Essar Steel, Bhushan face bankruptcy proceedings

25 June 2017

Lenders led by SBI are set to initiate action under the Insolvency & Bankruptcy Code (IBC) against Bhushan Steel and Essar Steel, which will join companies such as Electrosteel, Monnet Ispat, Alok Industries and Jyoti Structures.

Sources said SBI will take the two companies with combined loans of Rs 85,000 crore to the joint lenders forum and formal action is expected to be initiated next month. In case of the other companies, the country’s largest bank plans to approach the National Company Law Tribunal (NCLT) by June 30.

Separately, Punjab National Bank is initiating action against Bhushan Power & Steel. The two Bhushan Group companies with combined debt of over Rs 80,000 crore are seen as examples where the lenders were more than liberal in sanctioning loans and are among the most capital-intensive steel plants, at least in India.

Empowered by an ordinance promulgated to tackle record bad debt, the RBI had instructed banks to initiate insolvency and bankruptcy proceedings against 12 companies as part of the clean-up drive. On Thursday, the RBI also expanded the Overseeing Committee by roping in three more members — former chairman of L&T Finance Holdings Y M Deosthalee, retired Canara Bank chairman and MD M B N Rao and Sebi member S Raman, whose term ends in September.

At present, former CVC Pradeep Kumar and ex-vigilance commissioner Janki Ballabh form the two-member panel. The committee is meant to provide comfort to bankers in deciding on loans. “We have stepped up action and we are hoping that things will move at a faster pace,” said a senior bank executive.

A reference to NCLT is the first step towards initiation of bankruptcy proceedings. Once admitted by the tribunal, the board is dissolved and insolvency professionals take charge. Lenders are then given 180 days to resolve the loan, with a 90-day extension possible. If a package is not possible, NCLT is empowered to allow liquidation of assets.

Source-TOI