Insolvency proceedings: Bharati Defence bidders to deposit Rs 100 million

The National Company Law Tribunal’s (NCLT’s) Mumbai Bench directed any entity wishing to bid for Bharati Defence and Infrastructure for Rs 100 million as Earnest Money Deposit (EMD) by October 3, as proof of seriousness to acquire the insolvent firm. 

Further, to provide a bank guarantee worth 10 per cent of their bid amount by the same date. This is part of the eligibility criteria for accepting a Resolution Plan.

At present, there are four ‘Resolution Applicants' (RAs), as the term goes. These being ARCS Ship Build Services, Perfect Industries Group Holdings, Edelweiss Asset Reconstruction Company, and Geotech Investment and Holdings.

During the previous hearing, the NCLT bench of B S V Prakash Kumar and Ravikumar Duraisamy had directed the RAs to give their Resolution Plans by September 21. 

On Tuesday, however, counsel for the Resolution Professional (RP) appointed in this case told the NCLT: “There is no solid application and these companies have not provided details as to the source of funds or proof of funds. These are just proposals and not complete Resolution Plans; we need bona fide guarantees. They have had enough time to cure the various deficiencies in their plans but haven’t. This is purely delaying the process.”

Accordingly, the bench, on Tuesday of R Duraiswamy and M Shrawat, also told counsels for the various RAs to provide the RP with proof and details of the source of funds, as well as financial statements, within the next two days.

The insolvent ship building company (earlier known as Bharati Shipyard) faces claims of around Rs 85 billion from both financial and operational creditors. The Resolution Plan given by Edelweiss ARC proposes to convert all existing debt into equity and repay the loans in 15 years, once the firm revives its finances. Edelweiss has acquired 80 per cent of Bharati's loans from banks and around 95 per cent of the lenders had voted in favour of their Resolution Plan. However, since the plan did not include any capital infusion into the company, the NCLT decided it was appropriate to invite new applicants to the bidding process. 

ARCS, Perfect Industries and Geotech have offered to pay around Rs 30 billion each for acquiring Bharati. This means a 65 per cent write-off for the lenders. 

Bharati's stock price closed at Rs 2.8 on the BSE exchnage, down 4.1 per cent from Monday's close.