NCLT allows 90 days' extension for Jet Airways insolvency process

The National Company Law Tribunal (NCLT) on Wednesday allowed 90 days' extension for the corporate insolvency resolution process of Jet Airways.

Jet Airways' resolution professional had last week filed an application in NCLT seeking 90 days' extension for the insolvency process of the grounded airline after it failed to attract any bidder.

The NCLT bench, comprising Bhaskara Pantula Mohan and Rajesh Sharma, granted the extension as the Committee of Creditors (CoC) voted for the same, with 70 per cent votes in favour.

The CoC had on February 18 set a new deadline of March 10 for submission of bids for the grounded airline after South American conglomerate Synergy Group and New Delhi-based Prudent ARC failed to meet the previous deadline.

Later, Synergy Group had backed out of the bidding process over slot issues. The March 10 deadline was set after Russia's Far East Asia Development Fund also evinced interest in Jet Airways.

The cash-strapped airline, which was grounded in April 2019, owes more than Rs 8,000 crore to banks, with public sector lenders having significant exposure.

The NCLT had on June 20, 2019, admitted the insolvency petition filed by the lenders' consortium led by State Bank of India against Jet Airways.

The tribunal had also appointed Ashish Chhauchharia of Grant Thornton as the resolution professional for the crippled airline.

NCLT approves Cochin Shipyard's resolution plan for Tebma Shipyards

National Company Law Tribunal, Chennai (NCLT) has approved Cochin Shipyard (CSL)'s resolution plan for Chennai-based shipbuilding firm Tebma Shipyards Limited (TSL) under the Corporate Insolvency Resolution Process (CIRP) of the Insolvency and Bankruptcy Code, 2016. Lenders will be taking a huge haircut since CSL's plan proposes to pay only 9.74 per cent of TSL's admitted debt amounting to Rs 602.39 crore.

Jotun India Private Limited, an operational creditor, had filed an application under Section 9 of the IBC against Tebma Shipyard, and NCLT, through a September 2018 order, admitted the application and initiated Corporate Insolvency Resolution Process (CIRP) as against Tebma. The tribunal appointed N Kumar as the Interim Resolution Professional (IRP).

As per CSL's resolution plan the resolution applicant (CSL) proposes a sum of Rs 65 crore as the amount payable to all stakeholders as full and final settlement and discharge of all the claims of the corporate debtor (TSL), including CIRP Costs.

Financial creditors to Temba Shipyards include State Bank of India (with an admitted debt of Rs 339.22 crore), Andhra Bank (Rs 108.21 crore), IDBI Bank (Rs 49.15 crore) Syndicate Bank (Rs 39.67 crore), ICICI Bank (Rs 38.98 crore) and Punjab National Bank (Rs 27.16 crore). Total debt stands at Rs 602.39 crore and the amount provided for the financial creditors under the CSL's plan is Rs 58.65 core, which is 9.74 per cent of pay out on admitted debt.

The plan also talks about the exclusion of two ships, which are not required for continuing the current operations of the company and are occupying space at TSL's Maple Yard, as an impediment to the company's revival. CSL will sell both the vessels and the financial creditors are entitled to receive the net proceeds from their disposal, in addition to the amount provided in the plan.

While the liquidation value of TSL is around Rs 89.09 crore, the proposal is for Rs 65 crore. The Resolution Professional said the Committee of Creditors has voted in favour of the resolution plan after deliberating upon these aspects, even if the Resolution Plan value is lower than the Liquidation value. This is primarily because they are interested in the revival of the Corporate Debtor rather its death by Liquidation, the Order said.

NCLT orders inclusion of Videocon's overseas assets in insolvency

The National Company Law Tribunal (NCLT) has ordered the inclusion of Videocon Industries’ overseas oil and gas business in the ongoing insolvency process being conducted in the country.

Videocon was in the first list of the 12 largest accounts that the Reserve Bank of India referred for bankruptcy in late 2016. The diversified group owes collectively over Rs 1 trillion to lenders.

“…..there is cross creation of the security interest by all lenders in other business assets of Videocon Group treating it as a single economic entity,” the NCLT has said.

“... we have concluded that foreign oil and gas assets of the group held through VOVL, VHHL, VEBL and VINI, are in fact, the assets and property of VIL…. Therefore, the assets held by them can be said to be ‘its’ assets, which is under the insolvency,” the order noted.

VIL’s overseas oil and gas companies are VOVL, Videocon Hydrocarbon Holdings, Videocon Energy Brasil), Videocon Indonesia Nunukan Inc.

The tribunal also directed the resolution professional to include the assets, liabilities, claims of the above mentioned overseas assets, companies in the information memorandum of Videocon.

The two-member Bench comprising Suchitra Kanuparthi and Chandra Bhan Singh allowed a moratorium on the foreign petroleum assets of the group which will restrain its lenders from selling the conglomerate’s overseas assets.

In addition, the order cited that since some time has passed in deciding the application, the time spent in deciding this application from August 22, 2019 until the date of the order, is added in the permitted timeline for the completion of the ongoing insolvency process.

Venugopal Dhoot had moved NCLT after State Bank of India invited bids in August 2019 for the group’s overseas assets, which were offered as collateral for loans to Videocon entities. The proposed sale was outside the insolvency process of group entities, and lenders, including SBI, had opposed Dhoot’s plea.

Dhoot opposed the sale on the grounds that they belonged to Videocon Industries’ overseas arms, which were set up as special purpose vehicles to act as trustee and hold the assets on behalf of the parent.

Videocon Industries had jointly applied for acquisition and extended payments for acquisition of overseas assets in 2007.

Lenders opposed Dhoot’s application citing that the overseas subsidiaries were the owners of the oil and gas assets. They said Videocon Industries had no rights over the assets. SBI had argued that extension of moratorium to the overseas assets could delay recovery of money from sale of the assets.

Earlier, the NCLT had allowed consolidation of 13 of the 15 Videocon group companies into a single entity in August 2019, based on similarity in operations, debt repayment obligations, management, assets and liabilities and interlacing of financial structure among the Videocon entities.

The tribunal also allowed consolidation of overseas assets based on the same parameters which were framed by it during the consolidation of the insolvency proceedings.

The flagship Videocon Industries’ debt stood at Rs 19,506 crore as of March 2018. The group is among the 40 largest defaulters identified by the Reserve Bank’s first list for insolvency in late 2016.

The company has its core businesses in consumer electronics and oil & gas exploration, while the subsidiaries are into manufacturing, sale and distribution of consumer goods.

The lenders plan to first auction the electronics business estimated to be worth $2 billion.

Don't delay decision on reviving Jet Airways, NCLT tells Synergy Group

The National Company Law Tribunal (NCLT) has asked Synergy Group to hasten its decision on reviving Jet Airways. The South American group had failed to provide a resolution plan before December 16 deadline due to uncertainty on airport slots and would have to participate in a fresh bidding process proposed by lenders. Michael Welch, Synergy's executive president, informed the NCLT's Mumbai Bench that the group was keen to revive the airline by forming a new company upon takeover with all Jet's assets, aircraft, employees and it operating permit but all liabilities." Undoubtedly it will be challenging but we see an opportunity," Welch said.

10,860 cases under IBC pending before NCLT at the end of Sept

As many as 10,860 cases under the Insolvency and Bankruptcy Code were pending before the National Company Law Tribunal (NCLT) at the end of September 2019, Parliament was informed on Tuesday.

"As per the data provided by National Company Law Tribunal (NCLT), total 19,771 cases were pending with NCLT benches on 30.09.2019, which include 10,860 cases under Insolvency and Bankruptcy Code (IBC), 2016," Minister of State for Finance and Corporate Affairs Anurag Singh Thakur said in a written reply to the Rajya Sabha.

In a separate reply, the minister said that out of 18,782 cases filed under IBC, 2016 at the end of June 2019, 2,173 cases were admitted under the Code.

"Out of 2,173 admitted cases, 1,274 cases were ongoing under different stages of resolution process, 129 cases have resulted in resolution, 491 cases have been approved for commencement of liquidation process, 279 cases have been closed," he said.

The action is taken as per the provisions of the Code in all these cases admitted under the Code, Thakur added.

NCLT directs Jet Airways lenders to disburse lifeline funds within 15 days

The National Company Law Tribunal (NCLT) Wednesday directed the financial creditors of the grounded Jet Airways to release some interim lifeline funds within 15 days.

The lenders had in-principle sanctioned Rs 63 crore to the RP and SBI, the lead lender, had reportedly already disbursed its portion of Rs 10 crore.

However, other lenders like Yes Bank, Punjab National Bank, IDBI Bank, Bank of India, Indian Overseas Bank and Axis Bank are yet to release their portion.

Therefore the tribunal has directed these lenders to release the amount within 15 days.

The RP of Jet Airways had moved NCLT on September 20 seeking directions to the lenders, who own 51 percent in the airline since March, to release interim funds.

The lenders had earlier approved to sanction Rs 63 crore in interim funding to meet the day to day needs and also the fees for the RP.

The RP had informed the tribunal that if the interim financing is not done timely, the corporate insolvency resolution process would come to a halt.

Following this the lenders, who own 51 percent in the bankrupt company with no business or revenue, had approved interim financing measures in its previous meetings.

NCLT on June 20 admitted the insolvency petition filed by the lenders' consortium led by State Bank against Jet.

The tribunal has also appointed Ashish Chhauchharia of Grant Thornton as the resolution professional for the crippled airline that stopped operations on April 17.

SC sets aside insolvency of Jignesh Shah's firm La-Fin Financial Services

The Supreme Court on Wednesday set aside an order of the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT), thereby quashing the insolvency proceedings against Jignesh Shah and Pushpa Shah’s La-Fin Financial Services.

A three judge-Bench of the apex court said that since the winding up petition filed by IL&FS Financial Services was more than three years after the debt had occurred, it had to be struck down since it did not pass the muster of time limitation mentioned in Article 137 of the Limitation Act.

The Limitation Act sets deadlines for different cases within which a petitioner must approach the court seeking justice, failing which the case can be stuck down by the court for falling outside the limitation period.

IL&FS Financial Services Limited, a subsidiary of Infrastructure Leasing & Financial Services (IL&FS) had filed a winding up petition against the La-Fin for failing to honour a Letter of Undertaking (LoU) signed by the latter on behalf of its group company Multi-Commodity Exchange (MCX).

In 2009, IL&FS Financial Services purchased 442 lakh equity shares of MCX Stock Exchange (MCX-SX) from MCX. Following this agreement, La Fin gave a LoU to IL&FS Financial Services that either the former or it nominees “would offer to purchase from IL&FS Financial Services the shares of MCX-SX after a period of one year, but before a period of three years, from the date of investment”. The period of three years expired in August 2012, when IL&FS Financial Services decided to sell its entire stake in MCX-SX and asked La-Fin to purchase the stake as stated by it in the LoU.

Jignesh Shah owned La-Fin, however, said “that it was under no legal or contractual obligation to buy the aforesaid shares”. In 2016, IL&FS Financial Services moved a winding up petition against La-Fin, which was subsequently transferred to the NCLT when the Insolvency and Bankruptcy Code was passed in December 2016.

The Mumbai bench of NCLT admitted the petition in 2018, and said that “on a reading of the share purchase agreement and the Letter of Undertaking that a financial debt had, in fact, been incurred by La-Fin”. The judgment was upheld by NCLAT in 2019 which held that bar of limitation would not be attracted as the winding up petition against La-Fin was filed within three years of the date on which IBC came into force, i.e December 1, 2016.

In its judgment on Wednesday, the apex court, however, said that since even the winding up petition against La-Fin was filed in 2016, which was nearly four years after the company had refused to honour its LoU in 2012, the law of limitation would apply.

McLeod Russel moves NCLT to resume tea estate sale to help it repay dues

The Williamson Magor Group (WMG)'s stressed tea entity, McLeod Russel, has appealed to the National Company Law Tribunal (NCLT) to relax the stay order on sale of its gardens.

Earlier, after Techno Electric & Engineering, a financial creditor of McLeod moved the Kolkata bench of NCLT to recover its dues of around Rs 100 crore, the Tribunal had ordered McLeod not to sell any tea estates till further notice.

McLeod, while presenting its case before the Tribunal reasoned that the sale of assets is part of its restructuring plan which it has formulated to pay off its dues and bring the company to the black.

Over the past years, out of 52 tea estates, McLeod has sold 19 gardens across Assam, Dooars and Africa for Rs 765.36 crore to pare high cost debt, buy back shares and support the firm's daily operations.

Another estate sale in Assam is underway for consideration of Rs 28.15 crore. However, following the interim stay from NCLT, this transaction has been put on hold. Moreover, the company cannot sell any more gardens unless NCLT approves or lifts the stay.

Sources close to the creditor reasoned that Techno had pressed its case to obtain a stay on asset sale as it felt it is the best way to control McLeod from liquidating and exhausting its assets before the creditors are paid in full.

“There have been instances in the National Company Law Appellate Tribunal, when such stay was obtained to prevent a company from selling off its assets without paying back to the creditors. Citing this ground, Techno had pressed its case”, the source said.

On the other hand, apart from a debt restructuring proposal with the banks, asset monetisation is a key part of McLeod’s strategy to address the ongoing financial crisis, both at the company level as well as at the group level.

Its other group entity, Eveready Industries, has also been selling land parcels to reduce its own debt. Moreover, a strategic sale in Eveready is being chalked and Duracell, besides other interested companies are in talks.

However, the Calcutta High Court, earlier in this month, had passed an ad-interim (temporary) order of injunction restraining Williamson Magor & Co, one of the investment arms of WMG; McLeod and Eveready from transferring, alienating, or encumbering any of their tangible or intangible assets till an application filed by Infrastructure Leasing & Financial Services (IL&FS) was disposed of.

IL&FS had granted a term loan of Rs. 170 crore to WMG through Williamson Magor & Co. Although both McLeod and Eveready had appealed for a stay on the order, it was rejected.

Earlier this month, shareholders of McLeod had defeated all of the company’s special resolutions which included borrowing and lending money beyond permissible limits, besides others.

McLeod had moved the resolution as it felt that the debt restructuring would result in conversion of short term debts into long term ones which will be beyond legal permit and to bypass the legal clauses had sought approval from the shareholders.

Apparently, while the Calcutta High Court as well as NCLT has temporarily blocked McLeod from raising money by asset sale, the shareholders have defeated the resolution which may affect McLeod’s intention for debt restructuring.

NCLT starts insolvency proceedings against realty firm Today Homes Noida

The NCLT has initiated insolvency proceedings against NCR-based real estate firm Today Homes Noida Ltd on a petition filed by a group of homebuyers.

A two-member NCLT bench, headed by President Justice M M Kumar, has appointed an interim resolution professional (IRP) to take over the management of the company.

There are many companies in Delhi-NCR which are facing insolvency proceedings, including Jaypee Infratech, because of default to home buyers and bankers.

The tribunal rejected the submission of the real estate firm that it has got four-year extension from UP Real Estate Regulation Authority (RERA) to complete the project, saying that Insolvency and Bankruptcy Code (IBC) overrides provisions under the realty law.

Today Homes Noida Ltd had contended that UP-RERA has extended its timeline till June, 2021 to complete the Ridge Residency housing project in sector 135, Noida.

Observing that there is "overwhelming evidence to prove default" against the company, the tribunal directed the erstwhile promoters, directors and employees of Today Homes Noida to "provide every assistance and cooperation" to IRP in managing the affairs of the company.

The National Company Law Tribunal (NCLT) also granted it protection from the lenders by prohibiting them to recover the amount for a certain period.

The tribunal order came over a batch of petitions filed by home buyers of the real estate firms, who are now a financial creditor of the company following amendments in the IBC.

The petitioners had entered into home buying agreement with the firm on March 29, 2012 and had paid almost 90 per cent of their amount for flat in the Ridge Residency Housing Project, sector 135, Noida.

As per the agreements, buyers had to pay the regular payment and the builder was supposed to deliver the possession within 30 months with a grace period of 120 days, failing which a compensation of Rs 5 per square feet per month was to be paid depending on the flat size.

According to the agreement, flats were to be delivered latest by 2016 but neither the possession of premises was delivered nor money was refunded.

The petitioners had claimed Rs 4.18 crore along with 24 per cent interest and submitted that more than 60 months has passed but possession was not granted.

Consenting to their plea, NCLT observed: "The said period has lapsed and the Corporate Debtor having failed to deliver the possession of the said flats, there is a clear default committed by the Corporate Debtor (Today Homes Noida), which is the correct position taken by the financial creditors(buyers)..."

The tribunal also observed that as per the agreement, the flats were supposed to be delivered in FY 2016-17 only and the application was filed by home buyers in July 2018.

The NCLT did not agree with the submissions of Today Homes Noida that they have been given time till 2021 to complete the project by the real estate regulator RERA.

"We find that argument is completely fallacious, in as much as the same it would not absolve liability to honour the commitment made to the applicants, herein the builders buyer agreement for the purpose of the code (IBC)," said the bench.

"Mere because the builder has been provided a different timeline for completion of the project", it would not "cut any ice because IBC overrides RERA", the order further said.

NCLT allows ban on Deloitte, BSR for alleged auditing lapses in IL&FS firm

The National Company Law Tribunal (NCLT) Tribunal Friday rejected Deloitte's and BSR's appeals challenging a five-year ban on them for alleged lapses in their audits of a unit of Infrastructure Leasing & Financial Services (IL&FS), which the government took control of last year.

The tribunal had earlier allowed the corporate affairs ministry to prosecute the audit firms and 21 others in the same case, though the implementation of the same has been stayed after they sought time to challenge the order at the appellate tribunal NCLAT.

The auditors had challenged the jurisdiction of the NCLT to ban them under Sec 140(5) of Company's Act.

They had challenged the jurisdiction of the NCLT to ban them, saying section 140(5) of the Companies Act pertains to auditors who are still auditing the company in question while they have already resigned from the service and thus cannot be banned under the given provisions.

It can be noted that while Deloitte had stopped auditing IL&FS Group, which owes over Rs 95,000 crore to lenders and other financial institutions, by the end of FY18, BSR was the statutory auditor of IL&FS Financial Services (IFIN) and resigned only in June this year-nine months after the company was sent to the bankruptcy court.

The BSR counsel Darius Khambata and Deloitte's counsel Janak Dwarakadas had also argued that before banning them, the tribunal has to pass a final order in the matter which establishes that fraud was indeed committed by the auditors.

The ministry move to ban them came in after the Serious Fraud Investigation Office (SFIO) in its investigation found them guilty of painting a rosy picture of IFIN despite being aware of the poor financial health of the company.

The counsels of the auditors had said merely based on an investigation by SFIO is not sufficient to ban them.

The SFIO, in its report alleged that these auditors were aware that IFIN was lending to defaulting companies through group companies so that they could suppress their NPAs and not provide for the bad debt.

Deloitte said it "will review the order". "We remain committed to high standards of audit quality and ethical conduct in our professional practice. We have faith in the country's regulatory and judicial processes and will continue to cooperate fully with the authorities," said a company spokesperson in a statement.

The NCLT approved the appointment of auditors to recast accounts of IL&FS and its subsidiaries. The ministry had on Thursday proposed Borkar & Mazumdar & Co and MM Chitale & Co for IL&FS and IFIN respectively; and GM Kapadia & Co and CNK & Associates for IL&FS Transportation Networks to recast account of IL&FS and its subsidiaries.

IL&FS case: NCLT reserves order on accounts of Bawa's wife and daughter

MCA alleged that around Rs 27 crore was transferred by Bawa to his wife’s account and Rs 4.84 crore was transferred to his daughter

The National Company Law Tribunal (NCLT) on Monday reserved its order on the plea of wife and daughter of erstwhile MD&CEO of IL&FS financial services (IFIN) Ramesh Bawa to de-freeze their assets as they were neither charged in the Serious Fraud Investigation Office (SFIO) probe nor their names appeared in SFIO complaint.

Ministry of Corporate Affairs (MCA) opposed it on the grounds that Bawa’s daughter and wife are beneficiaries of the funds siphoned off by Bawa from IFIN. MCA alleged that around Rs 27 crore was transferred by Bawa to his wife’s account and Rs 4.84 crore was transferred to his daughter. Bawa’s wife even accessed the lockers, which were frozen by the NCLT order.

MCA also alleged that some part of the money transferred by Bawa to his wife were in turn transferred to two firms where she was the director. Counsel appearing on behalf of Bawa’s wife and daughter said the SFIO did not find any illegality in the funds transferred from the account of Bawa’s wife to the two companies.

Govt to charge Axis Bank, StanChart, Bawa & wife with contempt of NCLT

The corporate affairs ministry will on Friday file contempt of court petitions against Axis Bank and Standard Chartered Bank for their alleged role in ex-IL&FS Financial Services managing director Ramesh Chander Bawa and his wife disposing off a portion of their assets which were frozen by the NCLT.

The ministry is filling two applications and a petition against Bawa and his wife and the banks after it has come to light that the parties have gone against the orders of the bankruptcy tribunal.

A bench of VP Singh and Ravikumar Duraisamy had on December 3, 2018 had restrained the former directors of the crippled IL&FS group from mortgaging/selling, or creating third-party interests or in any way alienating movable or immovable or jointly held properties.

However, the NCLT had allowed the former directors of the crippled group to withdraw Rs 2 lakh each per month from one of their bank accounts after intimating the the tribunal.

The NCLT has posted the matter for hearing on Friday.