The country’s first corporate resolution plan under the new Insolvency
and Bankruptcy Code (IBC) has caused a ripple in the banking and finance industry, with the National Company Law Tribunal (NCLT) permitting Synergies-Dooray Automotive to settle a minuscule amount of its liabilities.
Synergies-Dooray Automotive used to manufacture and supply aluminium alloy wheels to global carmakers.
The resolution plan states that the acquirer, Synergies Castings, would pay Rs 54 crore to its creditors
of its total dues of over Rs 900 crore, and that, too, at attractive terms. Of the Rs 54 crore, Rs 20-odd crore would be paid upfront and the remaining over five years, sources aware of the insolvency
The principal amount of the debt was Rs 215 crore, the source said. The remaining Rs 685 crore includes interest, statutory dues and payments to other creditors.
“If the assets of the company were to be liquidated, creditors
would have barely received an eighth of what they have got (about Rs 7 crore) in the current restructuring process,” the person said.
Kolkata-based Mamta Binani, who was the resolution professional for the case, had received plans from three entities — S.M.B. Ashes Industries, Synergies Castings
and Suias Industries. The resolution professional recommended Synergies Castings’ plan to the NCLT, which was accepted by the Hyderabad bench of the tribunal earlier this month. Synergies Castings
is a company related to Synergies-Dooray Automotive.
Synergies-Dooray Automotive owes Rs 89.26 crore to Synergies Castings, Rs 122.06 crore to Alchemist Asset Reconstruction Company (ARC), Rs 86.92 crore to Edelweiss
ARC and Rs 673.91 crore to Millennium Finance.
ARC had taken over the debt from EXIM Bank, which had earlier pursued legal remedies to recover its loan from the company. Each of these lenders would take a 94 per cent haircut.
ARC has issues with the resolution plan. It had raised the issues with the NCLT
earlier and said that Millennium Finance was wrongly included in the committee of creditors, and that it was a related party. Under the IBC, obligations and dues of related parties should not be considered in a resolution plan.
ARC is now planning to approach the National Company Law Appellate Tribunal challenging the NCLT
order. An Edelweiss
ARC executive was not available for comment.
Synergies-Dooray is one of the 93,000 cases that were pending with the Board for Industrial and Financial Restructuring (BIFR) and transferred to the NCLT
under the IBC.
Synergies-Dooray’s case was one of the early cases to be filed with the NCLT
under the code. The IBC allows a company to restructure itself in a time-bound fashion.