bench of National Company Law Tribunal (NCLT) on Tuesday cleared bankruptcy
proceedings against Jyoti Structures
after the company failed to repay dues worth Rs 7,000 crore to Indian banks.
The company was among the first batch of 12 companies identified by the Reserve Bank of India
(RBI) for action under the Insolvency
According to the NCLT
order, the board of directors of the company will remain suspended and BDO Consulting would manage the company. BDO was appointed by the lenders led by the State Bank of India
to manage the company till a new owner is identified via bidding. The company, which supplies power equipment to Power Grid and NTPC, did not oppose the action by the banks
in the NCLT
on Tuesday but said it has an offer on the table from a strategic investor. It did not give any details on the prospective buyer.
The company had earlier said in its annual report for 2016 that its restructuring package as envisaged by the Joint Lenders' Forum in 2015 failed as the banks
did not release the enhanced working capital facilities. With this, the company was unable to adhere to milestones stipulated in the restructuring package and the lenders had to invoke Strategic Debt Restructuring (SDR) under RBI
guidelines. Since then, the lenders were busy restructuring its debt and evaluating investment proposal submitted by strategic investor outside SDR, the company told its shareholders last year.
If BDO fails to find any buyer in the next 270 days, then the NCLT
would appoint a liquidator that would sell the assets of the company so that lenders can recover part of their loans. The RBI
has already asked banks
to make at least 50 per cent provision for the loans given to the 12 companies. Going by an estimate by rating firm CRISIL, banks
will have to make provisions for at least Rs 40,000 crore on these loans.
The other companies that have been sent to NCLT
for action are Essar Steel, Bhushan Steel, Bhushan Power and Steel, Electrosteel Steels Ltd, Monnet Ispat and Energy Ltd, Amtek Auto Ltd, Alok Industries, Lanco Infratech Ltd, Era Infra Engineering, ABG Shipyard Ltd, and Jaypee Infratech Ltd. Many of these companies have already identified investors which would invest fresh funds in these companies.
Going by IBC, lenders will appoint an insolvency
professional to oversee the completion of restructuring process and this will not impact the day-to-day operations of the company in terms of production, dealing with customers or vendors. The company's operations will continue their normal course during the process of restructuring. The board will remain suspended till a new investor comes in.