Jyoti Structures insolvency underway, resolution plan to be re-worked

Jyoti Structures is in line to be one of the first large corporate debtors to be made insolvent

The National Company Law Tribunal (NCLT) in Mumbai dismissed a petition filed by F J Elsner Trading GMBII against Jyoti Structures Ltd, providers of turnkey solutions in the field of power transmission, who were the first referred to the NCLT by State Bank of India (SBI) back in August 2017. 

F J Elsner had initially filed its claim in the Bombay High Court, after which the Reserve Bank of India had sent instructions to banks to refer twelve of the biggest stressed asset accounts for insolvency and bankruptcy proceedings at the NCLT(s). 

Under the corporation insolvency resolution process (CIRP), an appointed insolvency resolution professional (IRP) has to determine the extent of financial and operational debt owed by the company, provide the committee of creditors (CoC) with details of the claims that need to be cleared, and post-deliberation by the CoC, the IRP has to submit a resolution plan to the court reflecting the same, within 180 days.

In the case of Jyoti Structures, the deadline of 180 days, plus a 90-day extension that was sought, has been passed on April 2nd and the company is in line to be one of the first large corporate debtors to be made insolvent. This will inflict a loss of Rs 70 billion on the lending banks. 

A source close to the matter said that after SBI had filed its case with the NCLT, and since the moratorium had set in, FJ Elsner's claim was not part of the record for a long time. 

Further, the IRP had submitted a resolution plan in February, but the CoC rejected the final plan due to the lack of a majority in the voting by lenders. According to the Insolvency and Bankruptcy rule, there has to be minimum 75 per cent agreement on the resolution plan by the lenders, who constitute the CoC. 

Sharadh Sanghi, and private equity executive Manish Kejriwal and Manipal Group’s Ranjan Pai proposed to invest Rs 1.5 billion in the company, and pay the lenders Rs 30 billion over 15 years. They also sought working capital loans of Rs 2.5 billion at the same time, wishing that Rs 10 billion of bank guarantees would continue for the new company. 

This plan was rejected, as there was a steep haircut, with the bid-offer almost on par with the liquidation value of the company. 

The source cited above said that FJ Elsner had initially submitted their claims, of Rs 170 million to the IRP, but only a part of it was accepted. Later the IRP had submitted an affidavit to the NCLT Division Bench of Duraiswamy and BSV Prakash Kumar, who is hearing the SBI versus Jyoti Structures matter, acknowledging the acceptance of the entire claim. 

"On hearing the submissions and in view of the order passed in SBI versus Jyoti Structures in July 2017, and thereafter in view of the claim lodged by FJ Elsner before the IRP, the petition filed in front of this bench has been made redundant," said Justice Shrawat while delivering the order. 

The Judge also granted FJ Elsner the liberty and opportunity to file an intervention application in the SBI versus Jyoti Structures case, in case they feel aggrieved of the final decision made by the CoC and IRP.