Nagarjuna Oil insolvency: NCLT further extends resolution period by 60 days

The National Company Law Tribunal (NCLT), Chennai, has further extended the period for Corporate Insolvency Resolution Process (CIRP) of Nagarjuna Oil Corporation Ltd (NOCL) for 60 days even as the creditors could not finalise a bidder during the initial 180 days and an extended 90 days. The order comes after a petition filed by the Resolution Professional (RP) appointed for NOCL, apart from petitions by two bidders - Haldia Petrochemicals and UK-based Citaxx Energy.

The RP has submitted an application for extending the company's CIRP deadline, pointing out that the process was not in progress for various reasons during 62 days out of the resolution period allocated by the Tribunal.

The NCLT, while granting an extension, directed the RP and the Committee of Creditors (CoC) to complete the processes of scrutiny of the resolution plan and approval by giving due opportunity to applicants for providing information, documents and the clarifications that may be sought by the CoC. 

All the required information and records should be provided by the applicants to the CoCs on or before 10 June 2018, said the order.

In separate orders on petitions filed by Citaxx Energy and Haldia Petrochemicals, two of the three bidders, the NCLT said that the RP and CoC have to take a commercial decision after considering all information and clarifications from applicants, without being influenced by any of the directions of the adjudicating authority. The RP has received three applications, from Citaxx Energy, Haldia Petrochemicals and Bharat Petroleum Corporation Ltd and UK-based Citax Ventures.

NOCL was carrying out a 6 million metric tonnes per annum (MMTPA) petroleum and oil refinery project in Cuddalore, almost 200 kilometers south of Chennai, but it got stalled due to a shortage of funds. 

The NCLT had earlier extended the period for Corporate Insolvency Resolution Process (CIRP) by 90 days with effect from 21 January 2018. The extension was granted as the process was not completed in the stipulated 180-day period.

On 4 April 2018, the NCLT issued an invitation for Expression of Interest (EoI) from interested resolution applicants, having a minimum net worth of Rs 5 billion, to submit resolution plans, as per a decision by the CoC. "The decision was taken with a view to maximising the value of assets," said the company. The last date for submission of resolution plans by eligible resolution applicants, along with the bid security guarantee, was 16 April 2018. 

The CoC, earlier in a meeting held on March 23, decided to extend the last date of submission of Resolution Plans to seek the highest value possible. The decision was taken after BPCL and Citax Ventures entered at an advanced stage of the process. 

In August 2016, NOCL promoter Nagarjuna Oil Refinery told exchanges that various prospective investors, including public sector companies like Indian Oil, had sought information on NOCL's project at Cuddalore. PSUs like HPCL, ONGC and foreign investors like Shell have also made moves to acquire NOCL but none of them fructified.

Sources said the COC felt BPCL’s bid was too low and they would have to call fresh bids if the oil major did not increase its offer. BPCL took strong exception to this on the ground that other potential bidders now would know the details of its bid terms and so enjoy an unfair advantage. 

The project, for which construction work had started in 2009, was partially completed in December 2011, when a cyclone and shortage of funds stopped work. The plant has the capabilities of meeting Euro VI requirements with some additions. According to earlier reports, the company is reeling under debts amounting to Rs 90 billion, of which around Rs 80 billion comprises loan from 15 banks. Once the recovery is made and the vendors, employees and other are repaid, the shareholders would be paid based on the approved mechanism.