Calcutta High Court has ordered the Abhijeet Group-promoted firm to be wound up in response to a petition filed by an employee last year.
In what could be a setback for lenders to Corporate Power, the Calcutta High Court has ordered the Abhijeet Group-promoted firm to be wound up in response to a petition filed by an employee last year. A consortium of nine banks has loaned the company a combined R4,712 crore. Meanwhile, State Bank of India had been scouting for a buyer and was close to shortlisting one but the court’s verdict may upset its plans.
The case highlight how public sector banks have been hamstrung in dealing with stressed assets by regulations that require them to set a reserve price for an asset and call an auction to dispose of an asset. If the first auction isn’t successful, a new reserve price must be fixed and a second auction called before a bilateral negotiation can begin. The problem, as bankers have pointed out, is that the process takes a long time, often defeating the purpose. Bankers have also not been able to convert their loans into equity at a price that is favourable to them because of the rules put out by the Securities and Exchange Board of India (Sebi).
The legal process has been virtually ineffective, further frustrating the efforts of banks to recover their dues. Reserve Bank of India (RBI) data show loans worth more than R2 lakh crore were pending at 33 debt recovery tribunals (DRTs) till FY14, up from R1.43 lakh crore in FY13. The amount recovered from cases decided in the DRTs in 2013-14 was R30,590 crore while the value of loans sought to be recovered was R2.36 lakh crore.
Thus, only 13% of the outstanding NPAs in the tribunals were recovered in FY14. The Manoj Jayaswal-led Abhijeet Group is allegedly among the biggest beneficiaries of the controversial coal block allotments; the company got blocks in Jharkhand and Chhattisgarh. Corporate Power, which is primarily into coal-based power plants, had sought restructuring under the corporate debt restructuring scheme in 2013, which did not materialise. “As such, the company, namely, Corporate Power, is directed to be wound up in accordance with the provisions of the Companies Act,” justice Biswanath Somadder said in an order on Tuesday. He added that the official liquidator will take possession of all the assets and properties of the company, now in liquidation, and take charge of its books, records, documents and transactions.
An employee of the company had approached the court in July last year to get salary dues of R6.4 lakh and asked other creditors to join the petition in November.
A lawyer familiar with the case said that since banks did not join the petition, only secured lenders would get the benefits of liquidation. “First, government dues like tax deducted at source and provident fund would be settled, followed by employee salaries and finally banks would get their share,” he said.
Justice Somadder said that the petitioner will cause a gist of the order to be published in the same newspapers where the winding-up petition had been advertised. “The petitioner as well as the supporting creditors will be entitled to pursue their claims in accordance with law before the official liquidator,” he added.
Corporate Power had appealed against the winding-up petition and the division bench had observed that Rajendra Kumar is entitled to the unpaid salary and other benefits and dismissed the appeal by imposing R10,000 on CPL.