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Lenders invoke IBC norms to keep stressed assets in NCLT
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SME Times News Bureau | 19 Apr, 2019
Lenders will cite one day default clause under Insolvency and Bankruptcy
Code (IBC) to defend their action against erring promoters taken to
insolvency under the now defunct February 12, 2018 circular of the
Reserve Bank of India (RBI).
Sources said promoters of about half
a dozen stressed power entities referred to National Company Law
Tribunal have approached the bankruptcy court to quash insolvency
proceedings against them as it has become non-maintainable following the
Supreme Court order declaring the RBI circular ultra vires.
But
banker's are confident that stressed assets referred to NCLT will
continue to face bankruptcy proceedings as IBC clearly states such
referral even if there is one day delay or default by any entity in
meeting its loan commitments.
"There is no question that stressed
assets referred to NCLT will come out from there following the apex
court's ruling. These assets continue to remain stressed and lenders are
sure that resolution under IBC framework would work best for all
stakeholders," said chairman and managing director of a leading
state-owned financial institution asking not to be named.
"If
need be, lenders would also file an affidavit with NCLT to continue the
bankruptcy proceedings in the case of companies that faced such action
over the earlier RBI circular," he added.
Five stressed power
producers, including 3,600 MW KSK Mahanadi Power Co. Ltd., 1920 MW Lanco
Amarkantak Power Ltd., 600 MW Avantha Power (Jhabua), 1350 MW Rattan
India Nashik Power Ltd. (formerly Indiabulls) and 1,350 MW Rattan India
Power (Amravati project) are preparing to oppose insolvency proceedings
as lenders filed petitions against them as per February 12 RBI circular.
The projects owe about Rs 50,000 crore to banks.
Lanco
Amarkantak has sought time from the NCLT to submit documents that
suggests that Axis Bank had initiated insolvency proceedings against it
under the now-defunct RBI circular. KSK Mahanadi and Avantha Power have
also cited the apex court order in earlier NCLT hearing. The other
projects are also thinking of taking up the matter in the court.
The
February 12 RBI circular had also mandated resolution process by
lenders even if there was one day delay in repayment by debtors. This
stands annulled by Supreme Court.
However, IBC gives powers to
any creditor to take a company to NCLT even if there is one day delay in
repayments and the outstanding amount is in excess of Rs 1 lakh. As
this provision stands, lenders want to maintain bankruptcy proceedings
against assets that remain in stress.
In all about 70 cases with
total bank exposure of about Rs 4 lakh crore was declared as stressful
by the banks post the RBI circular. This included 34 stressed power
projects worth 40,000 MW having total bank of close to Rs 1.8 lakh
crore.
Its not that institutions, including PFC did not try to
resolve certain power projects, but none of the attempts remained
successful. In the case of KSK Mahanadi, Adani Group showed interest but
it soon withdrew from the race as lenders were divided on the level of
hair cut and UP state regulator sought cut in tariff for the project.
In
case of an Rs 600 crore one time settlement scheme worked out for Lanco
Amravati, the sole investor backed out from the race at the last
minute.
With relation to Avantha Power (Jhabua) an Rs 100 crore
settlement for PFC got stalled after one of the operational creditors
took the asset to NCLT.
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