, 2018, the NCLT had put a stay on the insolvency process till a decision is made on the issue of consolidation. More than six months later, the order is still pending.

Fifteen companies of the Videocon Group, including flagship company Videocon Industries, are currently undergoing individual insolvency processes. While most cases have a different resolution professional, the lenders are common.

The Videocon Group companies under insolvency include Value Industries Ltd, KAIL, Trend Electronics, Applicomp (India) Ltd, Sky Electronics Ltd, Techno Electronics Ltd, Century Appliances Ltd and Evans Fraser & Co (India) Ltd, as per orders available on the NCLT website.

Double-Counting Of Debt

According to the first person quoted above, there is considerable inter-connectedness in the debt availed by the group. As a result, there has also been double-counting of claims at the group level.

Videocon Industries owes its financial creditors Rs 54,000 crore, while Videocon Telecommunications owes over Rs 24,000 crore. Each of the other 13 companies within the Videocon Group have their dues to repay as well.

A large portion of the debt in question was availed by Videocon Industries, where it got its group companies to act as a ‘co-obligor’, leading to insolvency proceedings against both firms. Even in case of Videocon Telecommunications, there is considerable double counting of debt due to co-obligor arrangements with Videocon Industries, the first person quoted above said.

One example of such an arrangement is a Rs 3000 crore loan availed by Videocon Industries in 2012. According to NCLT orders, 14 other Videocon Group companies were listed as co-obligators for this loan. In 2017, Videocon Industries defaulted on Rs 457 crore worth repayment which was due on this facilities and banks were unable to recover money from the co-oligators as well. This prompted SBI to initiate insolvency proceedings against all of these firms in 2018.

While cases such as the insolvency proceedings in Videocon Group could have been dealt with under a group insolvency process, India still does not have a clear law for this.

“In situations like this, a group insolvency may be preferred for two reasons. One is the administrative convenience that comes with a single process and the second can be that lenders may want to chase the guarantor before the corporate debtor itself to settle debt,” said Saurav Kumar, partner at Indus Law. The Insolvency & Bankruptcy Board of India (IBBI) is currently working on guidelines for group insolvencies.

However, a group insolvency may not always be easy to implement, said Kumar. Multiple lenders and multiple businesses in different sectors across a group can complicate a group resolution process.

Investigations Against Venugopal Dhoot

Lenders are also closely watching investigations against the group’s promoter. Any prosecution by these authorities would have an impact on insolvency proceedings against the Videocon Group companies, the second person quoted above said.

Dhoot is currently under investigation by the Serious Frauds Investigation Office and the Central Bureau of Investigation for alleged quid pro quo in dealings with ICICI Bank’s former chief executive officer Chanda Kochhar and her husband.

The authorities have alleged that Dhoot funded businesses owned by Kochhar’s husband Deepak Kochhar in exchange for availing loans from ICICI Bank. The Enforcement Directorate has also registered a case of money laundering against all three. According to media reports, an internal investigation by the Ministry of Corporate Affairs had revealed that there were instances of financial records either being omitted or misleading financial statements recorded in companies owned by Dhoot and Kochhar’s husband.

Meanwhile banks have provisioned nearly 100 percent against Videocon Industries, suggesting that any eventual recovery from the account will add to profits for the lenders, according to a senior banker directly involved in the case.

“If an account is fully provided for, the delays may not cause much of an issue for the bank balance sheets, since whatever they recover from these accounts will go directly to their quarterly profits,” said Anil Gupta, vice president and head of financial sector ratings, ICRA Ltd. Gupta, however, added that a delay in resolution can reduce the prospect of eventual recovery due to deterioration in the asset.

The BloombergQuint reported

ET: Lenders fail to reach consensus over emergency refuelling of Jet Airways

16 April 2019: Some lenders to Jet Airways have demanded more pledged shares of founder Naresh Goyal and planes owned by the airline as collateral for advancing further loans, even as the banks’ consortium remains sharply divided on additional debt assistance to Jet.

The latest condition was communicated to Jet’s management in a meeting on Monday evening. A meeting in the morning was inconclusive.

The delay in releasing funds has left the distressed airline perilously close to total stoppage of operations.

“The interim funding hasn’t been forthcoming thus far,” CEO Vinay Dube said in a communication to Jet’s employees on Monday, while informing them about the scheduled board meeting on Tuesday. The Jet management will inform the board about the current state of finances and operations. It has decided to extend suspension of international operations till Thursday and stick to its current seven-plane operations.

A senior banker said that PNB, ICICI and Yes Bank objected to any release of emergency money, although others such as State Bank of India, Bank of India, Canara Bank and Syndicate Bank did not have a problem. “So there is no funding as of now,” he added. He said that it would be near-impossible for Jet to continue operations without urgent cash.

Jet’s lenders will also select by Tuesday the qualified bidders from the companies that have expressed interest in investing in it. They will be given time till May 10 to submit binding bids, said a banker, as they need three weeks to prepare a bid. The date, according to the latest announcement from SBI Capital Markets was April 30. SBI Caps is overseeing the implementation of the resolution plan and running the bidding process.

Goyal owns 51% of Jet and has already pledged more than 31% to banks.

Owned Planes are Already Collateralised

Goyal has agreed to pledge more, totalling 41.1% of Jet’s shares but hasn’t formally done so yet. He has sought to retain 9.9% shares unencumbered.

It wasn’t clear if the banks want Goyal to pledge his entire shareholding. Goyal’s response to the banks’ latest demand couldn’t be ascertained either.

Jet owns 17 planes, mostly wide bodied Boeing 777s and Airbus A330s, while the rest are leased. It had a fleet of 124 planes as of December 2018. But the owned planes have already been collateralised against funds that were raised to finance their purchase. An airline usually finances 80% of a plane’s purchase via debt. The finance lease or EMIs on some 777s are supposed to be completed this year.

“There is sufficient value in the wide-body aircraft to pledge as collateral,” said Manish Raniga, an independent aviation expert and former vice president at Jet. “This value can be derived as the difference between the market value of the aircraft and outstanding loans and guarantees,” he added.

Jet has defaulted on loan payments, grounded almost all planes, stopped paying its employees and laid off many of them. The airline’s second biggest shareholder Etihad Airways has expressed an interest in investing a second time in it though with a condition that its stake be capped at 24%.

TPG Capital, Indigo Capital and Think Equity-Redcliffe Capital have also put in expressions of interest (EoIs). The state-run National Investment and Infrastructure Fund will bid directly. Founder Naresh Goyal is said to have bid too, being fronted by his general sales agent Jet Air, and two little known entities from Delaware, US and London-based Future Trend Capital and Adi Partners. Their bid arrived minutes after the deadline and lenders are discussing whether to disqualify the bid.

In a statement on Monday evening, Jet’s top banker State Bank of India said the EoIs are currently being vetted by the legal team of SBI Caps. It also said that the debtto-equity swap, if any, “will be transitory to facilitate the bidding cum sale process”.

Jet’s banks were supposed to convert Rs 1 of its debt to more than 50% of shareholding in Jet. That came under doubt after a recent Supreme Court order quashing a Reserve Bank of India circular dated February 12, 2018 on debt restructuring. Jet’s banks are now waiting for regulatory approvals for the planned debt to equity swap.

Employees of Jet have been gathering at its corporate office and airports at Delhi and Mumbai in peaceful marches. They have demanded an update on salaries from the management in vain. A strike planned from Monday was called off on Sunday night in the hope that lenders would release interim loans.

The Economic Times reported

ET: Liberty misses deadline to pay Rs 410 crore bid money for Adhunik Metaliks

16 April 2019: Liberty House Group has failed to pay the Rs 410-crore offer money for stressed steel company Adhunik Metaliks within the deadline set by the bankruptcy court. The UK-based conglomerate cited lack of statutory approvals for the delay, but some people close to lenders said it just could not secure funding.

The National Company Law Appellate Tribunal had on March 15 dismissed a claim by state-owned MSTC that it be paid dues of Rs 108 crore as part of the resolution plan to clear the final hurdle in the way of Liberty House to make the deal payment that it was originally supposed to make in October last year. NCLAT had also asked the British firm led by India-born Sanjeev Gupta to pay the deal amount within 30 days. That deadline ended on Sunday.

“We are working on procuring statutory and regulatory approvals which are a vital part of the implementation plan,” Liberty House said in a statement confirming missing the deadline.

A person close to Liberty House said a few approvals that were required to be sought from the stock exchanges had not been received yet. The approvals would have been in the nature of allowing Liberty House to infuse cash in the Kolkata-based steel maker by buying shares and debentures, the person said.

However, a person close to the lenders said, “It seems that the company is having issues securing funding from abroad.”

The monitoring committee set up to oversee Adhunik’s sale had on April 5 approved issuance of shares and debentures worth .`40 crore to Liberty House in line with its resolution plan.

The way forward will now be decided by the National Company Law Tribunal (NCLT) on the next hearing in Kolkata on April 30.

This is not the first time that Liberty House has failed to meet the deadline for payment after emerging the successful resolution bidder for a bankruptcy-facing company. Earlier, it failed to bring in the money within the stipulated time for Amtek Auto, prompting NCLT to allow its creditors to go for a fresh round of bidding.

The London-based takeover tycoon Gupta’s firm was also the sole bidder for ABG Shipyard. It had also emerged the successful bidder for Castex Technologies, a debtridden subsidiary of Amtek Auto. Liberty House has not managed to take over any of these firms.

The Economic Times reported

ET: Supreme Court clears Rs 4k-crore resolution plan for Jyoti structures

16 April 2019: The Rs 4,000-crore resolution plan by Sharad Sanghi and others for Jyoti Structures on Monday got a thumbs-up from the Supreme Court. The development nullified the possibility of the debt-laded EPC firm getting liquidated.

The NCLT last month had approved an amended plan for the firm with a heavy debt of `7,011 crore, on a directive from the appellate tribunal (NCLAT), but DBS Bank, the sole first charge holder over certain assets of the firm, subsequently challenged the plan in the SC.

An SC Bench led by Justice RF Nariman has now dismissed the appeal of DBS Bank against the NCLT order that accepted the amended resolution plan for Jyoti Structures.

The NCLAT had on March 19 set aside the July 31, 2018 NCLT-Mumbai order to liquidate Jyoti Structures and remitted the case back to the tribunal.

DBS Bank argued that the amended plan did not distinguish between the first charge holder and the second charge holder, but had distinguished between the secured and unsecured creditor, which made a resolution plan contradictory in nature.

Senior counsel KV Vishwanathan, appearing for DBS, argued that the liquidation value of the assets charged to DBS is more than three times of its exposure and the company owes `53.77 crore to it. DBS also said the appellate tribunal ignored the principles of law of mortgages, which give sanctity of property rights, more so right of a creditor holding a first and sole charge.

Terming as `unfair’ the voting process adopted by the committee of creditors (CoC) to approve the Sanghi’s resolution plan, DBS also said the resolution plan had completely ignored the superior security structure vis-a-vis other financial creditors and had treated the bank’s claim on an equal footing with other financial creditors who do not enjoy the same superior security structure.

Senior counsel Mukul Rohtagi, appearing for Sanghi, opposed DBS’s plea, saying in CoC, SBI had the largest exposure of 25% and it had supported the RP. Besides, there was only one resolution plan and if the same is rejected, the company will go into liquidation and that is not the purpose of the IBC.

The sole bidder, Sharad Sanghi, who heads software firm Netmagic, had submitted a revised bid pursuant to the appellate tribunal’s order. As per the fresh bid, Sanghi will pay `3,965 crore in 12 years against the original bid of 15 years. A amount of `50 crore would be paid upfront, followed by `75 crore over the next 12 months and the remaining in staggered payments over the next 12 years. As per this first bid, the company has a liquidation value of just `1,112.52 crore, leaving the bankers with a 43% haircut.

On March 26 and 27, 2018, Sanghi’s resolution plan was voted by 62.66% of lenders, while 23.12% voted against, and 14.21% abstained. On April 2, 2018, some lenders changed their decisions and the plan got an 81.3% approval.

Jyoti Structures is among the first 12 large accounts referred to NCLTs by the Reserve Bank of India in June 2017.

The Financial Express reported