Worried that its attempts to recovery money from Bharati Shipyard may be jeopardised, Edelweiss Asset Reconstruction Company (ARC) has appealed against a recent Bombay High Court ruling that allows bilateral settlements between the company and its unsecured creditors.
Nine unsecured lenders had filed separate winding-up petitions against Bharati Shipyard and the court had directed the company settle claims bilaterally. In its order dated March 10, the court observed that Bharati Shipyard had agreed to pay Rs 30.6 lakh to one of the petitioners and that the petitioner has agreed to accept the offer. It also said in the event the company defaults, the winding-up petition shall be revived without “reference to this court”.
Confirming the development, Siby Antony, managing director and CEO at Edelweiss ARC, explained that in case the company is unable to pay the creditors, the court would appoint a provisional liquidator to take charge of the assets.
“In that case our plan to revive the company and recover the dues will be thwarted.”
The ARC had already paid the first instalment of R40 lakh to unsecured lenders in April with the next one due on June 16 but does not want to pay any more till it makes recoveries. “That is reason we have appealed against the court’s ruling,” Antony said.
“In the event of any default the Official Liquidator shall forthwith stand appointed as provisional liquidator and shall immediately take charge of the records as well as the movable and immovable properties of the Company,” justice SJ Kathawalla said in his March 10 order.
As per a listing on the court’s website, the ARC has appealed “against a final judgement” relating to Western India Marine, one of the creditors.
Several winding-up petitions were filed against Bharati Shipyard for failing to pay dues to various companies. While some were disposed by the high court, others were settled after the company agreed to pay their dues. One of the petitioners included law firm Kanga and Company which had also filed a winding-up plea.
Antony said that while the ARC is trying to revive the company by raising around R600 crore, such settlements hamper the process. “We would rather put R12 crore in completing orders and generate a steady cash flow going ahead. There are more than 60 pending orders which need to be completed,” he said.
An email query sent to Bharati Shipyard seeking comments remained unanswered.
FE had earlier reported that with a clutch of creditors including Life Insurance Corporation (LIC), Shipping Corporation of India and IDBI Capital Market all having filed winding-up petitions against Bharati Shipyard in the Bombay High Court, other lenders looking to recover their dues may find it harder to do so. However, these petitions, according to the Bombay High Court website, are yet to be admitted.
Last year a consortium of lenders led by State Bank of India (SBI) sold 60% of its total exposure of R5,800 crore to Edelweiss ARC, while 11 out of 23 banks had sold loans amounting to R3,480 crore. Punjab National Bank (PNB) is believed to be in the process of offloading its exposure to an ARC.
Bharati Shipyard reported losses of R879.36 crore in FY14 and R491.91 crore in FY13. The account was referred to the corporate debt restructuring cell in December 2011 and lenders agreed to recast the company’s loans of R5,800 crore in April 2012, offering a moratorium on interest for 18 months and a reduced interest rate of 11%. However, the company remains in the red; net losses in Q3 FY15 were R98.8 crore on revenues of R2.98 crore.