National Company Law Tribunal today gave go-ahead to banks to start insolvency proceedings against Bhushan Steel Ltd and Bhushan Steel & Power Ltd (BSPL) to recover loans the companies have defaulted on.
National Company Law Tribunal today gave go-ahead to banks to start insolvency proceedings against Bhushan Steel Ltd and Bhushan Steel & Power Ltd (BSPL) to recover loans the companies have defaulted on.
Allowing the pleas filed by the lead bankers, SBI and PNB, NCLT appointed interim resolution professionals (IRPs) and directed the companies' managements, officials and promoters to assist them in the proceedings.
NCLT has appointed Vijay Kumar V Iyer as an IRP for Bhushan Steel Ltd and Mahender Kumar Khandewal for Bhushan Steel & Power Ltd.
"All personnel connected with the corporate debtor, its promoter or any other person associated with the management of the corporate debtor are under legal obligation to extend every assistance and cooperation to the IRP as may be required by him in managing the affairs of the corporate debtor," said a NCLT bench headed by Justice M M kumar.
In case there is any violation of its order, "the IRP would be at liberty to make appropriate application to this tribunal for passing an appropriate order", it added.
The petition for initiating insolvency process was filed by State Bank of India, the lead bank of the consortium of lenders, in the case of Bhushan Steel and by Punjab National Bank (PNB) against Bhushan Steel and Power.
Since the pleas have been admitted by the NCLT, there is a 180-day timeline to decide on a resolution plan in accordance with the Insolvency and Bankruptcy Code (IBC), 2016.
The tribunal, in two separate orders, also rejected debtors' argument questioning the role of RBI, which had issued directives to the banks to file insolvency proceedings against 12 defaulters.
"We may observe in the passing that issuance of direction by RBI on June 30, 2017 can not be termed illegal because there is adequate power conferred by the banking regulation act by amendment of section 35 to issue directions to the bank being a regulator entitled to do so," NCLT observed.
NCLT also did not agree with the submission that steps like restructuring are part of external process, which are beyond the scope of the Insolvency and Bankruptcy Code.
"It is imperative to observe that insolvency is not equivalent to liquidation or winding up. This involved restructuring, re-planning and facilitation of evolving a resolution for the industry to survive," said NCLT bench which also includes Deepa Krishan.
NCLT also rejected the plea that there was discrepancy in the amounts claimed by the banks.
"We are satisfied that the default has occurred in repayment of loan," it said adding "On a closer scrutiny, we find that there is hardly any discrepancy." NCLT further said that any objection with regard to amount would be maintainable before the committee of creditors.
Any order of NCLT could be challenged before the National Company Law Appellate Tribunal within a specified period.
SBI has claimed recovery of Rs 4,295 crore from Bhushan Steel and USD 490 million for foreign currency loan.
The NCLT, on July 13, issued notices to Bhushan Steel as well as Bhushan Steel and Power over insolvency proceedings initiated by the lenders. The companies were directed to file their reply.
Both the petitions were filed under the Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, where the financial creditor initiates insolvency proceedings with a claim.
After hearing both the parties, the tribunal had reserved the order on July 19.
Bankruptcy proceedings have also been initiated against other companies including Electrosteel Steel and Lanco Infratech, Alok Industries and Jyoti Structures, which are among the 12 non performing asset (NPA) or bad loan cases identified by the Reserve Bank of India.
The 12 accounts alone constitute a quarter of the over Rs 8 lakh crore of NPAs. Of the total, Rs 6 lakh crore are with public sector banks alone.
The internal advisory committee (IAC) of the RBI, after its meeting on June 13, had recommended 12 accounts representing about 25 per cent of gross NPAs of the banking system for immediate reference under the IBC.
These accounts have an exposure of more than Rs 5,000 crore each, with 60 per cent or more classified as bad loans by banks as of March 2016.
(This article has not been edited by DNA's editorial team and is auto-generated from an agency feed.)
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