Bankruptcy proceedings against Monnet Ispat, Alok Industries get NCLT nod
Ahmedabad/Mumbai: Bankruptcy proceedings against Monnet Ispat and Energy Ltd and Alok Industries Ltd were approved by different benches of the National Company Law Tribunal (NCLT) on Tuesday.
They become the second and third among the big 12 firms identified for early bankruptcy proceedings by the Reserve Bank of India (RBI) where the process has gone into the second stage. Jyoti Structures was the first.
Separately, the Ahmedabad bench of the NCLT gave Essar Steel time till 22 July to file its objections to the insolvency proceedings initiated against it by its creditors, including State Bank of India (SBI) and Standard Chartered Bank.
The 12 firms were chosen by RBI for immediate bankruptcy proceedings based on one criterion: the total banking exposure of the company should be at least Rs5,000 crore and 60% of this exposure should have turned non-performing by March 2016.
In Alok Industries’ case, the firm had already admitted its default, but the tribunal had to hear a petition filed by the Industrial and Commerce Bank of China (ICBC) that sought dismissal or deferment of SBI’s petition against the firm. The Chinese bank has lent close to $55 million to Alok Industries and said there was an ongoing case before the Bombay high court seeking the liquidation of Alok.
The judge dismissed ICBC’s petition invoking Section 14 (1) (a) of the Insolvency and Bankruptcy Code (IBC), which gives the NCLT power to impose a moratorium on any other pending suit against the defaulter in any other court. Alok Industries owes close to Rs8,000 crore to SBI, of which Rs3,700 crore has turned non-performing. The firm’s overall outstanding debt stands at about Rs20,000 crore.
Separately, a Mumbai bench of the NCLT admitted bankruptcy proceedings against Monnet Ispat after the lead bank clarified the default amount.
The firm was one of the first insolvency petitions filed, along with Essar Steel, on 27 June. However, the case was stuck after the judge asked why the claim amount in the petition was more than the default amount.
On Tuesday, the lead counsel for SBI clarified that the firm defaulted on loans worth Rs1,539 crore owed to SBI, as against to the claim amount of more than Rs2,239 crore. The remaining Rs700 crore is due for repayment later. According to NCLT filings, Monnet Ispat has total debt of more than Rs10,000 crore.
The tribunal approved consulting firm Grant Thornton India to be the insolvency resolution professional for Monnet, as suggested by SBI. It also gave permission to the promoters of the steel firm to submit a resolution proposal to Grant Thornton. In earlier hearings, Monnet’s counsel had reiterated that the company has received interest from several investors, including JSW Steel.
In Essar Steel’s case, the firm had asked for more time to file its reply to the NCLT, a day after the Gujarat high court dismissed its petition challenging RBI’s directive. In a statement late on Monday, Essar had said it would raise the same issues before the NCLT: namely, that it was unfairly clubbed with 11 other defaulters and it was already discussing a resolution plan with the SBI-led consortium.
SBI and Standard Chartered lawyers told the NCLT that the firm had had enough time to file its reply to NCLT and that the insolvency proceedings should not be delayed any further. Essar Steel has defaulted on Rs3,400 crore owed to Standard Chartered and its proposal to repay the amount in 25 years’ time at an interest rate of 1% was not acceptable to them, Standard Chartered lawyer Kamal Trivedi told the tribunal on Tuesday.
Essar Steel lawyers sought time, saying that their petition in the high court was against the central bank. The case is next scheduled for 24 July.
In the case of Electrosteel Steels Ltd, appearing before the Kolkata bench of NCLT, Sachchida Nand Pandey, the firm’s lawyer, said he had no instruction from the firm “to oppose the application” for appointment of an interim resolution professional. A key company official had earlier said it had decided not to oppose the application of SBI, the lead lender. The bench has kept its order reserved.
Arkamoy Dutta Majumdar in Kolkata contributed to this story.