The Kolkata bench of the National Company Law Tribunal (NCLT) on Wednesday asked the interim resolution professional (IRP), appointed for Electrosteel Steels, to submit a ‘progress report’ on the corporate insolvency resolution process for the steel maker within 10 days.The tribunal, on July 21, admitted the petition filed by the State Bank of India for initiating the corporate resolution process for the Kolkata-based company. It appointed Dhaivat Anjaria, who works as a partner in consultancy firm PwC, as the IRP.
The company, which owes lenders Rs 11,309 crore, was referred to the bankruptcy court under Section 7 of the Insolvency and Bankruptcy Code (IBC) by SBI following a nudge from the Reserve Bank of India (RBI). During the hearing of the case on Wednesday, Anjaria’s counsel Prapa Ganguly, associate of Shardul Amarchand Mangaldas, informed Justice Vijay Pratap Singh that the process under IBC has been going on. Anjaria was not present during the hearing. Justice Singh directed Ganguly that the IRP will have to file a progress report within 10 days. The next hearing is scheduled on August 16.
After the tribunal admitted the petition against Electrosteel Steels for insolvency proceedings, the company, in a stock exchange filing, had said that powers of the board of directors shall stand suspended during the pendency of the proceedings and be exercised by Anjaria till the time he continues to act as the IRP/Resolution Professional. According to the public announcement made under ‘Corporate Insolvency Resolution Process’ by the IRP in the newspapers, published on July 24, the estimated date of closure of insolvency resolution process is January 16, 2018.
In the announcement, Anjaria instructed the creditors of the company that they have to submit a proof of their claims to him on or before August 4.
In his submission on July 10, SBI counsel Rishav Banerjee had informed the tribunal that the total default stood at R1,400 crore. “The date of default was around August 2015. Electrosteel Steels has admitted the liability on several occasions,” he said, adding that in a letter sent in the month of June, the company said there was a default in making payments under the master restructuring agreement.
The RBI, on June 13, asked banks to refer a dozen troubled companies to the NCLT. The total exposure to these 12 companies adds up to a little over
Rs2 lakh crore, or about 30% of Rs 7 lakh crore worth of gross non-performing assets (NPAs) in the banking system.The central bank has said the accounts on the list constitute about 25% of the current gross NPAs of the banking system. Other companies, among the dozen identified by the RBI, admitted by the NCLT include Jyoti Structures, Monnet Ispat and Alok Industries. Lenders had initiated a strategic debt restructuring (SDR) on June 8, 2015, and on January 7, 2016 and the shareholders, in an extraordinary general meeting, approved the joint lenders forum’s (JLF) decision to convert a part of the principal restructured debt to equity.
Electrosteel Steels had said in its annual report for FY16 that a delay in release of working capital of Rs 1,300 crore under the corporate debt restructuring (CDR) package impacted the cash flow, which resulted in erosion of the company’s net worth for four successive years. The twelve accounts, identified by the RBI are those to which banks have an exposure of more than Rs 5,000 crore each, more than 60% of which has been recognised as NPAs. Once these cases are with the NCLT, lenders need to set up a committee of creditors that will come up with a plan on how the asset will be tackled. If the committee is unable to find a solution within 180 days — this can be extended to 270 days — the borrowing entity will go into liquidation.The company had reported a net loss of `1,463 crore in FY17 on revenues of `2,774 crore. On Wednesday, its scrip fell 1.79% to end the day at Rs 4.40 on BSE.