3-l cr sc uses special powers, allows bhushan cos...

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18�THE ECONOMIC TIMES | MUMBAI | THURSDAY | 27 JULY 2017Companies: Pursuit of Profit

Sangita.Mehta @timesgroup.com

Mumbai: The Supreme Court hasused special powers to allow acompany to withdraw from insol-vency proceedings after both par-ties, the borrower and the credi-tor, arrived at a mutual settlementon the loan.

The judgement assumes signifi-cance since the provisions of thenew recovery law, the Insolvencyand Bankruptcy Code (IBC), doesnot allow either of the two partiesto withdraw the case once it is ad-mitted at the National CompanyLaw Tribunal (NCLT).

Under the new law, the adjudica-ting authority can, however, per-mit withdrawal of the applicationfor insolvency proceedings on therequest made by the applicant be-fore the case is admitted.

A bench of justices Rohinton Na-riman and Sanjay Kishan Kaul onJuly 23 exercised special powers ofthe Constitution to record consent

terms between the two partieseven after the case was admittedby NCLT, thereby allowing theapplicant to withdraw the case af-ter it was admitted.

“It’s a landmark judgement sinceit gives a chance to distressed com-pany to claw back on its own withfiscal discipline,” said Subodh Ku-mar Agarwal, an insolvency pro-

fessional. The applicant, Nisus Financial

and Investment Manager LLP, hadmade a claim of `̀42.6 crore aga-inst Lokhandwala Kataria Const-ruction Pvt Ltd, which stood as aguarantor of the group company,Vista Homes, which raised moneyby issuing bonds. On June 15, theMumbai bench of NCLT admitted

the case and appointed DushyantDave as interim resolutionprofessional.

Subsequently, the financial cre-ditor, Nisus Financial and Invest-ment Manager LLP, appealed tothe National Company Law Ap-pellate Tribunal (NCLAT) that itwanted to withdraw the case frominsolvency proceedings sinceboth parties had settled the dispu-te and the borrower had madepart payment.

However, NCLAT rejected it onthe grounds that “such settlementcannot be ground to interfere withthe impugned order in absence ofany other infirmity”.

Further, it observed that once acase is admitted, it cannot be with-drawn and is required to followthe procedures laid down underthe sections of the Insolvency andBankruptcy Code. After this deve-lopment, both parties approachedthe Supreme Court.

“Miyan biwi razi toh kahe ko qazi(when a husband and wife havepatched up, where is the need for ajudge),” said Sameer Kakar, an in-solvency professional registeredwith the Insolvency and Bank-ruptcy Board of India.

However, Kakar said: “This rulingcan’t be set a precedent since theSupreme Court has used special po-wers. It is just a specific decision.”

SC Uses Special Powers, AllowsCo to Withdraw from NCLT

148cases

admitted to NCLT so far

RBI has directed banks to refer 12 large defaultersas on March 2016 to bankruptcy court

RBI had asked banks to write off 50% of loan amount if a case is referred to NCLT & 100% if it goes for liquidation

Crisil estimates that bankswill havetaken a hit of`2.4 lk crif they have written off60% of top50 defaulters

Of this, 56 caseswere initiated by borrowers

The Case Files

It’s a landmark judgement since it gives a chance to a distressed company to claw back on its own with fi scal disciplineSUBODH KUMAR AGARWALInsolvency professional

Judgement followsafter both borrowerand creditor settle dispute over loan

A RULING OF A KIND Apex Court’s ruling assumes significance as provisions of new recovery law does not allow either of the two parties to withdrawcase once it is admitted at NCLT. Experts call it a landmark judgement as it gives distressed cos a chance to claw back on their own with fiscal discipline

Our Bureau

New Delhi: The National Compa-ny Law Tribunal (NCLT) on Wed-nesday allowed bankruptcy pro-ceedings against debt-riddenBhushan Steel and Bhushan Po-wer & Steel.

The companies have 180 days tocome up with a resolution — tho-ugh they can ask for an additional90 days in some situations — or fa-ce liquidation.

NCLT had reserved its order lastweek over the bankruptcy petitionsfiled by the State Bank of India andPunjab National Bank, lead ban-kers to Bhushan Steel and BhushanPower & Steel, respectively.

Both petitions were filed underSection 7 of the Insolvency andBankruptcy Code (IBC), 2016,wherein the financial creditorinitiates insolvency proceedingswith a claim. SBI filed a claim torecover `̀4,295 crore from Bhus-han Steel and $490 million of fore-ign currency loan.

NCLT had issued insolvency no-

tices to both companies, with di-rections to file replies, earlierthis month.

Bankruptcy proceedings have al-so been initiated against Electros-teel Steels, Lanco Infratech, AlokIndustries and Jyoti Structures—among the 12 non-performingassets cases identified for resolu-tion by the Reserve Bank of India— Amtek Auto and Essar Steel.

NCLT, Chennai, has appointedan insolvency resolution profes-sional (IRP) in the case of Nagar-juna Oil Refinery (NOCL).

The government has already in-troduced the Banking Regulation(Amendment) Bill, 2017, in Parlia-ment in order to replace the ordi-nance it had promulgated in May toempower RBI to deal with bad lo-ans. At the end of March 2017, stres-sed assets of state-run banks alonewere pegged at `̀7.4 lakh crore, upfrom ̀̀ 6.99 lakh crore a year ago.

Bhushan Cos FaceInsolvency ActionBhushan Steel andBhushan Power & Steelhave 180 days to comeup with a resolution

Our Bureau

New Delhi:The ministry of ro-ad transport and highways hassaved the banking sector from`̀3 lakh crore bad loans by revi-ving stalled projects, its mini-ster Nitin Gadkari has said.

Banks were staring at almost400 stuck projects worth lakhsof crores at the time he tookcharge in 2014. “Most of theseprojects were delayed becauseof clearances or promotersnot having the intent. Wecalled several meetings foreach of these projects and sor-ted them out,” Gadkari toldthe media at the Ficci-organi-sed India PPP Summit onWednesday.

“Had we not acted in time,banks would have had bad lo-ans worth `̀3 lakh crore more.We terminated several of theseprojects, changed conditionsfor a few and even spent moneyon completing (some) wherethe contractor wasn’t in a posi-tion to,” said the minister.

Addressing the summit, Gad-kari said bankers, investors,contractors and the govern-ment need to collaborate for suc-cess of public-private projects.

He also mentioned prioriti-sing the setting up of an effici-ent public transport systembetween states and within citi-es. Biofuel and electricity isthe government’s focus to ma-ke mass transit environment-friendly and cost-effective.

Revival of StalledProjects SavesBanks from ̀̀ 3-L crBad Loans: Gadkari

CCI NG 3.7 Product: ETMumbaiBS PubDate: 27-07-2017 Zone: MumbaiCity Edition: 1 Page: ETMCPG18 User: sandeep.dutta Time: 07-26-2017 23:09 Color: CMYK