Bhushan Steel objects to insolvency proceedings, Bhushan Power does not; bench questions need for RBI to step in.
The New Delhi bench of the National Company Law Tribunal (NCLT) on Wednesday reserved orders on two separate insolvency petitions — State Bank of India (SBI) versus Bhushan Steel and Punjab National Bank versus Bhushan Power and Steel.
Privately-held Bhushan Power, which owes lenders a little over Rs 37, 000 crore did not object to the insolvency proceedings. It requested the court to ensure the company was treated as a ‘going concern’.
The company said in its annual report for FY14 (latest available) that it had borrowed from 41 banks, including seven foreign banks. Data from Capitaline show the company reported a net loss of Rs 2,433 crore in FY16 on the back of Rs 8,491 crore in revenues.
However, Bhushan Steel, which owes banks a whopping Rs 44,447 crore, objected to the insolvency proceedings alleging SBI had inflated the dues by around Rs 100 crore.
The company’s counsel said SBI had classified both term loans and working capital as default debt but the company had not received a recall notice for the entire amount. The counsel claimed 65% of the debt referred to as default was in the form of working capital.
Bhushan Steel is promoted by the Singal family who collectively hold 43.74% in it; the firm reported a net loss of Rs 3,501 crore in 2016-17 on revenues of Rs15,027 crore. The company claimed in the annual report for 2015-16 that it has been facing severe stress in its debt servicing for the past few years.
A bench headed by justice MM Kumar observed that recovering dues was the statutory duty of the banks and, thus, there was no need for the Reserve Bank of India (RBI) to step in as banks were responsible enough. He also took at dig at the banking sector in the country, saying that only in India could a borrower take a loans to make interest payments.
Bhushan Steel and Bhushan Power are among the 12 companies referred to NCLT benches across the country following an RBI press release. In its June 13 press release, the central bank had directed lenders to refer a dozen companies the bankruptcy court under the Insolvency and Bankruptcy Code following several failed attempts at loan recovery.