The Kolkata bench of the National Company Law Tribunal (NCLT) has admitted insolvency proceedings against Coastal Projects (CPL). The company, which was on the Reserve Bank of India’s second list of loan defaulters, was referred to the bankruptcy court by State Bank of India (SBI) over unpaid dues of more than Rs 975 crore. SBI has appointed Ravi Sankar Devarakonda as the interim resolution professional (IRP) to oversee the insolvency process of the construction company, engaged in developing infrastructure projects. Appearing before a bench of the tribunal on October 30 last year, SBI’s counsel Sauvik Majumdar had urged the bench to admit the insolvency petition against the company under Section 7 of the Insolvency and Bankruptcy Code (IBC). The total claim amount from Coastal Projects by SBI stood at around Rs 975.27 crore up to September 30, 2017. The company has not contested the default amount. During the last hearing of the case on January 3, 2018, SBI’s counsel Bishwajit Dubey informed a division bench of the tribunal, comprising justices Vijai Pratap Singh and Jinan KR, that the company had been on the RBI’s list of loan defaulters. The company did not oppose the lender’s insolvency petition for commencing a corporate resolution process.
Passing the order on January 5, the justices said, “The petition filed by the financial creditor under Section 7 of the Insolvency & Bankruptcy Code, 2016 is hereby admitted for initiating the corporate resolution process and declared a moratorium and public announcement stated in Section 13 of the IBC, 2016.” Apart from SBI, other lenders to Coastal Projects include Punjab National Bank (PNB), Bank of Baroda, YES Bank, Axis Bank, Standard Chartered Bank, Andhra Bank, South Indian Bank, IFCI and IndusInd Bank, according to the company’s annual report for 2016-17. CPL had reported a net profit of Rs 2.62 crore in FY17 on operational income of Rs 1,284.19 crore. The company is in the business of providing construction and EPC services, especially in underground tunnelling and excavation. Over the last five years, the company, like all similar firms, struggled with liquidity crunch, it claimed in its latest annual report.
The company said in its latest annual report: “Company’s fund and non-fund-based facilities amounting to Rs 4,435 crore was restructured under the corporate debt restructuring scheme on March 29, 2014. Though the package was implemented, the recovery of the company is taking time due to external and internal reasons and stressed phase of infrastructure industry. “Following to this, lenders had considered conversion of WCTL,FITL and overdue interest into compulsory convertible preference shares to provide relief to the company. The RBI had come out with a circular dated 08.06.2015, providing for conversion of debt to equity under the strategic debt restructuring (SDR) Scheme. After several deliberations, the lenders agreed to set 25.07.2015 as the reference date for invocation of SDR and thereby converted Rs 180.51 crore of debt into equity by holding 54.55% stake in CPL post SDR.”
As per SDR guidelines, lenders after attaining majority shareholding had to initiate change in the management and the same should have been done within 18 months (i.e. January 24, 2017) from the reference date. After considerable efforts for 12 months from the reference date, CPL had received binding investment offer from two potential investors for buying parts of the business of the company based on discussions between it and the investors.
“The implementation of the carve out scheme, coupled with SDR exit, which was approved by super majority of lenders cannot be implemented for want of investor’s approval. Thus, the scheme could not be implemented in the current form. Company’s accounts with various banks have been classified as non-performing assets as on 31.03.2017,” the annual report said.
“There was no opposition from the company for initiating the insolvency process because there has to be something to work out a solution. Apart from SBI, there are many other lenders. Through the resolution process the company actually wishes to settle the debts and figure out a way to come out from this situation,” a source close to the development told FE.