Promoters of Bharati Defence and Infrastructure (formerly Bharati Shipyard) have stalled Edelweiss ARC’s application seeking bankruptcy proceedings against the company at the National Company Law Tribunal (NCLT), citing violation of the ‘principles of natural justice’, sources told FE.
The company is promoted by Vijay Kumar (11.38%), Prakash Chandra Kapoor (11.38%) and Bharati Infratech Projects (17.82%). According to sources, the objection is an effort by the company to postpone hearing of the case under the Insolvency and Bankruptcy Code (IBC).
Siby Antony, MD & CEO of Edelweiss ARC, said NCLT is in its early days and therefore is being cautious in admitting a case. These, he said, are some of the problems faced by lenders in resolving the bad debt crisis. “We are trying to get it admitted as soon as possible and will use the NCLT as an effective platform to resolve stressed assets,” he said.
This follows the case of Pawan Ruia of Falcon Tyres moving the Karnataka High Court citing principles of natural justice being violated since he was not provided enough time to respond to lenders. While the Karnataka High Court had directed the NCLT not to hear the case before further orders, Edelweiss ARC approached the Supreme Court saying that the delay would affect the resolution time line of 180 days.
The company’s gross debt stood at Rs 5,255 crore, and in FY16, it had reported a net loss of Rs 1,898 crore on revenues of Rs 58 crore. It reported a net loss of Rs 68 crore on revenues of Rs 8 crore in the December quarter of FY17.
The corporate debt restructuring (CDR) package of Bharati Shipyard had failed in the first quarter of FY15, following which a consortium of lenders led by State Bank of India sold their loans to Edelweiss ARC in July. Eleven lenders out of 23 had sold their debt amounting to Rs 4,200 crore. At present, Edelweiss holds 75% of the company’s debt.
Bharati’s debt had been referred to the CDR cell in December 2011 and lenders were agreed to recast the loans in April 2012 and offered the company a moratorium on interest for 18 months and a reduced interest rate of 11%.
Worried that its attempts to recover money from Bharti Shipyard may be jeopardised, Edelweiss Asset Reconstruction Company (ARC) in May 2015 appealed against a Bombay High Court ruling that had allowed bilateral settlements between the company and its unsecured creditors.
Nine unsecured lenders had filed separate winding up petitions against Bharti Shipyard and the court directed the company to settle claims bilaterally. In its order dated March 10, the court observed that Bharti Shipyard had agreed to pay Rs 30.6 lakh to one of the petitioners and that the petitioner agreed to accept the offer. It also said in the event the company defaults, the winding-up petition will be revived without ‘reference to this court’.