NCLAT halts insolvency proceedings against Essar’s oil & gas subsidiary

The National Company Law Appellate Tribunal (NCLAT) on Tuesday stayed the insolvency proceedings against Essar Oil and Gas Exploration and Production Ltd., a subsidiary of Essar Group. The proceedings had been initiated following an NCLT order based on a petition from Greka Green Solutions (India) Ltd, which claimed an unpaid amount of ₹24.38 crore (about $2.96 million).

The appellate tribunal stayed the order of the NCLT’s Ahmedabad bench and issued a notice to Greka Green on a petition filed by Pankaj Kalra, the suspended director of Essar Oil and Gas Exploration. The next hearing has been scheduled for 6 November.

During the hearing, Kalra’s counsel argued that a settlement agreement specifying a final installment payment had been made before the insolvency petition was filed, and contended that the insolvency petition overlooked this settlement. He said that Essar Oil and Gas Exploration, with a turnover of ₹8 billion and 425 employees, should not have had its insolvency petition admitted without considering the settlement agreement.

The NCLAT noted the submissions and stayed the tribunal order.

Also read | IBC tale of delay: Speed up insolvency resolution for this reform to shine

Mohit B Adatiya, director at NPV Insolvency Professionals Pvt Ltd, has been appointed as the interim resolution professional (IRP) in the case. He said, “As an interim resolution professional, we have taken over the control of the assets of the company at Mehsana and Raniganj and are complying with the law. All the processes required under the IBC (insolvency and bankruptcy code) have been complied with.”

"We are getting full cooperation from the erstwhile directors and the management of the company. Their appeal has been heard by NCLAT, a notice has been issued and in we are awaiting the written order," he added.

Essar Group said in a statement, “We welcome the NCLAT's decision of suspending the [insolvency proceedings] against Essar Oil and Gas Exploration and Production Ltd. Our commitment to honouring our financial mandates remains steadfast."

"We are a profitable company with revenues of ₹870 crore and an operating profit of ₹625 crore. The suspension will allow us to maintain our focus on our core operations and ensure that our business activities continue without disruption,” the company added.

Case history

The Ahmedabad bench of NCLT had initiated insolvency proceedings against Essar Oil and Gas Exploration on 6 September. It appointed Mohit Bipinchandra Adatiya as the interim resolution professional (IRP) to manage the company’s affairs until a committee of creditors (CoC) was formed.

Also read: Let’s reform India’s bankruptcy code but without getting in the way of commerce

The tribunal upheld the claim, saying the debt was valid, exceeded the threshold for insolvency applications, and arose from operational expenses acknowledged by Essar. Previous judgments supported the admission of insolvency proceedings in cases where settlement agreements were breached.

The dispute dates back to a contract signed on 2 December 2013 by Essar Oil Limited (EOL) and Greka Green Solutions for drilling services. EOL transferred its contract obligations to Essar Oil & Gas Exploration and Production Ltd on 19 June 2017. 

Although a settlement agreement was reached in 2019, with payments scheduled across nine installments, Essar failed to comply. A revised payment plan in February 2020 also came to nothing, leading to a demand notice in October 2022 and the subsequent insolvency petition.

Also read | Mint Explainer: Why bankruptcy reforms should be the new govt’s top priority