ET: Ruchi Soya: Resolution may be delayed as NCLT wants to study impact of revised NLCAT order on Essar Steel

9 July 2019: The Mumbai bankruptcy tribunal NCLT Tuesday directed the resolution professional of Ruchi Soya to find out whether the appellate tribunal NCLAT’s last week’s order on Essar Steel- ArcelorMittal matter would have any impact on their case.

An NCLT bench of VP Singh and Ravikumar Duraisamy wanted to know what will be the impact of the National Company Law Appellate Tribunal (NCLAT) order passed last week on ArcelorMittal matter which ordered almost equal treatment of operational and financial creditors, leading to a much higher payout to operational creditors, and forcing much higher haircut on banks.

The tribunal observed that the NCLAT order has changed the entire outcome for all stakeholders and is like a formula with clear-cut directions on the distribution of the proceeds should be carried out.

The NCLAT on July 4, gave operational creditors equal status as lenders in the distribution of the ArcelorMittal’s Rs 42,000 crore bid to take over Essar Steel.

The move is likely to delay the award of the sole bid for the edible oils company to Patanjali.

Essar Steel was auctioned under the new bankruptcy code to recover Rs 54,547 crore of unpaid dues of financial lenders and operational creditors.

The NCLAT’s revised order said financial creditors would get only 60.7 percent of their admitted claims of Rs 49,473 crore, which in the present case means a little over Rs 30,000 crore. The rest would go to operational creditors, who were to only around 3 percent in the earlier order.

Unhappy over lower payout, the lenders led by State Bank are planning to move the Supreme Court to challenge the NCLAT order, as the IBC laws do not treat operational creditors and financial creditors equally.

Similarly, the Ruia brothers, the original promoters of Essar Steel are also planning to challenge the winning bid of Arcelor-Mittal claiming the bidder is ineligible as its two subsidiaries were defaulters.

Reserving an order on Ruchi Soya, the tribunal said, the resolution plan is required to be further discussed and adjourned the matter for hearing on July 18.

NCLT, had on May 10, reserved its order on the Rs 4,350-crore offer by Haridwar-headquartered Patanjali to take over the crippled edible oil maker Ruchi Soya.

Meanwhile, the RP sought an interim order to maintain status quo on Sebi’s show cause notice to Ruchi Soya. The counsel alleged that even though the Sebi is aware of the moratorium, still they continue with the hearing on the show cause notice.

Admitting the plea, the tribunal asked Sebi to reply within seven days.

In December 2017, NCLT had referred Ruchi Soya for insolvency on applications moved by Standard Chartered Bank and DBS Bank and appointed Shailendra Ajmera as the RP.

Patanjali after losing the bid later increased its bid value by around Rs 140 crore to Rs 4,350 crore along with a capital infusion of Rs 1,700 crore.

Ruchi Soya owes over Rs 9,345 crore to financial creditors led by State Bank, which has an exposure of Rs 1,800 crore, followed by Central Bank at Rs 816 crore, PNB at Rs 743 crore and StanChart at Rs 608 crore.

The Economic Times reported

FE: Jaypee homebuyers matter: SC asks Centre to come out with uniform proposal

9 July 2019: The Supreme Court on Tuesday asked the Centre to come out with a “uniform” proposal for all cases to resolve the difficulties being faced by lakhs of homebuyers who have not yet got possession of flats despite paying huge amounts of money to real estate builders. The apex court, which was hearing a homebuyers matter related to Jaypee Infratech Ltd, said the issue concerns lakhs of flat buyers and the Centre should give a proposal to resolve it.

“We want suggestions from the Union of India which could be uniform for all such cases,” a bench comprising justices A M Khanwilkar and Dinesh Maheshwari said. “This issue will be bothering lakhs of homebuyers. Within the IBC (Insolvency and Bankruptcy Code), we cannot do anything. But outside it, you (Centre) can suggest something. We can consider that,” the bench told Additional Solicitor General (ASG+) Madhavi Divan, who was appearing for the Centre.

The bench made the observation while hearing a plea which has sought that Jaypee Infratech Ltd (JIL) be not sent into liquidation, although the deadline for the corporate inlpsolvency resolution process is over, as it would cause “irreparable loss” to thousands of home buyers. The ASG told the court that proper authority to respond to the plea would be the resolution professional or the bank concerned.

“Can some other arrangement be suggested by the Union of India without disturbing the ongoing process?,” the bench asked, adding, “We are keen to know whether you have something to suggest”. “Policy issue has to be resolved by the Union of India,” the bench said and posted the matter for hearing on July 11.

The apex court had on August 9 last year ordered re-commencement of the resolution process against JIL and barred the firm, its holding company and promoters from participating in the fresh bidding process. It had also allowed the Reserve Bank of India to direct banks to initiate corporate insolvency resolution proceedings (CIRP) against Jaiprakash Associates Ltd (JAL), the holding company of JIL, under the IBC.

It had said there was “no manner of doubt” that JAL and JIL lacked financial capacity and resources to complete unfinished housing projects in which over 21,000 home buyers had not been given the possession of their flats till then.

The fresh plea filed in the top court has sought a direction that an “independent and thorough forensic audit” of JIL should be conducted from the date of its incorporation.

Referring to the apex court’s last year order, the plea has said, “The court had made a conscious effort to avoid liquidation of Jaypee Infratech Limited. However, the events as have unfolded subsequent to the passing of the judgment have frustrated the efforts as made by the court.” As per apex court’s direction, the 270 days for completion of CIRP have concluded on May 6, it has said.

“Till date only two serious bids have been received by the Committee of Creditors. One bid has been submitted by National Buildings Construction Corporation Limited, whereas the other has been submitted by Suraksha ARC. None of the said bids have been accepted by the Committee of Creditors till date,” the plea has said, claiming that “threat” of JIL going into liquidation is “turning into a reality with each passing day”.

It said if no resolution plan is accepted till May 6, JIL would “automatically go into liquidation”, leaving thousands of home buyers without any remedy. Seeking forensic audit of JIL, the plea alleged that “diversion of funds in the present case is on an even larger scale than that of projects developed by Amrapali Group of Companies”.

The Financial Express reported

YH/BTVI: Banks sign inter-creditor agreement for resolution of bad assets

9 July 2019: Banks have already signed Inter-Creditor-Agreement (a mandate for all the banks to sign if they wish to find resolution on any recognised NPA account, having exposure above Rs 2000 Cr), for close to 22 NPA accounts in last one month post the issue of the new RBI Circular for stressed asset management.

Sources tell BTVI, Inter-Creditor- Agreement (ICA) has been signed for companies where they have resolution in sight. Currently, the total exposure in the companies which have already become NPA or have defaulted, is being considered for a resolution is worth close to Rs 3 lakh Crore.

BTVI collates data on the companies for which resolution seems to be the way ahead, giving hopes of survival before they can be taken to NCLT. Out of the two dozen companies where resolution through Restructuring, Change of Management or One-Time-Settlement cane be a possibility, few power sector companies have also found some hope.

Some names which have recently defaulted in the banks ‘books of accounts’, include DHFL, Suzlon Energy, Videocon Oil Ventures & Cox & Kings. Resolution in these companies is in sight as sources confirm.

The purpose of Inter-Creditor-Agreement was to ensure that banks to be given 30-days grace period to review and pick on accounts which have possibility of resolution insight. Once the ICA is signed, it enters a standstill period, when the particular account cannot be taken to NCLT for 180 days.

RS 3 Lk Cr Debt Now Under ICA:

Power sector holds a major share in the list of NPA accounts held by banks. Post the Supreme Court orders that held on the Power companies admission in NCLT, banks manage to look for resolution in few outside the court for now.

Sources tell BTVI, Prayagraj Power, GMR Chhatisgarh, KSK Mahanadi, Jaiprakash Power Ventures, Coastal Energen, Simhapuri Energy, Rattan India Nasik and Emco Energy are a few of the power and energy companies, which hhave scope for some buyers or restructuring through a majority consensus approach among lenders.

Indian Banking Association Chief Executuve VG Kannan speaking exclusively with BTVI said, “Before any resolution plan is signed, it is mandatory that Inter-Creditor- Agreement is signed, binding lenders to come together and work together. There is also space given by the bankers to prepare the plan & vote on the plan.”

When asked about the expected value locked in the cases signed under Inter-Creditor- Agreement, V.G.Kannan said, “Amount of exposure in the resolution for cases signed under Inter- Creditor-Agreement, could be around Rs 3,15000 Cr – Rs 415,000 Cr” as currently the circular is only implementable for large ticket accounts which have been declared NPA/defaulters. Resolution in 60%-70% is quite possible to happen among the companies taken under the ICA Gambit.

As reported on

ET: NCLT orders liquidation of Adhunik Metaliks, Zion Steel

9 July 2019: Close to two years after getting admitted for insolvency, Kolkata-based Adhunik Metaliks and Zion Steel were ordered to be liquidated by the Cuttack bench of the National Company Law Tribunal (NCLT) on Monday after Liberty House failed to implement its resolution plan.

However, Maharashtra Seamless — which had submitted a revised offer — can still apply to acquire the companies under Sections 230-232 of the Companies Act that deals with mergers and amalgamations, the bench ruled.

The NCLT though rejected a plea by the committee of creditors to be allowed to consider the offer. Maharashtra Seamless was the second-highest bidder for the assets of Adhunik Group of Industries, which has collective debt of more than Rs 5,000 crore and employs over 1,500 workers. Liberty House’s plan was approved in July 2018 but its implementation got delayed.

The delay occurred due to MSTC’s claims which were later rejected by both the National Company Law Appellate Tribunal (NCLAT) and the Supreme Court.

However, even after the claims were dismissed, the Liberty House failed to pay the upfront amount of Rs 410 crore, saying the lenders did not issue it an offer letter for equity shares, which made it difficult for the UK-based company to invest funds as per plan.

The NCLT bench said this concern was deliberately raised at a belated stage by Liberty House. “In this case, the situation that has arisen is that successful resolution applicant Liberty House Group is not in (a) position to implement the resolution plan,” said the order. EThas seen the order. “Corporate Insolvency Resolution Process period of 270 days has already been over along back. In such a situation, this authority has no option but to pass order of liquidation of the Corporate Debtor as per Section 33 of Insolvency and Bankruptcy Code, 2016,” the NCLT bench said.

Rejecting the lenders’ appeal to be allowed to consider the Maharashtra Seamless offer, the bench said that in its earlier form the offer was rejected because the capital being infused into the stressed companies was below the liquidation value. “In such a situation, the authority cannot reset the clock back to Day One. I cannot allow the Committee of Creditors to restart the Corporate Insolvency Resolution Period afresh over and again.” Liberty House did not offer any comment.

A source aware of the developments said the banks are reviewing the matter and may contest the NCLT order.

Sumit Binani of Grant Thornton, who was the resolution professional, has been asked to liquidate the company as a going concern. However, the source mentioned above said the company is not a going concern as it has not been operational for the past 14 months. The integrated steel plant has a capacity of 0.45 million tonnes in Odisha which can be increased to 1million tonnes. Zion Steel, which is also located in the premises of Adhunik, has a rolling mill of 0.12 million tonnes.

This is the second company that Liberty House was keen to acquire that has receive a liquidation order. In April, ABG Shipyard was ordered for liquidation after the Sanjeev Gupta-led company — the sole bidder — failed to get its bid approved by the lenders.

The Economic Times reported

FE: Leela-Brookfield deal: Conclude probe in two weeks, NCLT directs Sebi

9 July 2019: The National Company Law Tribunal (NCLT) on Monday directed the Securities and Exchange Board of India (Sebi) to wrap up its investigations into the proposed sale of Hotel Leelaventure’s various undertakings to Brookfield in about two weeks, during a hearing on the bankruptcy case against Hotel Leelaventure initiated by JM Financial Asset Reconstruction.

This was after the counsel representing the regulator intimated the tribunal that it will take up to three months to complete ongoing investigations of the proposed sale of Hotel Leelaventure’s various undertakings to Brookfield, based on complaints it received from minority shareholders ITC and Life Insurance Corporation of India (LIC).

The NCLT has adjourned hearing on the case to July 25.

During the proceedings, Ashish Pyasi of Dhir & Dhir Associates, counsel to Hotel Leelaventure, argued that Sebi had been directed by the NCLT to complete its examination of ITC’s complaint by July 8, but the regulator had not done so, having been provided information by Hotel Leela and JM Financial Asset Reconstruction Company.

The counsel further said in view of the injunction, the deal with Brookfield is stalled and cannot be acted upon, further suggesting that hearing be deferred because of these “peculiar circumstances”.

In an exchange notice dated March 18, Hotel Leela informed it has entered into a binding agreement with a Brookfield Asset Management (Brookfield)-sponsored private real estate fund to sell by way of slump sale, four hotels the Leela Group owns. They are located in Bengaluru, Chennai, Delhi and Udaipur. The property it owns in Agra was subject to approval of shareholders, lenders and other regulatory, statutory approvals.

A postal ballot notice seeking shareholders’ approval to this sale was also issued, with the voting period ending on April 24.

According to a letter to Hotel Leelaventure, Sebi had already sought comments from the company on alleged violation of provisions pertaining to related-party transactions.

The regulator’s directions came within hours of an ITC petition in the NCLT against Hotel Leelaventure, alleging suppression and mismanagement of minority shareholders.

ITC’s petition objected to the Brookfield transaction, alleging it would leave Hotel Leelaventure a mere shell with only liabilities while allowing promoters to benefit while leaving minority shareholders holding worthless shares with no underlying business or assets.

The Financial Express reported

FE: NCLT sends Siva Industries to insolvency process for Rs 130-crore default

9 July 2019: The Chennai bench of the National Company Law Tribunal (NCLT) has ordered the corporate insolvency resolution process (CIRP) against Siva Industries and Holdings, a Siva Group company promoted by serial entrepreneur and former promoter of Aircel C Sivasankaran, admitting a petition filed by IDBI Bank.

IDBI Bank had dragged Siva Industries to the NCLT alleging a default of `130.30 crore as on December 31, 2018, and prayed for initiation of the resolution process, in a bid to recover the dues.

The bank has pointed out that Siva Industries also failed to discharge duty of a guarantor in respect of the loans given to another group firm Rudhra Pte which defaulted in repaying `79.45 crore, as on October 1, 2018.

Ordering the insolvency resolution process, the NCLT bench comprising BSV Prakash Kumar, judicial member, said the bench was satisfied that the petitioner (IDBI Bank) has proved existence of debt and default. The bench also appointed Savan Godiawala as the interim resolution professional (RP).

The story started when Siva Ventures, which was later merged into Siva Industries and Holdings, approached IDBI Bank for working capital facilities in 2010.

Subsequently, the bank sanctioned fund-based limits in the form of cash credit to the extent of `35 crore, non-fund based limits in the form of letter of credit for `25 crore, a bank guarantee for an amount of `25 crore as inner letter of credit limit and additional treasury limits for `2 crore aggregating to `62 crore were disbursed on various dates to the company.

Later in 2011, Siva Ventures again approached IDBI Bank seeking allocation of non-fund based limit of `15 crore and loaned equivalent limit of `4.5 crore to Rudhra Energy Division which has subsequently become Rudhra Pte, over and above the original sanction already provided to the company.

In the meanwhile, Siva Ventures merged with Siva Industries and Holdings in 2013, and when the company failed to service the debt, IDBI Bank, in 2015, issued a recall notice demanding the company to pay the outstanding amount in respect of the working capital facility aggregating to `62 crore or else regularise the loan account. The bank in 2017 gave another recall notice, rejecting the one-time settlement proposal for an amount of `48.68 crore.

As Rudhra Pte failed to maintain the financial discipline and committed default, the bank in 2017 issued a demand notice asking the company to pay the defaulted amount. When the repayment was not materialised, the bank again issued notice to Rudhra Pte for recovery of the outstanding dues.

The Enforcement Directorate in February this year ordered attachment of assets of Sivasankaran worth `224.6 crore in connection with an investigation on alleged loan fraud at IDBI Bank. ED had reportedly filed a case against him and various firms for non-payment of loans to the tune of $67 million issued by the bank which Siva Group allegedly obtained for a front company, Axcel Sunshine.

The Financial Express reported