Exit of BDO resolution professionals to hit insolvency proceedings

The insolvency proceedings for Bhushan Power & Steel and Jyoti Structures might be hit as their resolution professionals have quit audit firm BDO India and joined rival Price Waterhouse. BDO India has filed a petition in the Bombay High Court against two of its partners, Mahendar Khandelwal (resolution professional for Bhushan Power & Steel) and Vandana Garg (resolution professional for Jyoti Structures). The petition is likely to be heard this week. Tata Steel was the highest bidder for Bhushan Power & Steel. 

The lender's committee for the Bhushan Steel, which owes Rs 470 billion to banks, is scheduled to meet on Wednesday to announce Tata Steel as the highest bidder, subject to approval by the National Company Law Tribunal (NCLT).  

The resolution process for Jyoti Structures is under way. 

BDO India said it was forced to seek legal intervention so that the resignations did not come in the way of the resolution process. 

According to the audit firm, Khandelwal and Garg had submitted their resignations in December but had later informed the firm that they would not be serving their six-month notice period. "Their notice tenure would have ensured the conclusion of the insolvency mandates of Bhushan Power and Jyoti Structures," it added.

In June, BDO India had won three mandates among the Reserve Bank of India's (RBI's) list of 12 corporate defaulters referred to the NCLT for insolvency resolution. "Their (Khandelwal and Garg) action of relieving themselves of their obligation as part of the agreement would jeopardise these mandates and cause immense challenge to lenders and BDO India apart from delaying the resolution timeline," BDO India, owned by its Indian partners, said.

The audit firm said it wanted to ensure that the resolution professionals completed their mandates and honoured their commitment to serve the notice period. It said it had no intention of restraining them beyond the stipulated period or from joining Price Waterhouse. 

Khandelwal had said he would complete the resolution process before leaving the organisation. 

The departure of Khandelwal and Garg comes at a time when most of the 12 cases referred by the RBI for insolvency resolution have entered the final phase. 

But most of these cases have been ensnared in some legal tussle or the other. For instance, Liberty House has moved the NCLT against the resolution professional for Bhushan Power saying its bid was not entertained even though it had offered Rs 10 billion more than that of Tata's. The case is pending with the NCLT.  Lenders said the insolvency processes for 40 companies were headed for litigation. Last week, Larsen and Toubro (L&T) moved the NCLT seeking Rs 9 billion from Bhushan Steel. L&T was the operational creditor of the company. Tata Steel is also the highest bidder for Bhushan Steel. 

Ultratech has also moved the NCLT against resolution professional Vijaykumar Iyer and Deloitte for not providing it an opportunity to match the bid for Binani Cement and not disclosing why its bid was rejected. Dalmia Bharat was selected as the highest bidder for Binani Cement. 

In the case of Essar Steel, the resolution professional, Alvarez and Marsal, has still not decided whether bids by Numetal and ArcelorMittal are eligible. Numetal has said it will move court if its bid is incorrectly rejected. 

A petition filed by Videocon Industries is pending with the Bombay High Court after it sued State Bank of India and the RBI for referring the company to the NCLT without providing it an opportunity to be heard.