Gujarat NRE Coke Ltd is staring at liquidation after the Kolkata bench of the National Company Law Tribunal (NCLT) on Wednesday declined to extend the deadline for finalizing a rescue plan for the insolvent firm beyond the mandatory 270-day period allowed under India’s new bankruptcy code.
At least four companies are interested in taking over Gujarat NRE Coke, but none will be able to submit binding bids within the specified time frame, the NCLT-appointed administrator, or resolution professional, said on Wednesday. He has time till 1 January to submit a plan with binding offers.
For creditors, liquidation may not be the most optimal way of recovering their dues—especially in view of the fact that the company still has multiple suitors—but it may be unavoidable. The company owes at least Rs4,600 crore to various creditors, and liquidation may yield less than a tenth of that amount.
An asset reconstruction company had earlier expressed interest in taking over Gujarat NRE Coke’s debt, but its offer wasn’t explored because the promoters were keen to keep the company under their control, said a company official, who asked not to be named.
With only 12 days remaining, Gujarat NRE Coke, which had voluntarily moved the NCLT declaring itself insolvent, on Wednesday asked the bench to dismiss its petition because no resolution plan can be finalized within the given time frame.
The bench declined to do so saying that there is no provision to withdraw a petition after a resolution professional had been appointed to run an insolvent company.
Sumit Binani, the resolution professional appointed by the NCLT, then asked the bench to extend the deadline as an alternative. But the bench said there was no provision to do that either.
Under the Insolvency and Bankruptcy Code, resolution professionals are initially given 180 days to prepare a rescue plan. This is extendable by 90 days, but the authority of the resolution professional cannot be extended beyond 270 days.
Since founder-shareholder Arun Kumar Jagatramka was barred from bidding for the company’s assets by a recent amendment to the bankruptcy code, no rescue plan could be finalized, lawyers for Gujarat NRE Coke argued. The company had engaged consulting firm PricewaterhouseCoopers to prepare a rescue plan.
Binani said on Wednesday that four companies had expressed interest in taking over the company’s 1.5 million tonne metallurgical coke production facilities after the amendment was passed and Jagatramka was barred from bidding for Gujarat NRE Coke’s assets.
However, they have said that they need time for due diligence and will not be able to submit binding bids immediately, Binani submitted to the bench on Wednesday.
At a meeting on Monday, the company’s creditors asked Binani to seek more time from the NCLT. But the bench said it had no authority to intervene, while advising the company and the resolution professional to move a higher court.
To avoid liquidation, the company has to move the Supreme Court, said a senior lawyer, who asked not to be identified. Only if the apex court agrees to impose an interim injunction on the amendment barring promoters from bidding for the assets of an insolvent company, can Gujarat NRE Coke avoid an immediate liquidation, this person added.