NCLT rejects Essar Power Jharkhand ex-promoters' bid to clear dues

Former promoters of Essar Power Jharkhand wanted to pay Rs 1,200 crore against a debt of Rs 5,600 crore

The principal bench of the National Company Law Tribunal (NCLT) on Thursday rejected Essar Power Jharkhand’s former promoters’ bid to take the company out of insolvency by offering to pay Rs 1,200 crore as a one-time settlement against a total debt of close to Rs 5,600 crore. The promoters had offered to pay the amount and settle the dues under Section 12 (A) of the Insolvency and Bankruptcy Act. Section 12A of the IBC allows the corporate debtor another chance to make good on the default and retain control over the firm even after the case is admitted to the NCLT. 

Such plans, however, must be approved by more than 90 per cent of the lenders. ICICI Bank, which had dragged Essar Power Jharkhand to the NCLT and comprised of nearly 99.3 per cent of the Committee of Creditors (CoC), had rejected the former promoters' plea to pay Rs 1,200 crore and take the firm out of insolvency. ICICI Bank had in January 2018 moved the principal bench of the NCLT against Essar Power Jharkhand, seeking to recover Rs 3,626 crore.

The company was declared a non-performing asset on September 30, 2016. The project is one of the projects which is incomplete and has been tagged 'difficult to resolve' by the Centre.

Envisaged in 2008, the project is long overdue and barely 45 per cent complete until now. Its cost has doubled in these years to Rs 104 billion, according to estimates of the Central Electricity Authority (CEA). The coal block allotted to the project was de-allocated post a Supreme Court ruling in 2014.

Essar Power Jharkhand owes creditors around Rs 5,600 crore as of May 22, 2018, according to a legal document on the company's website. Workmen and employees of Essar Power Jharkhand have filed claims worth Rs 3.52 crore with the resolution professional. As on May 22, 2018, the resolution professional had accepted claims worth Rs 438.7 crore.