Power Mech seeks more time for Lanco's insolvency resolution process

In the latest twist to the Lanco Infratech's delayed insolvency resolution process, Vijayawada-based listed company Power Mech Projects Limited on Friday filed an interim application before the Hyderabad bench of National Company Law Tribunal (NCLT) seeking an opportunity to submit a resolution proposal.

The development comes two months after the mandatory 270-day timeframe available for the completion of corporate insolvency resolution process (CIRP) expired on May 4. 

It may be recalled that Tamil Nadu-based Thriveni Earthmovers Private Limited, a lone applicant to submit a resolution proposal for Lanco Infratech, had filed a revised plan just a day before the expiry of 270 day-period on May 3 after its initial proposal was rejected by the committee of creditors (CoC). 

The whole resolution process remained in a kind of suspended animation since then. While the CoC had refused to examine Thriveni's revised offer for want of time, the NCLT bench is yet to decide on whether to extend the time for resolution process to consider the revised proposal or set the liquidation in motion. Power Mech Projects entered the picture at a time Thriveni Earthmovers stayed away from the NCLT hearing after the CoC's decision.

Pleading the bench for an extension of time for a resolution, Power Mech Projects' counsel cited the changes effected twice in section 29(A) of Insolvency and Bankruptcy Code(IBC), related to the exclusion of certain persons or entities from participating in a resolution process. 

While the promoters and managers of declared non-performing assets (NPAs) were made ineligible to file a resolution application in the earlier changes to the IBC, subsequent Ordinance, which was issued by President of India last month, has fine-tuned clause C of Section 29(A) by giving a 3-year cooling period to the resolution application holding an NPA by virtue of acquiring it in the past under the IBC, 2016. 

While responding to this and various other appeals in the Lanco Infra Insolvency case, Judge Ratakonda Murali said he would issue the orders on the question of extension of time for resolution after examining the latest interim application (IA) filed by Power Mech. The bench posted the next hearing on July 13, by which time a clear picture on the fate of Lanco resolution process is expected to emerge.

Power Mech, which went public with an IPO in 2015, is into infrastructure development, particularly in power projects EPC construction and maintenance activity. The company has reported a total revenue of Rs 1,317 crore and a net profit of Rs 65 crore for the year 2017-18.

According to a senior Lanco official, Power Mech's application reflects the revival of interest in the resolution process of Lanco Infratech in the light of changes made in Section 29(A) of IBC through the latest Ordinance. "Power Mech was among those who responded to the EoI in Lanco Insolvency process. Even Tatas and Adanis, who had shown interest in the initial stages, had left the scene because if they take the NPAs of the holding company by virtue of the ongoing resolution process they can not participate in a similar exercise involving the Lanco subsidiaries, which are the assets that can generate revenues. The Ordinance has changed the situation," Lanco official told Business Standard on condition of anonymity. 

NCLT had admitted the insolvency resolution for the debt-laden Lanco Infratech in August 2017 after IDBI, one of its financial creditors approached the Hyderabad bench seeking the initiation of resolution process under IBC, 2016.  The cumulative debt of Lanco group as a whole is said to have reached Rs 500 billion while that of the holding company is in excess of Rs 100 billion, all of which went bad.