RT: Allahabad Bank reports $259 million alleged fraud by Bhushan Power & Steel

13 July 2019: The Allahabad Bank on Saturday became the second Indian state-owned bank to report a major alleged fraud by bankrupt steelmaker Bhushan Power & Steel Ltd this month, adding to concerns about a banking industry burdened with bad debts.

Allahabad Bank said in a statement that it had told the Reserve Bank of India (RBI) that it had identified a fraud worth $259 million in Bhushan’s accounts.

On July 6, state-run Punjab National Bank (PNB) said it had reported an alleged fraud of $554.6 million in the steelmaker’s accounts.

“It has been observed that the company has misappropriated bank funds, manipulated books of accounts to raise funds from consortium lender banks,” Allahabad Bank said in its statement, adding that it had made provisions of about $131 million against the bank’s exposure.

Bhushan Power & Steel, one of India’s most indebted companies, was among the first 12 companies referred by the RBI to a bankruptcy court for a debt resolution process under India’s new insolvency law.

Prime Minister Narendra Modi’s government introduced new bankruptcy resolution rules in 2016 to help with faster resolution of bad loans, but litigation has tied down some big restructuring deals.

To revive the banking sector the Indian government has injected about $36 billion of taxpayers’ money into the banks in the past five years and initiated an asset quality review by the central bank.

Only about 5% of the stressed assets of banks have so far been dealt with through the bankruptcy process.

Bhushan Power & Steel could not be immediately reached for comment on the latest allegation.

Reuter’s reported

FE: Jet Airways insolvency: NCLAT to hear Dutch court administrator’s appeal

13 July 2019: The National Company Law Appellate Tribunal (NCLAT) on Friday agreed to hear a petition filed by a Dutch court administrator in the Jet Airways insolvency case as it stayed parts of the Mumbai bench of the National Company Law Tribunal’s order that declared overseas bankruptcy proceedings null and void.

Jet is facing insolvency proceedings in the Netherlands as well, where it was declared bankrupt after it failed to pay two European creditors. Subsequently, a bankruptcy administrator was appointed by the Dutch court.

A three-member NCLAT bench headed by Justice SJ Mukhopadhyay said it will clarify the law on action to be taken when there are two insolvency petitions filed against the same company in two different countries.

At the proceedings, the Dutch administrator agreed not to sell the confiscated assets of the debt-ridden Jet Airways.

The NCLAT issued notice to the consortium of Jet Airways lenders and directed them to file their reply within two weeks.

It fixed August 21 as the next date of hearing.

The Dutch bankruptcy administrator could also “collate the claims of Offshore Creditors including financial creditors, operational creditors and other stakeholders” of Jet Airways and forward their details to the resolution professional (RP) of the defunct airline, the NCLAT said.

Last month, while admitting State Bank of India’s insolvency plea against Jet Airways, the Mumbai bench of the NCLT had rejected the Dutch administrator’s plea to recognise their proceedings.

The grounded airline owes more than Rs 8,500 crore to lenders. It also has a large debt by way of accumulated losses to the tune of Rs 13,000 crore, vendor dues of over Rs 10,000 crore and salary dues of over Rs 3,000 crore.

“First Respondent (SBI) may file a reply affidavit suggesting the procedure that may be followed in the facts and circumstances of the case, without any conflicting interest of stakeholders of both the countries,” said the NCLAT.

The appellate tribunal further said that “during the pendency of this Appeal, the Appellant Administrator (Dutch bankruptcy) and 2nd Respondent – ‘Interim Resolution Professional’ will cooperate with each other”.

“It will be open to the Appellant Administrator to collate the claims of Offshore Creditors including financial creditors, operational creditors and other stakeholders and forward their details to the RP for the purpose of preparing the Information Memorandum with the approval of the Committee of Creditors,” the bench said.

The NCLAT stayed a part of the order passed by the Mumbai bench of the NCLT, which had in June dismissed the Dutch administrator’s plea saying that offshore proceedings are not maintainable.

During the proceedings, the Dutch bankruptcy administrator also assured NCLAT that it would not sell or transfer Jet Airways’ seized properties in the Netherlands, which was the European hub of Jet Airways.

“Sumant Batra, counsel appearing on behalf of Appellant Administrator, assured that the Appellant Administrator will cooperate in the proceedings pending in India and will not sell, alienate, transfer, lease or create any third party interest on the offshore movable and immovable assets of the ‘Corporate Debtor’ [Jet Airways (India) Limited], which are or may be taken in his possession,” the NCLAT noted.

The NCLAT has also directed the RP of Jet Airways to “ensure that ‘Corporate Debtor’ remains a going concern and will take the assistance of the (suspended) Board of Directors, paid Director and the employees.”

“The person who is authorised to sign the bank cheques may issue cheques only after authorisation of the IRP. The bank accounts of the Corporate Debtor be allowed to be operated for the day-to-day functioning of the Company…,” it added.

The NCLAT’s direction came over the appeal filed by the Dutch bankruptcy administrator, challenging the order of the NCLT.

Jet Airways is facing insolvency proceedings in the Netherlands and was declared bankrupt in response to a complaint filed by two European creditors.

In April, H Esser Finance Company and Wallenborn Transport had filed a petition citing unpaid claims worth around Rs 280 crore.

Following this, a trustee in charge was appointed by the Dutch court and it had approached its Indian counterpart for access to the financials as well as assets of the airline.

One of the Jet Airways aircraft, parked in the Schiphol Airport in Amsterdam, has already been seized.

Jet Airways, which has not flown since April 18, is going through insolvency proceedings in India as well.

The Financial Express reported

ET: Three IL&FS group companies to service Rs 3,300 crore debt

13 July 2019: Three group entities of debt-laden Infrastructure Leasing and Financial Services with outstanding loans of about `3,300 crore are set to begin servicing them after lenders and IL&FS reached agreements to restructure debt, according to submissions before an appellate tribunal.

L&T Finance and its other arms, as well as Aditya Birla Sun Life Mutual Fund, are major lenders to these three companies, with L&T Finance alone having an exposure of about Rs 1,500 crore.

IL&FS on Friday also submitted before the National Company Law Appellate Tribunal (NCLAT) that it will follow a similar procedure to begin servicing debts of 10 more group entities with total outstanding debt of around Rs 13,000 crore.

Ramji Srinivas, counsel for IL&FS and Union of India, told NCLAT that all lenders of West Gujarat Expressway and Jharkhand Road Project Implementation Company had signed term sheets restructuring loan agreements with IL&FS and that once final documentation was signed, the companies would begin servicing their debts.

Srinivas also said all lenders, barring Bank of India, had agreed to similar restructuring for loans of Moradabad Bareilly Expressway, and that Bank of India was expected to agree to terms within two days.

A two-member NCLAT bench led by Justice SJ Mukhopadhaya, however, asked the IL&FS counsel how the group planned to resolve the debt of 82 other domestic group entities — a total of Rs 61,375 crore.

All group companies of IL&FS have been classified according to their ability to meet payment obligations. Group companies able to meet all payment obligations are categorised as ‘green’. Those companies able to meet only operational payments and senior secured debt obligations are categorised as ‘amber’. Those that are not able to meet any payment obligations are categorised as ‘red’.

The NCLAT bench gave IL&FS 15 days to reach similar agreements with 10 other ‘amber’ companies and questioned IL&FS on its plan for resolution of ‘red’ companies.

“Why should we not release red companies (from the moratorium)? Let somebody who want to trigger (insolvency) because you will not be in a position (to pay lenders),” it said.

The bench also directed IL&FS to file an affidavit on the measure it would take to release payments to provident funds, pension funds and said NCLAT may direct IL&FS and Union of India to release any funds generated to these and other employee related funds who have invested in IL&FS group entities.

The Economic Times reported