Mumbai: IFCI Ltd, the erstwhile Industrial Finance Corp. of India, has challenged the AION Capital-JSW Steel Ltd resolution plan for Monnet Ispat and Energy Ltd, which treats IFCI’s secured loan as unsecured debt, before the National Company Law Appellate Tribunal (NCLAT). Last April, Monnet Ispat’s committee of creditors (CoC) had approved the resolution plan to revive the distressed steel manufacturer.

Subsequently, the resolution professional (RP) had submitted the AION-JSW resolution plan to the National Company Law Tribunal (NCLT) for approval. In July 2018, the tribunal had approved the 2,875-crore plan by the AION-JSW Steel consortium, which was the sole bidder for the assets.

Monnet Ispat’s debt stood at 11,000 crore.

“One of the grounds taken by the appellant is that the resolution plan discriminates between Monnet Ispat’s financial creditors and, thereby, is against the ratio laid down by this appellate tribunal in the Binani Industries Ltd vs Bank of Baroda case," said the division bench of justices S.J. Mukhopadhaya and Bansi Lal Bhat in its ruling on 10 January. Monnet Ispat owes around 158 crore to IFCI.

In the Binani Industries case, while striking down the resolution plan submitted by Dalmia Bharat Pvt. Ltd-owned Rajputana Properties Pvt. Ltd, the NCLAT had ruled that discriminating between different categories of financial creditors is unlawful.

The NCLAT has directed the resolution applicants (AION-JSW) to either modify the financial matrix of the resolution plan or to argue on its legality at the next hearing. It will next hear the matter on 29 January.

The AION-JSW Steel consortium has also sought the appellate tribunal’s permission to hear their side of the argument.

“The issue arises out of the fact that the plan has prescribed different treatment to different categories of financial creditors, between secured and unsecured financial creditors, and also treats IFCI’s secured debt as an unsecured debt," argued IFCI lawyers in the court.

N.P.S. Chawla, associate partner of law firm Vaish Associates, which is representing IFCI in the NCLAT, confirmed the development, but refused to divulge further details since the matter is subjudice.

An email query to Monnet Ispat and Energy remained unanswered.

Monnet Ispat is among the major stressed assets from the so-called first list of the Reserve Bank of India (RBI) which were taken up under the resolution process.

Bharat Heavy Enterprises Ltd (BHEL) has also approached the NCLAT challenging the CoC’s decision, arguing that it has assigned nil liquidation value to its operational dues.

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