One year after the Reserve Bank of India (RBI) first directed the commercial banks to invoke immediate bankruptcy proceedings against 12 big corporate defaulters, the insolvency resolution in many of the large firms is still mired in legal tangles. Under the Insolvency and Bankruptcy Code (IBC), the sale process has almost been completed in three cases — Bhushan Steel, Electrosteel Steels and Monnet Ispat and Energy. There is less clarity in the other cases when the 270 day timeframe for resolution ends around now.
Metal and mining giant Vedanta has acquired the management control of debt-laden Electrosteel Steels.
The company has received a new resolution plan from a prospective bidder, pursuant to a fresh bid process initiated through publication of advertisement on April 18. The said resolution plan was opened at a creditors’ meeting on May 18. Earlier, the resolution professional rejected the only bid received from UK-based Liberty House citing its lower than the liquidation value of the firm.
In addition, there were questions raised on the eligibility of Liberty House under Section 29(A) of the IBC as the company owed $2.8 million dues to Exim Bank. The deadline for the completion of the resolution process expired on April 28.
The Chandigarh bench of the National Company Law Tribunal (NCLT), last week, reserved its order on whether Liberty House was eligible to bid for the bankrupt auto-component firm, Amtek Auto. The auto component maker was admitted for insolvency in July 2017, and the Deccan Value and Liberty were the two bidders for its assets. Liberty emerged as the highest bidder.
The lenders have chosen a clutch of high net worth individuals led by Sharad Sanghi, the chief of Netmagic Solutions, to revive the bankrupt EPC (engineering, procurement and construction) company Jyoti Structures. They are the sole bidder, offering just about Rs 3000 crore to lenders over a period of 15 years while infusing equity capital in the range of Rs 150 to Rs 170 crore. However, the reports say that the legal representatives of IndusInd Bank and DBS Bank have filed applications with the NCLT in Mumbai, opposing the current resolution plan.
The appellate tribunal, NCLAT had on May 22 ordered status quo on insolvency of Essar Steel for two months as it admitted petitions of NuMetal and ArcelorMittal over the bidding eligibility. The resolution professional had disqualified ArcelorMittal since they had ownership interests in bankrupt companies Uttam Galva and KSS Pteron. Numetal was a consortium formed by Russian bank VTB and a trust controlled by the estranged promoter of Essar Steel, Rewant Ruia.
In the second round of bid, Anil Agarwal’s Vedanta Resources has also submitted a resolution plan, while Numetal consortium severed ties with Ruia and joined hands with JSW Steel and submitted an offer of Rs 37,000 crore, which is Rs 2,000 crore higher than the offer made by ArcelorMittal in the first round.
The 270-day deadline to find a resolution in real estate developer Jaypee had lapsed on May 12. According to IBC, a company has to be sent for liquidation if no solution found. But liquidation is not a favourable option in this case since thousands of homebuyers deposited their money with company to buy flats. The court had on May 16 asked the promoter Gaur family to deposit Rs 1,000 crore with the registrar of the company but they failed to do so. The company had deposited Rs 750 crore earlier.
For beleaguered Jaypee Infratech, the resolution plan was submitted by multiple bidders, including Sudhir Valia of Suraksha Asset Reconstruction Company and Adani Group. The offers range between Rs 7,000 crore and Rs 8,000 crore. However, Jaiprakash Associates, the promoter company of Jaypee Infra, approached Supreme Court complaining that the company was undervalued and the original valuation would come to around Rs 16,000 crore. Besides, it submitted another revival plan of Rs 10,000 crore under which the promoters promised to deliver the 18,000-19,000 flats to the company’s homebuyers in three years.
Tata Steel, which had won the bid for Bhushan Steel under the insolvency process, had completed the acquisition of controlling stake of 72.65 per cent in the debt-laden firm on May 18.
Monnet Ispat and Energy
The consortium led by Sajjan Jindal-promoted JSW Steel and AION Capital has received the letter of intent for acquiring the stressed asset of Monnet Ispat and Energy. They were the only bidder. The media reported that JSW-AION submitted a Rs 3,750 crore bid for the steelmaker.
Alok’s lenders had rejected the joint bid by Reliance Industries and JM Financial Asset Reconstruction Company in April. However, the Ahmedabad bench of the NCLT recently asked the company’s lenders to reconsider the only resolution plan of Reliance-JM. The joint bidders offered Rs 5,000 crore against close to Rs 30,000 crore in dues to creditors. Lenders rejected this resolution plan, putting the company at risk of liquidation. However, some of the company’s operational creditors and employees opposed this and approached the NCLT.
Bhushan Power and Steel
The company, which owes more than Rs 47,000 crore to its bankers, received bids from Tata Steel, JSW Steel and Liberty House. Earlier reports said that Tata Steel is the highest bidder with Rs 24,500 crore offer, but reports say that Liberty House has submitted an offer slightly higher than Tatas’. However, the lenders are not confident of the funding plans of Liberty House. But it is also not clear whether Tatas, which already bagged Bhushan Steel, would go for one more big take over.
The Hyderabad-based infrastructure company is on the brink of liquidation. However, the NCLT received a petition from Thriveni Earthmovers recently for considering its revised resolution plan after the 270-day deadline. While the first bid of Thriveni, filed in the stipulated period, was rejected by the lenders. NCLT will hear the matter after the summer vacation.
Dalmia Bharat, declared winner is the first round of bid for Binani Cement, declined to raise its offer of Rs 6,582 crore in the second round. But UltraTech Cement submitted Rs 7,600 crore resolution plan in the second round. Dalmia approached Supreme Court to stay the resolution process, but the apex court rejected the appeal. The court will hear the matter in July. UltraTech has offered to pay the lenders their dues only 5 days after the receipt of the order in their favour.
The joint venture Adani Wilmar had submitted a Rs 5,474 crore resolution plan for Ruchi Soya while Patanjali Ayurved had offered Rs 5,765 crore. However, last week, it was reported that Adani Wilmar offered to pay Rs 6,000 crore, surpassing Baba Ramdev’s Patanjali in the race of acquiring Ruchi Soya. With the latest move, billionaire Gautam Adani’s firm has emerged the highest bidder, but Patanjali still has the right to match the Adani Wilmar’s offer as the auction is being carried out under the Swiss challenge method.
Source: June 16, 2018, Business Today