Bankruptcy proceedings started against Essar Steel, Monnet Ispat
Mumbai: Essar Steel Ltd and Monnet Ispat and Energy Ltd have become the first of the 12 big bad loans cases identified by the Reserve Bank of India (RBI) against which bankruptcy proceedings have been filed, said two people aware of the matter.
Proceedings were initiated at the National Company Law Tribunal (NCLT) on Tuesday, the people said on condition of anonymity.
In Essar’s cases, it was Standard Chartered Bank, an unsecured creditor, and not the lead banker, State Bank of India (SBI), which filed the suit. In Monnet’s case, SBI, which led the lending consortium, filed the case, the people said.
Standard Chartered Bank and SBI declined comment. An Essar spokesperson said he wasn’t aware of the matter. Monnet’s chairman and managing director Sandeep Jajodia didn’t respond to calls and text messages seeking comment.
At the end of March 2017, Monnet Ispat had debt of Rs10,333 crore. At Essar Steel, debt at the end of March 2016 was Rs31,211 crore. These are two among the 12 entities against which RBI wanted banks to quickly initiate bankruptcy proceedings. The 12 cases together account for a quarter of the banking system’s bad loans.
Since an RBI notification earlier this month, joint lenders’ forums (JLFs) of banks have met and approved taking these defaulters to the NCLT.
In the case of Standard Chartered, as an unsecured creditor of Essar, it was not a part of the JLF, said the people cited earlier. “We are not sure why StanChart decided to jump the gun when the JLF had decided to take Essar to court,” said one of the persons.
On 19 October, Bloomberg reported that Standard Chartered was one of the biggest winners of Essar Group’s deal to sell its refinery arm and related facilities to a group of investors, including Rosneft PJSC, at a $13 billion enterprise value. Essar was to use part of the proceeds to pay off creditors. The deal was stuck pending approval from local banks and Life Insurance Corp. of India. On Friday, PTI reported that a consortium of 23 lenders led by SBI had cleared the sale, which was expected to close in July.