ET: NCLT directs insolvency proceedings against realty firm Three C Projects

29 August 2019: The National Company Law Tribunal (NCLT) has ordered start of insolvency proceedings against NCR-based realty firm Three C Projects Ltd and also appointed an Interim Resolution Professional (IRP) to take over the management of the debt-ridden company. A two-member principal bench, headed by President Justice M M Kumar, admitted a plea filed by five flat buyers who had booked homes in the company’s Lotus Zing project in Noida, Uttar Pradesh.

“We are satisfied that a default has occurred and the applications under sub section 2 of section 7 (of IBC) is complete,” said NCLT.

“As a sequel… this petition is admitted and Manish Kumar Gupta is appointed as the Interim Resolution Professional,” it added.

NCLT also directed the ex-management of Three C Projects to “provide all documents in their possession and furnish every information in their knowledge” within a period of one week to the IRP.

The tribunal declared a moratorium, protecting the company from the lenders by prohibiting them from recovering their dues for a certain period.

The NCLT order came on a petition filed by flat buyers of the company for its project Lotus Zing, through their counsel Aditya Parolia, Partner, PSP Legal.

Flat buyers, who are now treated as financial creditors after recent amendments in the Insolvency and Bankruptcy Code (IBC), had paid money to the realty firm as per their construction-linked payment plans on various dates.

According to the buyer agreements, the flats were to be delivered in 33 months in the year 2014.

Three C Projects submitted that the petition against it was not maintainable and that the project was delayed due to various factors, including demonetisation, order from NGT and farmers’ unrest.

However, NCLT rejected the builder’s argument, saying that “submission made by the respondents (Three C Projects) is whole unsustainable.”

According to the tribunal, objections like water supply interruptions and farmers agitation “are merely lame excuses to deny the claim of the financial creditors.”

“The maximum period of 33 months has already expired either in 2013 or early 2014. The possession as per stipulation has not been handed over till date,” the tribunal observed.

NCLT said while there was some delay due to reasons specified in the clauses of the buyer agreements, home buyers could not be expected to wait till eternity.

“The clause cannot be given a literal meaning to mean that till eternity the corporate debtor would defer possession and the financial creditors are bound to wait.

“A reasonable construction of any such clause would be to grant maximum period of one year. Even then, the possession should have been delivered in 2015,” it said.

The Economic Times reported

ET: Lenders likely to put bad loans worth Rs 8,000 crore on the block

29 August 2019: About Rs 8,000-crore worth of stressed loans, mainly from the power and manufacturing industries, are likely to be put up for sale by lenders seeking quicker recoveries — both within and outside the dedicated bankruptcy-resolution framework.

Lenders including United Bank of India, Bank of Baroda, Axis Bank, Indian Overseas Bank, Bank of Maharashtra, and Karur Vysya Bank are likely to offer loans for sale to distressed funds or asset reconstruction companies (ARCs) in the next few days, three people familiar with the matter said. A large housing finance company will also put up some of its sour loans to builders for sale.

United Bank of India has, perhaps, put up the largest chunk on the block. A total of 42 accounts with an outstanding of Rs 2,182.2 crore have been offered. The bank has invited bids from asset reconstruction companies, banks, and financial institutions. Other lenders may be looking at anything between Rs 500 crore and Rs 1,500 crore each.

“Banks can put assets for sale but the price they want should match what is offered by funds and ARCs. Banks are looking for cash settlement, but the price they expect is still higher than what funds are offering, which means deals are few and far between,” said P Rudran, former CEO at Arcil.

Other loans on sale may include those to Jindal India Thermal Power and KSK Mahanandi. Indian Overseas Bank may offer Vadraj Cement for sale, people associated with the process told ET.

Axis Bank declined to comment on the matter. Other banks did not reply to ET’s mailed queries.

“Lenders may have to take at least 50% haircut as investors are unlikely to settle for anything less,” said an executive involved in the processes. Tough negotiations are expected, with lenders seeking to get rid of sticky assets.

United Bank of India and Bank of Baroda have either called for tenders, or will soon do so.

Earlier, too, some state-owned banks, including the State Bank of India, tried to sell bad loans. The banks received very few bids, which were not remunerative.

“Some private sector lenders are in one-on-talks with distressed funds as they are negotiating private deals to sell off bad loans,” said another person, adding that retail loans are not being offered.

Bankruptcy cases are taking rather long to get resolved. About 34% of the 1,292 cases in the bankruptcy courts up to June 2019 are delayed beyond 270 days, up from 26% a year ago, and 31% in the quarter ended March, ET reported on August 16.

The Economic Times reported

FE: Changes in liquidation process under IBC not retrospective: IBBI

29 August 2019: The Insolvency and Bankruptcy Board of India (IBBI) has clarified that the recent amendments to the norms on the liquidation process under the Insolvency and Bankruptcy Code (IBC) will be applicable to those cases that commenced on or after July 25, which is when the amendments came into effect. The IBBI’s clarification comes after stakeholders expressed difficulty in applying the amendment regulations to a liquidation process which commenced before July 25.

As reported earlier by FE, the amendments to the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations stipulated that the liquidation process of any corporate debtor under IBC will have to be completed within a year of its commencement.

Further, the amendments called for financial creditors to contribute towards the liquidation cost in case the corporate debtor does not have adequate liquid resources to complete liquidation. In instances where the committee of creditors hasn’t approved a plan on such contribution during the corporate insolvency resolution process, financial creditors would have to contribute in proportion to the financial debts owed to them by the corporate debtor.

Such contributions, along with interest at bank rate thereon will form part of liquidation cost, which is to be paid in priority. The amendments also delved into specifics of process over the sale of corporate debtor as a going concern under liquidation, where the process ‘shall be closed without dissolution of the corporate debtor’.

“In the ongoing cases, implementing the amended liquidation regulations were becoming a challenge for the stakeholders. For instance, in a case where more than a year is gone in the liquidation process and the process is not yet over, the timeline of completion of the process within a year is not possible for all the stakeholders,” Ashish Pyasi, associate partner with Dhir and Dhir Associates, said.

“Similarly, cases where the liquidation process has started and 90 days are over, completion of scheme of arrangement as per the revised timeline was not possible,” he added. Listing other instances  of challenges faced by stakeholders, Pyasi said in the liquidation process where assets have been already sold, constitution of a stakeholders’ consultation committee to advise the liquidator would be a futile exercise. Cases where the creditors have filed their claim in liquidation but haven’t decided about relinquishing their security, applying these regulations retrospectively was becoming difficult, he added.

The Financial Express reported