LM: NCLT to next hear Jet Airways case on 23 July

5 July 2019: The Mumbai bench of the National Company Law Tribunal (NCLT) on Friday said that it will hear the insolvency case against Jet Airways (India) Ltd. and next progress report by the insolvency resolution professional (IRP), who have been approved by the court to oversee the insolvency proceedings of the airline, on 23 July.

The tribunal said it will issue notice to one of Jet Airways’ lessors and regulator Directorate General of Civil Aviation (DGCA) to appear before it on 19 July. The lessors had sought deregistration of a Boeing 777 aircraft belonging to the airline due to non-payment of dues.

The court-appointed IRP for Jet Airways, Ashish Chhawchharia of Grant Thornton India, through his counsel, asked the tribunal to stall deregistration of the Boeing 777 aircraft since the airline is under moratorium.

Jet Airways has not flown since 18 April due to funding woes. A consortium of 26 bankers led by State Bank had approached the NCLT to recover dues of over ₹8,500 crore from Jet Airways. The lenders have been trying to sell the airline as a going concern since the past five months, but failed due to many a reason.

Apart from banks, the airline also owes over ₹10,000 crore to its hundreds of vendors, primarily aircraft lessors and over ₹3,000 crore to its employees who have not been paid since March.

The airline has been having negative net worth for long and has run a loss of over ₹13,000 crore in the past few year. Thus it has over ₹36,500 crore of dues and being a services company negligible assets to recover.

The Mumbai bench of the NCLT admitted Jet Airways on 20 June for bankruptcy proceedings under the Insolvency and Bankruptcy Code (IBC). The court also approved an insolvency resolution professional (IRP) to oversee the insolvency proceedings.

The tribunal also ordered the IRP to complete the IBC process in three months, even though the law allows six months, saying “the matter is of national importance”.

On 4 July, mortgage lender HDFC moved NCLT seeking to keep Jet Airways headquarters in the city out of the bankruptcy process. HDFC counsel told NCLT on Thursday that three floors of the building were mortgaged with the lender.

(With inputs from PTI)

The LiveMint reported

ET: Jet hits 5% lower circuit as SFIO probes on alleged irregularities

5 July 2019: Jet Airways stock hit its lower circuit limit of 5 per cent in Friday’s trade on reports that the government has ordered an SFIO probe into the affairs of now defunct airline after finding instances of fund diversions and large-scale irregularities, sources told PTI.

According to the sources, the ministry’s inspection report had found large-scale irregularities, including diversion of funds. The government is likely to oppose airline founder Naresh Goyal’s plea in the Delhi High Court seeking lifting of travel ban, the report suggested.

Following the development, the scrip hit its lower circuit at Rs 62.80.

The sources said Goyal is likely to be summoned by the Serious Fraud Investigation Office (SFIO), which comes under the Corporate Affairs Ministry.

Meanwhile, HDFC moved the bankruptcy court claiming that a portion of a Jet Airways’ office in Mumbai was mortgaged to it, and so should not be among the assets being considered for sale as part of the debt-resolution process.

The Economic Times reported

ET: Videocon case: NCLT told to pass orders in 3 weeks

5 July 2019: The National Company Law Appellate Tribunal has directed the National Company Law Tribunal to pass orders on consolidating the bankruptcy proceedings of Videocon group companies within three weeks.

The directive came after the State Bank of India claimed it has been waiting for requisite orders to kickstart the process, which has been held up for almost five months, according to a person familiar with the matter. SBI approached the NCLT last year to consolidate the bankruptcy proceedings of 15 Videocon group companies, against which separate petitions had been filed at various benches of the court.

The state-run lender had argued that consolidation would lead to a speedier resolution process for the companies, which have inter-connected operations. It had requested that a single resolution professional be appointed to manage the bankruptcy process for all the companies.

The NCLT heard arguments from all parties, including Videocon’s promoter Venugopal Dhoot, and reserved its orders on January 25, after which the bankruptcy process has been stalled.

SBI then approached the NCLAT to expedite the process. The Videocon group companies owe Rs 20,000 crore to a group of banks led by SBI.

Infotel Business Solutions, a creditor to one of the companies, opposed the proposed consolidation, ET reported on March 15.

New Delhi-based businessman Mahendra Nahata is a major shareholder of Infotel Business Solutions. Nahata had sold his company Infotel Broadband to Reliance Industries in 2010. That company has morphed into present-day Reliance Jio Infocomm.

SBI did not immediately respond to a request for comment.

The bank has carried out a fresh exercise for the appointment of one resolution professional to oversee the bankruptcy process. It has interviewed candidates from several firms after sending out requests for proposals. Five such professionals — Anuj Jain, Mahendra Khandelwal, Divyesh Desai, Dushyant Dave and Avil Menezes — are currently tasked with overseeing the insolvency process for the 15 Videocon companies.

The units that have been taken to the bankruptcy court are engaged in the manufacturing of consumer electronics and home appliances.

The lenders have received feelers from a clutch of possible suitors, including Chinese electronics major Haier, private equity firm Blackstone and investment banking giant Goldman Sachs, to purchase the business, according to a banker.

Though the manufacturing plants are only partially operational, they can swing to full capacity with an infusion of about Rs 500 crore of cash, a person aware of the matter told ET in September.

Dhoot, who is currently under scrutiny of the Enforcement Directorate for granting favours to ICICI Bank’s former CEO Chanda Kochhar’s husband in return for loans to the Videocon group companies, also faces the prospect of losing his oil exploration business, the credit profile of which is being closely monitored by Videocon’s lenders.

The Economic Times reported

ET: Deferred fund raising, trouble at associate hit Quess Corp stock

5 July 2019: Quess Corp’s decision to defer fund raising and bankruptcy at an associate that owes the staffing company about Rs 150 crore, or three-fifth of FY19 profits, have roiled investors, sending the stock to a fresh yearly low in a precipitous plunge that began four days ago.

Through a deal with associate Trimax Smart Infraprojects, Quess provided hardware, software, maintenance and technical support to Trimax IT Infrastructure & Services. Trimax executed an agreement with Smart City Ahmedabad Development, a government entity, two years ago for supply, installation, commissioning and operation and maintenance of a pan-CIT infrastructure and intelligent command and control centre for the Ahmedabad Smart City.

The NCLT Mumbai Bench, on February 21, had acted upon a Corporation bank plea to begin the resolution process at Trimax. The lender had declared Trimax as an NPA on March 31.

The resolution professional handling the insolvency process acknowledged Rs 151 crore as debt due to Trimax Smart Infraprojects.

Quess Corp’s CMD Ajit Isaac told ETNow in an interview that the smart city project of Ahmedabad is almost complete.

“For the Rs 200-crore project, we have collected about Rs 55 to 60 crore,” Isaac said in the interview to ETNow.

The Economic Times reported

FE: FDI rules violation: ED summons executives from Etihad in JetPrivilege case

5 July 2019: The Enforcement Directorate (ED) has summoned Etihad Airways executives for questioning in connection with its investment in Jet Airways’ loyalty programme business, JetPrivilege, for alleged foreign exchange regulations violation.

According to ED sources, the then directors of JetPrivilege, representing Etihad on the board, have been summoned to give information on the five-year-old deal. Peter Baumgartner, Rangesh Embar and Harsh Mohan were appointed additional directors firm in March 2014 following the investment.

Queries sent to Etihad Airways did not elicit any response till the time of going to the press.

In 2014, the Abu Dhabi-based based carrier had picked up a 50.1% stake in Jet’s frequent-flyer programme for $150 million (over Rs 900 crore at that time).

“Etihad made an FDI in 2013-14. At that time a case was registered as it was found to be in violation with the FDI (foreign direct investment) norms. But it was considered by the then dispensation to be an investment not in the civil aviation sector, but into JetPrivilege which is not a civil aviation company. Now the case has been revived by ED after the recent events at Jet Airways,” a source said.

Jet Airways shut all operations on April 17, 2019, due to financial crunch. The airline’s lenders have taken Jet to the National Company Law Tribunal for resolution under the Insolvency and Bankruptcy Code after they failed to find a buyer for it. Before the 2014 deal, Jet was managing its frequent-flyer programme in-house.

The ED has earlier this year summoned executives of Jet Airways to understand the structure of the deal and whether Etihad had secured necessary permissions from the Foreign Investment and Planning Board, which was abolished in May 2017.

The Financial Express reported

FE: Essar Steel: Lenders may take a Rs 20,000 crore hit

5 July 2019: ArcelorMittal’s `42,000-crore resolution plan for Essar Steel was on Thursday approved by the National Company Law Appellate Tribunal (NCLAT), but lenders are staring at a `20,000-crore hit after the appellate tribunal said operational creditors be given 60.7% of their admitted claims.

The lenders are expected to challenge the decision on the distribution of funds in the Supreme Court.

The erstwhile promoters — the Ruias — who had challenged the eligibility of ArcelorMittal under Section 29(A) of the Insolvency and Bankruptcy Code (IBC), which bars promoters of defaulting firms from bidding for stressed assets, are also likely to move the SC next week challenging the tribunal’s decision.

The two-member NCLAT bench, headed by chairperson Justice SJ Mukhopadhaya, was adjudicating on the alleged discrimination in the distribution of funds, among others.

“On Thursday, the NCLAT held that such distribution is “not only discriminatory but also arbitrary…We have noticed a huge discrimination made by the committee of creditors (CoC) in distribution of proposed amount to the operational creditors qua financial creditors.”

The tribunal cited Regulation 38 of the IBC which provides that operational creditors under a resolution plan should be given priority in payment over financial creditors. “…the regulation strengthens the rights of operational creditors by statutorily incorporating the principle of fair and equitable dealing of OC’s rights, together with priority in payment over financial creditors,” it noted.

The bench held the “the CoC has no role to play in the matter of distribution of amount amongst the creditors, including the ‘financial creditors’ or the ‘operational creditors.”

It said the CoC is only required to look into the viability and the feasibility of the resolution plan and should have requested ArcelorMittal to distribute the amount among various creditors and other stakeholders.

Operational creditors had made total claims of `19,719 crore and could get `11,969 crore if lenders lose the appeal in the SC. The bench also directed that the `4,000-crore profit earned by Essar Steel during the resolution period should be distributed between financial and operational creditors on a pro-rata basis.

Ashish Pyasi, principal associate with Dhir & Dhir Associates, said the NCLAT has noticed that discrimination among the same class of creditors is not justifiable and cannot be permitted. “The secured and unsecured financial creditors are also discriminated in the plan. This judgment is reinforcement of what was held by the NCLAT in the matter of Binani Industries that within a class of creditors there should not be any discrimination,“ Pyasi, said.

Against their admitted claims of `45,559 crore, bankers including State Bank of India, IDBI Bank and Canara Bank stand to recover `30,030 crore, or 60.7%. At its October 25, 2018 meeting, the CoC had decided to retain `41,909 crore or 91.99% of the receivables; operational creditors were to get very little. After some prodding by the NCLAT, the lenders pruned their share to `40,910 crore or 89.80% of the receivables, leaving the rest for the operational creditors.

Virtually rejecting the plea by the Ruias challenging ArcelorMittal’s eligibility, the appellate tribunal said, “….no ground is made out to entertain the appeal”. The NCLAT said that the matter had been settled by the Supreme Court and it can’t be “re-agitated again and again”.

The Financial Express reported

ET: HDFC wants NCLT to keep Jet Airways headquarters out of resolution plan

5 July 2019: Housing Development Finance Corporation has moved the bankruptcy court claiming that a portion of a Jet Airways office in Mumbai was mortgaged to it, and so should not be among the assets being considered for sale as part of the airline’s debt-resolution process.

The nation’s largest mortgage lender filed its application before the Mumbai bench of the National Company Law Tribunal (NCLT), which is hearing the grounded airline’s bankruptcy case.

On Thursday, HDFC’s counsel argued that three floors of the building, Jet Airways Godrej BKC, in the business district of Bandra Kurla Complex, were mortgaged to it. The NCLT bench presided over by VP Singh and Ravikumar Duraisamy posted the case for further hearing on Friday.

According to HDFC, Jet owes it Rs 414 crore. The lender recently put up a part of the office — 52,775 square feet on the fourth floor — for sale with a reserve price of Rs 245 crore, as part of efforts to recover the dues.

Lenders led by State Bank of India decided to take the airline to the bankruptcy court after failing to stitch together a revival plan, despite working on it for more than five months.

HDFC’s move is to pre-empt listing of the mortgaged office space among the assets for sale.

JET’S LANDLORD ISSUES NOTICE

Meanwhile, Luckystar Property Holdings, the owner of Siroya, Jet’s six-storey headquarters of in Andheri, have sent a notice through its law firm to the airline’s interim resolution professional (IRP), asking him to facilitate repossession of the building. The lease agreement was terminated on June 7, but goods including computers and files of Jet are still lying in the office premises.

“Luckystar is seeking the interim resolution professional’s intervention to remove all Jet Airways’ belongings so that it can give the premises on lease to another third-party,” said a person privy to the development. Dhaval Mehta, managing partner of Wadia Ghandy & Co, the law firm representing Luckystar, declined to comment on the matter citing client confidentiality. Jet Airways’ IRP, Ashish Chhawchharia of Grant Thornton India, refused to comment.

The Economic Times reported