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Business News/ Companies / What’s next for Jyoti Structures, Monnet Ispat, Alok Industries?
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What’s next for Jyoti Structures, Monnet Ispat, Alok Industries?

The next leg in the resolution process for Jyoti Structures, Monnet Ispat and Alok Industries, with National Company Law Tribunal (NCLT) approving bankruptcy proceedings against them

A screen grab of Jyoti Structures websitePremium
A screen grab of Jyoti Structures website

The next leg in the resolution process for Jyoti Structures, Monnet Ispat and Alok Industries, with National Company Law Tribunal (NCLT) approving bankruptcy proceedings against them

Mumbai: The National Company Law Tribunal (NCLT) has so far approved bankruptcy proceedings against three companies—Jyoti Structures, Monnet Ispat and Alok Industries. In each of these cases, the tribunal has approved the appointment of an interim resolution professional (IRP) to monitor the operations of the company until a resolution professional is finally appointed.

Mint looks at the next leg of the resolution process, following the admission of these cases.

1) What happens in the next 30 days after an IRP is appointed?

Once appointed, the IRP will be given a 180-day moratorium period to prepare a resolution plan. During the first 30 days, the professional will draw up a list of financial creditors by verifying their claims. A public advertisement will be put out inviting claims from other operational creditors. Simultaneously, the IRP will start the process of appointing valuers who will prepare valuation reports on the assets of the company. During this period, the IRP will also appoint accountants, legal or other professionals to assist him in managing the affairs of the company. The IRP will also be required to get cash flows in control and call for a meeting of the committee of creditors (CoC) on the 30th day. The professional will collect all information relating to the assets, finances and operations of the defaulter. He will then draft an information memorandum to invite bidders for the company, following the approval of the creditors’ committee.

2) Is an interim resolution professional same as an insolvency resolution professional?

Currently, these terms are being used interchangeably. However, they are not the same. As per the Insolvency & Bankruptcy Code (IBC), an interim resolution professional is proposed by the lender who had filed the application with the NCLT. The CoC, in the first meeting after its constitution, will give its final nod by way of a 75% majority vote to appoint the interim professional as a resolution professional or replace him by another professional.

3) Once an IRP is appointed, who is in control of the debtor and who does an IRP report to?

Once the insolvency proceedings are initiated, the powers of the board of directors stand suspended and the reigns of the defaulting company is passed on to the insolvency professional. While he will act as an administrator at the instance of the creditors, the promoters of the company along with the management are expected to extend all assistance and cooperation to the IRP. Though not laid down in the IBC, some IRPs have also formed “steering committees" which comprise of the management and promoters to assist him in the operations.

4) Is an IRP an individual or a firm?

An IRP is an individual who is registered with the Insolvency & Bankruptcy Board of India. Typically, in big cases, these professionals are supported by big consulting firms. These professionals can be partners in these firms or independent professionals. In the 12 large cases identified by the Reserve Bank of India (RBI), the big consulting firms have constituted a team of around 10 people to assist the IRP.

5) Who drafts the resolution plan?

An IRP under the IBC is not required to draft a resolution plan for the company under insolvency, but facilitate the CoC in arriving at the best resolution. The professional can draft a resolution plan, invite one from promoters, lenders and interested bidders and buyers.

6) What happens if the management turns hostile? What is the recourse available for an IRP in such a situation?

There can be a situation where the employees and management can lose interest, fearing that the company is on the verge of closing down. The management turning hostile will lead to inconsistent flow of information, which is the basis for drafting an “Information Memorandum" and a resolution plan. Without information readily available, the timelines provided under the Code become unattainable.

Without the support of the employees and management of the company, the insolvency professional would be left with no option but to draw his best estimate of the value of assets, thereby pushing away any good “resolution plans" that could be otherwise possible. The worst-case scenario is liquidation. An IRP can highlight to the NCLT that the management is not cooperating.

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ABOUT THE AUTHOR
Jayshree P Upadhyay
Jayshree heads a team of reporters focussing on legal, regulatory, investigative stories. She has worked for over a decade, reporting on financial scams, legal stories and the intersection of corporate and regulatory issues. She is based in Mumbai and has previously worked with Business Standard, Mint, The Morning Context and Bloomberg TV India.
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Published: 21 Jul 2017, 09:02 AM IST
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