Litigation mars success of IBC : 06-08-2018

Six months after the Reserve Bank of India (RBI) deadline for the second list of non-performing assets (NPAs), 17 of the 28 cases have been admitted to the National Company Law Tribunal (NCLT). While resolution process in at least one of the cases has been put in abeyance by a high court, two are close to resolution and as many are facing liquidation.
Of the cases that have not been admitted, Soma Enterprise was restructured outside of NCLT before the deadline, said a lender. In the case of Anrak Aluminium, the high court stayed insolvency proceedings and lenders approved a one-time settlement. For Shakti Bhog Foods, winding-up was already ordered by the high court.
Even among the cases that have been admitted, five happened between June and July, which implies that a resolution in these cases is still a long way off.
SEL Manufacturing, which was admitted on April 11, informed the stock exchanges on June 27 that the High Court of Punjab and Haryana directed that the resolution process against the company be kept in abeyance.
Last August, the RBI had given banks time till December 13, 2017, for accounts where more than 60 per cent of the total outstanding was classified as NPA as on June 30, 2017, for resolution outside the Insolvency and Bankruptcy Code (IBC).
In the event that a viable resolution plan was not finalised and implemented before the date, insolvency proceedings under the provisions of the IBC were to be initiated before December 31, 2017.
However, at least two are nearing resolution. One of them is Orchid Pharma, whose committee of creditors has approved the resolution plan put forward by Ingen Capital Group LLC.
Ruchi Soya Industries where Adani Wilmar has emerged as the H1 bidder is also close to resolution. But two firms, Nagarjuna Oil and Unity Infra projects, are facing liquidation.
“The time value involved in the process is painful. If the case was resolved or even liquidated, banks would have realised some money. For every passing quarter, banks have to provide more and more. The IBC rests on two pillars: process and time. There is no clarity on process, and time has been vitiated. The resolution is taking much more time than expected, and clearly some legal intervention is required to expedite the process in a transparent and time-bound manner,” said Sunil Srivasatava, former deputy managing director of State Bank of India.
His views were echoed by Ashok Kumar Pradhan, executive director of United Bank of India. “Delay in IBC resolution is damaging the fabric of the banking sector. The worst hit is the power sector, as assets worth about Rs2,000 billion are stuck,” said Pradhan.
Lenders also don’t expect much from the second list. “In the second window, the asset quality is poor. We are apprehensive that we might not be able to recover more than 33-35 per cent. That will be the biggest hit bankers are looking at. There would be many companies, which don’t have real estates,” Pradhan said.
But lenders pointed out that even in the first list, resolution was getting delayed because of litigation. Of the 12 RBI-mandated cases, there have been four resolutions: Bhushan Steel, Electrosteel Steels, Monnet Ispat & Energy and Amtek Auto. – [06-08-2018]
Source : Times of India
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