FE: Jet Airways creditors file claims worth Rs 30,907 crore

20 September 2019: The total claims filed by creditors against Jet Airways has been updated to Rs 30,907 crore. As on September 6, the resolution professional (RP) of the grounded airline has admitted claims worth Rs 14,054 crore. The RP is yet to verify claims worth Rs 3,202 crore. An earlier notification on claims against Jet Airways showed that total claims stood at Rs 30,588 crore as on August 7. Financial creditors, including domestic and foreign banks, have dues worth over Rs 8,200 crore with Jet Airways.

The total claims amount has risen even as the Synergy Group, the sole suitor for the beleaguered Jet Airways, met with lenders of the airline earlier this week seeking a haircut on its existing debt.

On June 24, the RP had invited operational and financial creditors to file claims against the airline. Claims worth Rs 13,670 crore have so far been rejected, according to data on the airline’s website.

Jet Airways has been grounded for five months. It halted operations on April 17, after lenders refused to provide emergency funding to the airline. Slots belonging to Jet Airways have since been reallocated to other airlines. Following the grounding of Jet Airways, lenders of the airline, led by the State Bank of India, tried in vain to sell the airline.

On June 20, the National Company Law Tribunal (NCLT) initiated insolvency proceedings against the airline. According to the timeline set out by the RP, the resolution plan for Jet Airways is expected to be finalised for the NCLT’s approval by October 27.

The Financial Express reported

FE: Reliance Communications RP wants status quo to be maintained on spectrum licences

20 September 2019: Deloitte, the resolution professional (RP) to Reliance Communications (RCom), has filed an application in the National Company Law Tribunal seeking a direction to the Department of Telecommunications (DoT) that status quo be maintained on spectrum licences, and that they should not be terminated.

Senior advocate Ravi Kadam, representing the RP, told the tribunal that DoT had allegedly threatened to terminate the spectrum licences held by the company, which according to them were a ‘transferable asset’. He also added that it is the only asset with the company and if the licences were to be terminated, any future resolution plan for the corporate debtor would fail.

Ashish Mehta, the lawyer representing DoT, however, informed the tribunal that it had given a showcause notice to the company in March and no fresh notices had been served to RCom since. The two-member bench of the tribunal has directed the DoT to file a reply within the next seven days and allowed the RP to send a rejoinder within seven days of receiving the reply. The tribunal has adjourned hearing on the matter to September 30.

RCom and DoT have been warring over spectrum for months. Earlier this year, the Supreme Court had upheld an order by the Telecom Dispute Settlement Appellate Tribunal (TDSAT) and rejected a plea by DoT that Reliance Jio Infocomm be held liable for RCom’s earlier debt.

DoT had wanted an undertaking from Jio that it would be responsible for RCom’s past spectrum liabilities before approving the deal with RCom. This was in view of TDSAT’s go-ahead to RCom on its proposed spectrum sale to Jio, which would have helped RCom become debt-free. Jio, however, refused to give an undertaking and the deal subsequently collapsed.

The Financial Express reported

FE: Supreme Court seeks response from Jaiprakash Associates lenders on 858-acre land bank

20 September 2019: The Supreme Court on Thursday sought response from the lenders of Jaiprakash Associates (JAL) as to why they should not be asked to return a land bank of 858 acre to Jaypee Infratech (JIL), which is undergoing insolvency proceedings. JAL, the parent company of JIL, had mortgaged the latter’s land bank to secure loan of Rs 20,510 crore from a consortium of around 20 banks including State Bank of India, Axis Bank, ICICI Bank and Standard Chartered Bank.

A bench led by Justice AM Khanwilkar issued notice to JAL’s lenders on an appeal by homebuyers challenging the National Company Law Appellate Tribunal’s August 1 order that allowed JAL lenders to control over 858 acres of JIL land. The next hearing of the case will be on October 17.

Stating that the NCLAT had “erroneously legitimised certain transactions which they apprehend were “preferential,” Jaypee Green Krescent homebuyers said that the appellate tribunal overlooked the fact that the transactions were entered into by the corporate debtor in its run-up towards insolvency, where the management of JIL was aware of the impending insolvency event as its accounts were already declared NPA.

They further alleged that the preference was given to creditors of JAL and they got a “favoured treatment.” “… there was no viable explanation for entering the impugned transactions for the benefit of JAL, when the corporate debtor itself was facing acute financial crunch,” the petition stated.

It said that Section 43 of the code provides for the avoidance of preferences given by a corporate debtor and also invalidates any transfer of property or creation of an interest thereof by it during the look-back period to a person on account of antecedent debt or other liabilities which have the effect of putting such creditor, surety or guarantor in a better position in the liquidation waterfall than the position which it would have been in if such transfer had not been made.

According to the petition, the resolution professional under Section 25(2)(j) of IBC is duty-bound to examine all the transactions undertaken by the corporate debtor during the period of two years preceding the insolvency commencement date and file an application for avoidance of transactions.

“The management of the corporate debtors, related parties and their creditors often have the benefit of superior information of the financial affairs and may collude to siphon off assets with the knowledge that the corporate debtor may become insolvent in the near future,” the homebuyers stated. However, the JAL lenders told the apex court that the transactions were made in the ordinary course of business and there was nothing to show that they were made to defraud the JIL creditors.

NCLAT had set aside a National Company Law Tribunal Allahabad bench’s May 16, 2018 order, which had directed JAL to return the land to JIL and discharge the interest created over the patch of land to lenders. The tribunal had quashed the deal and termed the transaction as “fraudulent” and “undervalued.”

The NCLAT had on July 30 extended the CIRP period of JIL for 90 days during which fresh bids for the company can be submitted. Though fresh bids can be submitted by NBCC, Adani Infrastructure and Development, among others, the NCLAT had held JAL eligible to place new bids. Appeals against this NCLAT judgment are pending before the Supreme Court.

In the first round of insolvency proceedings conducted last year, the Rs 7,350-crore bid of Lakshdeep, part of Suraksha Group, was rejected by lenders. In October 2018, the RP had started second round of bidding. On the suggestions of the SC, NBCC is supposed to file its revised plan to complete the pending projects. The Adani group is also now in the fray with its unsolicited bid.

The IDBI Bank-led consortium had initiated insolvency proceedings against JIL for failing to repay debt of around Rs 24,000 crore. The NCLT had admitted the IDBI Bank-led consortium’ plea.

The Financial Express reported

ET: NCLT initiates insolvency proceedings against Sana Realtors

19 September 2019: The National Company Law Tribunal (NCLT) has initiated corporate insolvency resolution process against Sana Realtors under Section 7 of the Insolvency and Bankruptcy Code 2016.

The court has appointed Sudhir Kumar Agarwal as the interim resolution professional (IRP) for the case. The court directed the IRP to make public announcement.

The buyer had booked four apartments in Sana Realtors’ Precision Soho Towers, situated in Sector 67, Gurugram in August 2010 for Rs 48.30 lakh. The project was to be delivered within 36 months with a grace period of 12 months but the builder failed to do so.

The buyer further pleaded that the builder had promised assured returns of Rs 1.02 lakh per month from August 2010 till the time the premises were constructed by them and leased out. The builder paid assured returns till August 2014 and thereafter no payment has been made. The buyer claimed that the total sum due is Rs 1.46 crore.

Sana Realtors in its plea said that they had called upon the buyer to take possession of the properties in 2016 hence they are not liable to pay assured returns. The builder further said that due to various reasons the project got delayed for more than two years and there is no clause to pay interest as claimed by the buyer. The OC was issued in July 2017.

The buyer has been ordered to deposit Rs 2 lakh to the IRP to meet the expenses to perform his function within three days of the order.

The ex-management has been directed to provide all documents in their possession and furnish every information within a period of one week from the admission of the petition to the IRP.

The Economic Times reported

FE: Jet Airways: Synergy meets government officials to discuss airline’s revival

19 September 2019: The Synergy Group, the sole suitor for Jet Airways, met with government officials on Wednesday to discuss the revival of the grounded airline. The group, promoted by Bolivian-born German Efromovich, sought assurance from the government on recovery of Jet’s slots. The government sought clarity whether the group’s business proposal was compliant with Indian foreign direct investment (FDI) rules, sources said.

“Officials from the ministry of civil aviation (MoCA ) met with the group’s representatives on Wednesday. The Synergy Group mainly sought assurance on the return of Jet’s slots. In response, the government gave an assurance that reallocating the slots should not be an issue post March,” a person aware of the developments told FE.

The Synergy Group will also send a technical team to evaluate Jet’s assets, sources indicated to FE. The slots of Jet Airways, which has been grounded for the past five months, have been reallocated to other airlines till March 2020.

The government, however, has serious concerns on whether the investment from the Synergy Group will comply with Indian FDI rules, as the group is yet to find an Indian partner. As per the Indian FDI regulations, a foreign airline can directly invest up to 49% in a scheduled Indian carrier. However, the rule applies only to those entities which directly own an airline. If the foreign entity is an investment arm, private equity, fund, bank, or an industry conglomerate, FDI can go up to 74%, which is the maximum permissible investment that can be held by a foreign investor provided it is explicitly not an airline. “The Synergy Group has informed the government that it is looking for Indian partners and their legal team is looking for ways to resolve the concerns regarding FDI,” the source said.

Last week, FE reported that the resolution professional (RP) for Jet Airways has approached at least two Indian companies to partner with the Synergy Group to invest in the grounded airline. Independently, Synergy Group has also held talks with some Indian entities.

The Synergy group has also met lenders of Jet Airways including State Bank of India, IDBI Bank and Yes Bank this week. The group gave presentations to the lenders on their potential business plans with the airline. An adviser to the group had last month told FE that the group wants lenders to take a significant haircut. The Synergy Group also plans to run the airline at a much smaller scale than Jet’s earlier operations.

The financial creditors alone have admitted claims worth over Rs 8,200 crore with Jet Airways, data on the airline’s website shows. So far, creditors have submitted total claims against Jet Airways worth over Rs 30,000 crore, of which claims of over Rs 12,000 crore have been admitted by the RP. Jet Airways was grounded on April 17 this year and insolvency proceedings against the airline were initiated on June 20.

German Efromovich had in 2004 bought a bankrupt Avianca. The airline has since grown to become Latin America’s second largest. Earlier this year, Efromovich was reportedly removed from the board of Avianca Holdings for a loan breach.

The Financial Express reported

FE: McLeod Russel urges NCLT to quash ‘status quo’ order

19 September 2019: Debt-laden McLeod Russel on Wednesday urged the Kolkata-bench of the National Company Law Tribunal (NCLT) not to continue the interim order of “status quo” against its assets as it has very “serious repercussion” and negative “ramifications” for the operations of the bulk tea producer.

On September 3, the NCLT Kolkata bench passed an interim order of status quo of assets of the Kolkata-based company – once the biggest bulk tea producer in the world – as disclosed in the financial statement for the year ending March 31, 2019, till the next date of hearing.

The order was passed after one of the company’s financial creditors, Techno Electric & Engineering, apprehended disposal of the assets of the corporate debtor (McLeod) for defeating its interest.

Earlier, Techno Electric filed a petition for Corporate Insolvency Resolution Process (CIRP) before the tribunal under Section 7 of the IBC against the tea maker after it had defaulted on repayments of Rs 100-crore loan. “The documents referred to us add strength to the apprehension on the side of the applicant that if an ad interim order is not passed, there is every chance of removal of the assets of the CD (corporate debtor) for defeating the very purpose of (CIRP) resolution if any passed in favour of the applicant,” a two-member bench of Justices Jinan KR and Harish Chander Suri observed while passing the interim order.

On Wednesday, in his submission before the bench, Joy Saha, the counsel for McLeod Russel, said: “My entire line of credit will dry up because of this order. I am not able to pay the wages to around 65,000 workers of our tea gardens. It will have a catastrophic effect on the operations of the respondent company and likely to cause unrest amongst the workers. So far, as the interim order of injunction is concerned, this has very serious repercussion.”

According to Saha, each of the assets over which Techno Electric has asked for injunction are already mortgaged in favour of the banks. Stating that banks were considering a restructuring of loans proposal, Saha said, “All the banks, in common words, have been chastising me because I have not been defended the claim of an unsecured creditor.”

According to the latest annual report of McLeod Russel, part of the Williamson Magor Group, its financial creditors are ICICI Bank, HDFC Bank, State Bank of India, Yes Bank, RBL Bank, Axis Bank, Allahabad Bank, Uco Bank and United Bank of India.

The counsel for the tea company contended that the operational creditor now has taken the driver seat, while the banks, which are the the secured creditors and want to enter into loan restructuring agreement, are now “languishing in the background”.

“If an asset be mortgaged, can it be sold?” asked Saha, adding that as the assets were already mortgaged, the operational creditor would not need further protection from the tribunal. Saha urged the bench not to continue the interim order of ‘status quo’ against the company’s assets.

In his counter-argument, seeking continuation of status quo against McLeod’s assets, Techno Electric & Engineering’s counsel Ratnanko Banerjee said: “In one year, the corporate debtor sold Rs 500 crore worth of assets, even assets were mortgaged. For the purpose of the insolvency resolution process, their assets have to be preserved. I have expressed apprehensions that they will sell their assets, that is why the injunction is required.”

Banerjee allegedly said the Williamson Magor Group had siphoned off money from one group company to other group company. “This is a case for a forensic audit when the time comes,” he added.

Hearing the argument and counter argument, Justice Jinan KR said the bench was “only concerned” about whether the interim order required a ‘modification’ or not. “We are not going to confirm the order, we are not going to set aside the order,” he averred.

The Financial Express reported

ET: Reliance Communications subsidiary files for bankruptcy protection without prior consent

18 September 2019: Debt-ridden telecom firm Reliance Communications on Wednesday said its subsidiary GCX filed for bankruptcy protection in the US without any prior consent of the company. The B2B arm of RCom, GCX has voluntarily filed for bankruptcy protection under chapter 11 of the United States bankruptcy code last week, as per a regulatory filing.

“Kindly note that while there was financial stress in GCX, however, the decision to file for bankruptcy protection under chapter 11 of the United States Bankruptcy Code has been made by the management of GCX without any prior consent of the Company,” RCom said in the filing.

GCX on September 15 announced that it has initiated a voluntary case under Chapter 11 of the United States Bankruptcy Code to effectuate the plan while continuing to serve its customers as usual.

“Upon emergence from this process, the Company expects to be well-positioned to aggressively pursue its business plan independent of the overhang caused by its corporate parent’s challenges,” GCX said.

It claimed that more than 75 per cent of the company’s lenders have already committed their support for the plan, which outlines the terms for a transaction through which GCX’s senior secured noteholders would become owners of the Company and provide new loans to support and grow the business.

“GCX expects to complete the Chapter 11 process and emerge as a stronger company within the fourth quarter of 2019, subject to all required regulatory approvals,” the company said.

RCom, on the other hand, itself is undergoing through insolvency proceedings in India.

The Economic Times reported

ET: NCLAT asks RCom to approach NCLT for Rs 577 crore refund from Ericsson

18 September 2019: The NCLAT on Wednesday declined RCom’s resolution professional’s plea seeking refund of Rs 577 crore from Swiss firm Ericsson, and directed the RP to approach the Mumbai-bench of NCLT for the same.

Reliance Communications is presently going through the Corporate Insolvency Resolution Process under the supervision of the Mumbai-bench of National Company Law Tribunal.

The RP had filed and interim application with the NCLAT, contending that Ericsson, which is only an operational creditor of the company, should return the money paid by it, as RCom is now under the resolution process.

However, a two-member NCLAT-bench headed by Chairperson Justice S J Mukhopadhaya asked that the RP may raise all arguments for refund of money begfore the NCLT.

It also said that the RP may file appeal before it, in case of adverse order by the NCLT on this issue.

“We are not inclined to take this interim Application…,” said the NCLAT.

RCom had paid a sum of Rs 577 crore to Ericsson India after the Supreme Court had directed it to pay.

In February this year, the apex court held Rcom’s promoter Anil Ambani and two of his top executives guilty of contempt of court for wilfully failing to pay the dues of Ericsson.

On April 30 this year, RCom withdrew the cases, which challenged an NCLT order that allowed insolvency resolution process against the company, from the NCLAT.

RCom in May last year had filed a petition before the NCLAT against the NCLT order on a insolvency plea moved by Ericsson.

The Mumbai-bench of NCLT on May 15, 2018, admitted an insolvency petition filed by Ericsson against RCom and two of its subsidiaries — Reliance Infratel and Reliance Telecom.

The NCLAT on May 30, 2018, had stayed the operations of NCLT orders.

Ericsson India had in September 2017 moved insolvency petitions against RCom, Reliance Telecom, and Reliance Infratel before the NCLT for failing to pay their dues amounting to nearly Rs 1,500 crore.

It is estimated that RCom has been reeling under debt of over Rs 46,000 crore.

The company had chalked out plans to sell assets for about Rs 25,000 crore and use it for clearing debt of around 40 lenders.

RCom was expecting to realise Rs 975 crore from sale of spectrum to Jio which it promised to use paying off dues of Rs 550 crore to Ericsson and Rs 230 crore to settle dues of its minority stakeholder Reliance Infratel.

Reliance Jio, however, declined to take over any past liability of RCom for which the Department of Telecom may raise demand in future.

The Economic Times reported

NIE: Dues from PSUs blamed for stress in Hindustan Construction Company

18 September 2019: In a sign of the huge liquidity crisis facing the economy, Hindustan Construction Company Ltd, a Mumbai-based public-private entity, is struggling to get a whopping Rs 6,070 crore in dues from top public sector undertakings (PSUs) as arbitration awards.

The PSUs that were yet to pay up include the National Highway Authority of India, National Hydro Power Corporation, National Thermal Power Corporation, Ircon International and the National Institution for Transforming India.

In a petition filed in the Supreme Court, HCC said because of the non-payment of the dues, the company was facing a financial crisis that “could destroy the shareholders value and (making the company) face insolvency proceedings”.

As against Rs 6,070 crore dues, “the total loans taken by HCC from banks and financial instruments apart from bank guarantees (BGs) issues by various banks is around Rs 3,948 crore”, HCC said.

It also challenged the Insolvency and Bankruptcy Code (IBC) saying it was violative of fundamental rights.

HCC said the 2016 law created a non-level playing field and artificial financial stress due to non-payment of arbitration awards by government bodies and PSUs.

Since PSUs were defaulters, IBC should not apply to HCC, it reasoned.

Arbitration awards are deemed to be dues under the Arbitration Act.

“However, the actual receipts of such amounts are locked in litigation for years together due to mechanical and casual challenge in one or the other court by way of abusing the process of law,” the plea pointed out.

A bench headed by Justice Rohinton Nariman issued notices to various ministries and the PSUs and sought their response in two weeks.

The New India Express reported

ET: RCom may approach NCLAT for Rs 577 crore refund from Ericsson

18 September 2019: Reliance Communications is set to approach the appellate tribunal in a bid to get Swedish telecom equipment maker Ericsson to refund Rs 576.77 crore paid by the bankrupt telecom operator, a person familiar with the matter said.

The refund of the money paid on the direction of the Supreme Court is being sought on the grounds that Ericsson should not have got its dues while other creditors and vendors await the proceeds from an impending asset sale under the ongoing insolvency process, the person added.

“Resolution professional Deloitte sent a mail informing that RCom and its units – Reliance Telecom and Reliance Infratel – will head for the appellate tribunal to seek the refund,” the person told ET.

RCom, Deloitte and Ericsson did not respond to ET’s queries.

Deloitte, which oversees RCom’s operations during the insolvency process, had earlier written to Ericsson seeking the refund. Ericsson then contended that the RP had no right to seek a refund of the amount paid under the Supreme Court’s direction.

The Swedish firm wanted to know under what provisions the refund was sought. It asked for copies of the minutes of meetings held by the telco’s committee of creditors, a list of financial and operational creditors who attended the meetings where the refund was discussed, copies of the tribunal order appointing Deloitte as the resolution professional, and any applications filed by financial and operational creditors.

The battle started when Ericsson petitioned for RCom’s bankruptcy in September 2017 over non-payment of dues worth over Rs 1,500 crore. The bankruptcy court – National Company Law Tribunal – admitted the petition but under RCom’s appeal, the National Company Law Appellate Tribunal stayed the order and a settlement was chalked out with Ericsson.

When RCom failed to pay the settlement amount of Rs 550 crore, the matter went to the apex court, after which the telco cleared the dues with interest to Ericsson in March 2019 to save chairman Anil Ambani from being jailed for contempt.

RCom’s operational creditors include tower companies, equipment vendors and the Department of Telecommunications.

The battle may eventually head to the Supreme Court, experts said. Creditors, financial and operational, have claimed some Rs 90,000 crore in dues. Deloitte is trying sell RCom’s assets including spectrum, a fibre optic network, towers and real estate to raise funds to at least partly repay lenders.

The Economic Times reported