The Kolkata bench of the National Company Law Tribunal on Thursday directed the resolution professional (RP) for Ferro Alloys Corporation, the corporate debtor who stood guarantor for Facor Power, to file an application seeking continuation of moratorium, which according to the Bank of India terminated on April 2, with no resolution plan approved within the stipulated 270 days period. While this calls for liquidation of Ferro Alloys, the bench of justice Jinan Kr and Madan B Gosavi asked the RP to continue managing the affairs of the debtor, allowing more time to get a complete resolution plan approved.
Rural Electrification Corporation (REC) was the sole financial creditor till now, but on Thursday, Bank of India too filed an application claiming `30 crore. Its claim, though, was rejected on the ground that the moratorium continues. KG Somani, the RP for Ferro Alloys, told FE that the terms of moratorium prohibits any suits or proceedings against the corporate debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority until completion of the corporate insolvency resolution process.
While the counsel for the Bank of India made his submission that the 270 days time frame was over on April 2, justice Jinan Kr said he allowed more time to the RP to get a resolution plan approved. The court has not yet ordered liquidation. Somani on Thursday told FE that three bankers namely the Bank of India, Central Bank and Syndicate Bank extended credits totaling Rs 70 crore on account of working capital. But Bank of India has claimed Rs 30 crore trying to establish itself as a creditor. They have even stopped extending credit from April 2 onwards, which is not permissible by the terms of moratorium.
The moratorium says: “The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period.” The RP said the NCLT bench has been requesting the banks to continue cooperating with the corporate debtor. But Bank of India has been taking a different stance. “We will file an application on June 5, the next hearing date, seeking written direction from NCLT to the banks,” Somani said.
In fact, the Committee of Creditors (CoC) rejected the proposal of the highest bidder, IMR Mettalurgical Resources, a Swiss Company, on the ground that it was a partial bid with the company only wanting to take part of the asset of the corporate debtor and refusing to take over the management. Indian Metals & Ferro Alloys, the second highest bidder, who also gave a partial bid, raised objections over the credibility of IMR Mettalurgical Resources.
Although the proposal of IMR covered the entire REC claim amount, comprising a principal of Rs 510.97 crore and interest of Rs 218 crore, it didn’t want to take over the mines and management of Ferro Alloys, which is why the CoC considered it a partial bid.
REC, the financial creditor of Facor Power, extended loan totaling Rs 510.97 crore between 2009 and 2014. Ferro Alloys became the corporate guarantor or the debtor and pledged 15.10 crore physical shares and 4 crore demat shares. With Facor failing to repay the debt, the financial creditor invoked the corporate guarantee making the guarantor liable to pay Rs 728.97 crore. This drew Ferro Alloys Corporation into the process.