The National Company Law Tribunal (NCLT) today issued notices to Bhushan Steel Ltd and Bhushan Steel and Power Ltd over insolvency proceedings initiated by their lenders State Bank of India and Punjab National Bank. The Principal Bench of the NCLT headed by its President Justice M M Kumar has directed Bhushan Steel and Bhushan Steel and Power Ltd to file their reply. The tribunal has posted the matter for the next hearing on July 19. The tribunal, which has also jurisdiction in the matters related to insolvency and bankruptcy code, was hearing two petitions filed by lead lenders SBI and PNB. Both the petitions have been filed under the Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, where the financial creditor initiates insolvency proceedings with a claim.
Bankruptcy proceedings have also been initiated against other companies including Electrosteel Steel and Lanco Infratech and Jyoti Structures Ltd which are among the 12 NPA or bad loan cases identified by the Reserve Bank of India. SBI is the lead banker to defaulters like Bhushan Steel, Essar Steel, Jyoti Structures Ltd and Electrosteel Steel, while IDBI Bank has been directed by the RBI to initiate insolvency proceedings against Lanco Infratech. PNB is the lead banker for Bhushan Steel and Power. 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. Once a case is admitted by the NCLT, there is a 180-day timeline to decide on a resolution plan, though 90 days can be given in addition. If a plan is not decided, then the company goes into liquidation.
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The internal advisory committee (IAC) of the RBI, after its meeting on June 13, had recommended 12 accounts totalling about 25 per cent of the gross NPAs of the banking system for immediate reference under Insolvency and Bankruptcy Code. 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. Last week, Essar Steel moved the Gujarat High Court against insolvency proceedings initiated by the banks on the direction of the RBI. Essar Steel, in its petition, had appealed that the RBI notification arrived even while the firm was trying to implement a board-approved restructuring package.
The company also said it has repaid almost Rs 3,467 crore in the last one year, adding that it employs 4,500 people and that if action was taken under the provisions of sections 7, 16 and 17 of the IBC, the administration of the company would go into hands of interim resolution professionals and it would result in the closing down of the company.