ET: Bankruptcy process at Indu Techzone set aside by NCLAT

29 May 2020: The National Company Law Appellate Tribunal (NCLAT) has set aside the insolvency proceedings at Indu Techzone, providing relief to promoters led by I Syam Prasad Reddy, who is a co-accused in the disproportionate assets case against Andhra Pradesh CM YS Jagan Mohan Reddy.

The tribunal has ordered in favour of the company on the ground that lender IFCI had filed the insolvency petition after missing the deadline as per the Insolvency and Bankruptcy Code.

It allowed Indu Techzone to “function independently through its board of directors with immediate effect”. The May 22 order also provides relief to the Enforcement Directorate, which had attached certain assets of Indu Techzone in the disproportionate assets case and sought to exempt those from the insolvency proceedings.

The firm had approached the NCLAT after the National Company Law Tribunal’s (NCLT’s) Hyderabad bench ordered insolvency proceedings against it in November last year. It argued that the resolution application was barred by limitation — the period within which legal action could be initiated or a right enforced.

The ED had earlier submitted before the NCLT that it had registered a case in August 2011 against Jagan Mohan Reddy and others under the Prevention of Money Laundering Act, wherein Indu Techzone was one of the suspects.

Source: The Economic Times

FE:Orchid Pharma resolution: Banks will be able to show recovery in Q4

2 April 2020: Lenders to Orchid Pharma have received close to Rs 1,100 crore from Gurgaon-based Dhanuka Laboratories on the last working day of the financial year 2020, sources close to development told FE. The monitoring committee attached to the insolvency process of Orchid Pharma implemented the resolution plan on March 31.

This implies around 32% recovery for banks against total exposure of Rs 3,299 crore to Orchid Pharma. The development on late evening of March 31 also marks significance as banks will be able to show recovery on their books in the March quarter.

According to sources, lead creditor State Bank of India (SBI) has in all likelyhood received Rs 130 crore, Bank of India Rs 101 crore, Allahabad Bank Rs 81 crore, Andhra Bank Rs 74 crore, Punjab National Bank (PNB) Rs 70 crore and Union Bank of India Rs 62 crore from the resolution of Orchid Pharma.

The lenders will also receive 4,08,164 equity shares of Orchid Pharma at Rs 10 each. There will also be issue of 0% non-convertible, non-marketable, cumulative redeemable debentures of value of Rs 3,650 crore to a special purpose vehicle created by Dhanuka Laboratories, as a part of the resolution plan.

The National Company Law Tribunal (NCLT), Chennai, had approved Dhanuka’s resolution plan on June 25, 2019, for Orchid Pharma after earlier approved bidder — Ingen Capital — refused to pay money for the company. However, trouble started for the company when the National Company Law Appellate Tribunal (NCLAT) in its November 13, 2019, judgement had set aside the Chennai NCLT’s order that approved the resolution plan by Dhanuka, on the ground that the amount offered in favour of stakeholders including the financial creditors and the operational creditors, was less than the liquidation value.

Lead creditor SBI had later filed the appeal before the Supreme Court seeking setting aside the NCLAT order, alleging that the appellate tribunal erred in overriding the commercial wisdom of the CoC.

Finally, a Supreme Court bench of Justices Rohinton Fali Nariman and S Ravindra Bhat, on February 28, 2020, set aside the judgement of the NCLAT, in view of its recent judgement where it had categorically held that no provision in the Insolvency and Bankruptcy Code (IBC) or regulations had been brought to the court’s notice, under which the bid of any resolution applicant has to match the liquidation value arrived at in the manner provided in the relevant regulations.

The Financial Express reported

ET: NCLAT asks investigative agencies to clarify over JSW Steel’s immunity in BPSL matter

16 January 2020: The National Company Law Appellate Tribunal (NCLAT) has asked the investigative agencies like Enforcement Directorate, SFIO and the CBI to file an affidavit clarifying whether JSW Steel, a successful bidder for Bhushan Power and Steel Ltd (BPSL), is liable for offences committed by the previous management of the debt-laden firm under the amended IBC.

A three-member NCLAT bench headed by Chairperson Justice S J Mukhopadhaya asked the agencies to file their reply affidavits by January 20 stating whether after insertion of section 32 A in the Insolvency and Bankruptcy Code (IBC) last month, JSW Steel has immunity from the alleged fraud committed by the previous BPSL managemet.

“The Directorate of Enforcement and the central government through the Secretary, MCA on behalf of the Serious Fraud Investigation Office (SFIO) and the Central Bureau of Investigation (CBI) are allowed to file additional reply affidavit by 20th January, 2020 stating therein as to whether JSW Steel, whose plan has been approved, are covered by newly inserted Section 32A of the IBC, 2016,” said the NCLAT in an order passed on January 13.

It further said: “In case, the answer is in negative, they will enclose the evidence in support of their stand after serving a copy of the same on the learned counsel for JSW Steel and other appellants.”

The appellate tribunal had directed to list the petition on January 23, for next hearing.

The government had last month amended the Insolvency and Bankruptcy Code (IBC) and inserted section 32A inside it, which mandates that once management or control of a debt-ridden company changes after the completion of Corporate Insolvency Resolution Process (CIRP), it would not be liable for any offences committed prior to the commencement of the insolvency resolution process.

The changes were made after the ED and the Ministry of Corporate Affairs (MCA) went loggerheads over the attachment of the assets of BPSL by the former over the money allegedly siphoned off by the erstwhile promoters of BPSL, which is presently going through insolvency resolution process.

On October 10, the ED had attached assets worth over Rs 4,025 crore of debt-ridden BPSL in connection with its money laundering probe linked to an alleged bank loan fraud by its former promoters of BPSL.

JSW Steel, which has emerged as a successful bidder for BPSL with its bid of Rs 19,700 crore, filed an appeal against ED’s move before the NCLAT, which had on October 14 directed them to be immediately released in favour of the resolution professional of the debt-ridden firm.

Earlier, on October 14, the NCLAT had directed the ED to release BPSL properties attached by the agency on the JSW Steel plea, alleging siphoning off of funds by its erstwhile promoters.

While the ED is of the opinion that it can attach the property of BPSL under the Prevention of Money Laundering Act (PMLA), the MCA has been maintaining that the ED cannot do so as proceedings under the Insolvency & Bankruptcy Code was on.

Earlier, on October 25, the NCLAT had asked both organisations, which are presently headed by Union Finance and Corporate Affairs Minister Nirmala Sitharaman, to settle the matter adding that there was no question of amendment of laws.

On this, the ED filed an affidavit before the NCLAT questioning its jurisdiction.

In the said affidavit, the ED told the appellate tribunal that it has no jurisdiction over the properties attached by the agency under the PMLA and asked it to vacate its earlier order and dismiss the appeal filed by JSW Steel.

The validity of the attachment could be examined by an adjudicating authority only under the PMLA, and hence the NCLAT should vacate its order passed on October 14, directing it to release the assets of BPSL, the ED told the NCLAT.

The Economic Times reported

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