Insolvency: Lenders Shortlist Resolution Professionals For Firms Heading To NCLT
NCLT begins hearings in 12 large insolvency cases.
The National Company Law Tribunal (NCLT) will this week begin hearings on the Reserve Bank of India-identified stressed accounts referred to it under the Insolvency and Bankruptcy Code.
With the tribunal having accorded priority hearings to these cases, lenders have already shortlisted resolution professionals (RPs) for each of them, according bankers and lawyers involved in the matter and some of the RPs themselves. None of them wanted to be identified. Efforts to reach out to the shortlisted RPs have so far not met with responses.
Once the NCLT admits the cases, it will appoint the RPs shortlisted by lenders and the due process laid down under the code will begin.
Lenders have shortlisted RPs employed with consultancies ranging from the big four to other smaller ones, but the final decision on appointment of these firms remains with the NCLT.
As on Monday, lenders have filed cases against seven of the 12 companies RBI had identified.
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Jyoti Structures Ltd. last week became the first case to be heard by the Mumbai bench of the NCLT. During the hearing, the company admitted that it was in advanced negotiations with a potential buyer to sell the company as a going concern. The company also said that it does not object to any debt restructuring or insolvency proceedings initiated by the lenders.
The NCLT was scheduled to decide on July 3 whether to admit the insolvency application filed by State Bank Of India but has now rescheduled the matter for a day later.
Hearings in cases such as Essar Steel Ltd., Era Infra and Engineering Ltd. and Electrosteel Steels Ltd. will begin this week at different benches of the NCLT across the country. Typically, banks file insolvency proceedings at the NCLT bench in the same city as the company’s registered office.
In case of Essar Steel, Standard Chartered Bank and SBI have both filed separate insolvency cases against the company at the NCLT’s Ahmedabad bench. On June 22, the domestic lending consortium to Essar Steel, led by SBI, had decided to file for insolvency proceedings after shortlisting turnaround specialist Alvarez & Marsal (India) Ltd. as the resolution professional in the matter. SBI had been mandated by the lenders in the consortium to file the case on their behalf.
But before SBI could file the case, foreign lender Standard Chartered Bank filed its case with EY as preferred RP.
How the NCLT considers the two filings will serve as an important precedent in future insolvency applications where multiple creditors, domestic and foreign, are involved.
Insolvency cases against the remaining five companies could likely be filed in the next few days, two RPs who did not wish to be identified told BloombergQuint.
The central bank had shortlisted 12 companiess last month after its internal advisory committee (IAC) had created a common criteria to select stressed asset cases for insolvency. These cases represent 25 percent of the total gross non-performing assets (NPAs) in the banking system.
Once these cases are admitted for insolvency proceedings, the RP will constitute a committee of creditors and work with it to create a resolution plan for the company.
If at the end of 180 days from the day of admission there is no resolution plan agreed upon by 75 percent of the committee of creditors and the NCLT, an extension of 90 days can be granted by the tribunal. If a resolution plan is not finalised within this period, the asset automatically goes into liquidation, as provisions in the insolvency and bankruptcy code.