A decision on the future of loss-making Jayaswal Neco is likely only in July, after the Supreme Court hearing on July 2.
A decision on the future of loss-making Jayaswal Neco is likely only in July, after the Supreme Court hearing on July 2. A Mumbai bench of the National Company Law Tribunal (NCLT), which was supposed to hear the matter on Thursday, postponed its hearing to July 6, after the Supreme Court expresses its views. Earlier this week, the SC had asked Jayaswal Neco, the RBI and others to maintain status quo in the insolvency process initiated against Jayaswal Neco, which is one of the 28 companies in the RBI’s second list of corporate defaulters, and was given time till December 13, 2017, to finalise a debt resolution plan.
Legal experts opined that since the SC has ordered a status quo, it will examine the case and decide the future course of action. Jayaswal Neco’s master restructuring agreement (MRA) was rejected by the RBI on the ground that one of the credit ratings agencies was not approved by it, not all lenders had signed the MRA and that there was some incongruity in the upfront capital invested by the company as part of the deal, the legal experts added.
“While both the credit ratings agencies appointed by the company were accredited by the RBI, the central bank had made it mandatory that the agencies would have to be approved by it. One of the agencies was not approved by it for this particular mandate,” one of the legal experts said.
The RBI had asked the company to take a credit rating from India Ratings and Research which gave one grade below the investment grade to its debt, the petition documents filed by the company showed.
Jayaswal Neco said 10 out of 12 lenders (constituting 92% of the lenders by value) had signed and executed the MRA on December 12, 2017. It also said two RBI-accredited rating agencies — CARE and SMERA — had done the credit rating and assigned the BBB-rating (investment grade, signifying moderate degree of safety regarding timely servicing of financial obligations). It also said the promoters have brought in an upfront contribution of Rs 100.38 crore, thereby satisfying all the requisite conditions stipulated by the RBI.
The matter came to the SC after Jayaswal Neco challenged the Bombay HC’s March 3 order that dismissed its plea while holding that RBI’s mandate and requirements had not been met by it under the stipulated deadline of December 13, 2017. Jayaswal Neco’s bankers include SBI, Union Bank of India, PNB, among others. Its total debt stood at Rs 3,853 crore as on March 31, 2017. It reported a net loss of Rs 459 crore on revenues of Rs 2,516 crore in FY17, according to Bloomberg data.