Insolvency resolution: Another defaulters' list sent to NCLT

Includes Videocon, Jaypee and Jayaswal Neco, after RBI refuses to relax its earlier directive

Banks on Friday sent all companies from the Reserve Bank of India’s second list of defaulters on large-size corporate loans to the National Company Law Tribunal (NCLT) for insolvency resolution.

This was after RBI refused to a proposal from the banks to relax the rules in this regard for those companies which are close to a resolution.

Videocon Industries, Jaiprakash Associates and Jayaswal Neco Industries are now among those to face NCLT proceedings for resolution of their loans. These three were recommended by banks for resolution outside the NCLT process but RBI, as mentioned, negatived this.

Under the Insolvency and Bankruptcy Code, a defaulting company’s board of directors are suspended and NCLT appoints an insolvency resolution professional to manage its day to day affairs. The company will then be sold to the highest bidder who takes over the largest portion of the debt. Banks are also expected to write off a substantial portion, up to 70 to 80 per cent, on the dues.

In its annual report for 2017, Videocon said it owed Rs 20,905 crore to banks. Jaypee’s debt was Rs 25,586 crore and that of Nagpur-based Jayaswal Neko Rs 4,188 crore.

Apart from Videocon Industries, its telecom arm, Videocon Telecommunications, with debt of Rs 3,000 crore, will also be sent to the NCLT. Banks will have to make 50 per cent provisioning for these loans on their balance sheet.

The Jaypee group’s realty arm, Jaiprakash Infratech, is already before the NCLT; its equity has received interest from the JSW group, Adani and Vedanta during the resolution process.

The RBI dictat to send all companies on its list to NCLT comes as Reliance Communications announced sale of its wireless assets to Reliance Jio, effective the March 2018 quarter, for Rs 20,000 to Rs 24,000 crore. Lenders said RCom will be considered a non-performing asset in the December quarter and they will make provision for its Rs 44,700-crore loan, by the RBI rules.

On June 2 this year, RCom signed a ‘standstill agreement’ with its lender, under which it would not be paying dues till December 2018. The RBI had come out with its first circular on sending companies to NCLT on June 13.