RBI likely to extend NCLT deadline for second NPA list

Jaiprakash Associates, Jayaswal Neco, Videocon may not land at the insolvency court if RBI extends deadline beyond Dec 13

Lenders to companies figuring on the Reserve Bank of India’s (RBI) second list of non-performing loans expect some leeway in terms of time to firm up resolution plans or take these units to bankruptcy court.
 
This could result in cases such as Jaiprakash Associates, Jayaswal Neco Industries and Videocon Industries staying out of the National Company Law Tribunal (NCLT).
 
“The resolution for these cases is a complex task and reports from rating agencies on these cases have just started coming now. These reports will form the basis to decide between resolution or the NCLT option. The processing would need time,” a senior executive with a Mumbai-based public sector bank said.     
 
“It made little sense to bunch up cases, and that too in close succession, after the first list was prepared in June,” he added. Bankers claim that substantial progress has been made in some cases such as Jaiprakash Associates, a company listed on the second list. It had sold the cement business to UltraTech Cement last year as part of a restructuring package.
 
Sajjan Jindal, chairman of JSW group, questioned why existing promoters of the second list of defaulters were being allowed to participate in the debt restructuring. “If so, why differentiate in the earlier NCLT cases to debar legitimate promoters in bidding process?” he said about the 12 stressed cases sent to the NCLT by the RBI. 
 
“Uniform evaluation criteria should be specified upfront for all stressed cases under the NCLT. This will bring transparency to bid evaluation process and will help avoid litigation,” he said.
 
According to rating agency ICRA, the second list of 29 cases has accounts from diverse sectors. The total exposure of lenders to these cases is about Rs 1.15 lakh crore. Most of the cases are likely to be referred to the NCLT under the Insolvency and Bankruptcy Code.
 

Sources say lenders are looking at various options for Videocon Industries’ debt resolution, and that they may not drag it to the insolvency court.
 
Meanwhile, some lenders are seeing a hope of a possible extension from a central bank communication. “Our interpretation of the RBI’s recent communication is that the deadline for the second list could be extended till the end of December,” said a public sector banker. The RBI spokesperson could not confirm or deny this development.
 
The extra time will help lenders complete the restructuring plan at a few companies on the RBI’s second list. A senior banker said that there was a strong chance that restructuring could be completed soon in case of Jayaswal Neco too. However, bankers also said that a large number of cases from the second list would be referred to the insolvency court.
 
Not everyone is pleased with the extension of the deadline. A corporate lawyer said that by not sending these cases to the NCLT, lenders are sending a wrong message to investors and the earlier 12 companies can now approach the courts seeking the same treatment.