Of the top 12 cases under insolvency process, most cases are stuck before various courts for final approval of bidders or a resolution plan
Delay in approving final resolutions in several of the large insolvency cases is raising governance concerns among some of the participants in the bidding process.
This comes at a time when promoters, employees and other stakeholders are challenging and moving higher courts against some of the insolvency cases, including big ones such as Monnet Ispat and Bhushan Steel, which are approaching final resolutions after being cleared by the lenders under the Insolvency and Bankruptcy Code (IBC).
Koushik Chatterjee, executive director and chief financial officer at Tata Steel said, "In the short term, the delay in the process is a concern…The fact is that what is happening on the ground, the health of the assets, the way it is being maintained, the commercial transactions happening on the ground, whether there are appropriate checks and controls on purchases and sales.."
He added, "These things worry us as we have valued it on the basis of it being a going concern. We don’t even get to go into the plant…it is already 270 days and any further delay is a concern."
Tata Steel has won the bid to buy Bhushan Steel, which is one of the 12 non-performing loan accounts (NPA) and among the early ones facing insolvency proceedings on the Reserve Bank of India’s directions.
The NCLT gave a go-ahead after the committee of creditor (CoC) approved Rs 32,500-crore deal with 12.27 percent equity to lenders as financial creditors and Tata Steel owning 72.65 percent equity in Bhushan Steel. It will also pay Rs 1,200 crore to operational creditors and will also absorb about 5,000 employees of Bhushan Steel as part of the process.
A day after the NCLT approval, Neeraj Singal, the aggrieved promoter of Bhushan Steel owing 22 percent stake in the company, moved the appellate tribunal challenging the NCLT order. Moreover, Bhushan Steel’s employees and operational creditor Larsen and Toubro had also opposed Tata Steel’s bid fearing non-payment of dues but was dismissed by the NCLT.
Like Tata Steel, JSW Steel is also facing hurdles at the NCLT approval stage in buying Monnet Ispat, which has been approved by the CoC and cleared by Competition Commission of India (CCI). JSW along with Aion Investments has bid for Monnet Ispat for about Rs 3,750 crore.
JSW Steel joint managing director and chief financial officer Seshagiri Rao also expressed similar views saying, “Eventually every case is going to the Supreme Court so IBC will take a long process. We will wait for the hearings on the Monnet case…But we are not moving court against anything as of now.”
Of the top 12 cases under insolvency process, except Electrosteel Steels, most cases are stuck before various courts for final approval of bidders or a resolution plan despite most of the 270-day deadlines having ended in April.
Similar delays have been seen in other accounts too.
In the case of Jaiprakash Associates has about 30,000 homebuyers petitioning in the Supreme Court against the insolvency. In Binani Cement’s case, Birla group-owned UltraTech Cement and Dalmia Bharat have also approached the apex court challenging the National Company Law Tribunal (NCLT) order approval to select Dalmia Bharat as the final winner.
Meanwhile, employees like in the case of Alok Industries have filed an interlocutory application at the NCLT challenging the liquidation order.
According to Chatterjee, all situations cannot be plugged into the legislation. “There is something called what is the spirit of the legislation and what is written in the legislation. We have seen participants or stakeholders who have attempted to delay interfere and postpone…We worry about the governance issues (in Bhushan Steel), the resolution professional is doing his best but after all, he is not an industry professional. That’s a genuine concern. We want to see that the physical assets are in place.”
Besides Bhushan Steel, Tata Steel is fighting a legal battle with UK’s Liberty House over the bankrupt Bhushan Power and Steel. The company had earlier shown interest in the debt-ridden Electrosteel Steels, but failed to win.
“We did not create more trouble when we lost out on Electrosteel...Value maximization can go on for years…From a longer term perspective, I don’t think there are concerns if it comes in the right form as we have seen it, Chatterjee added.Among other cases, Essar Steel’s two bidders - ArcelorMittal and Numetal - are fighting eligibility cases at the NCLT bench, for lenders to approve any offer.