Road to insolvency: Ferro Alloys Corporation may head towards liquidation

The resolution professional for Ferro Alloys Corporation (Facor) is likely to submit the plan to the National Company Law Tribunal (NCLT) for approval on April 2. This is the same day when the 270-day period, stipulated under the Insolvency and Bankruptcy Code (IBC), will expire. However, its committee of creditors (CoC) has still not been able to select a H1 bidder. If the resolution plan cannot be submitted by April 2, the company may face liquidation.

Facor was taken to the NCLT in July last year for not paying a debt of Rs 8 billion. The deadline for submission of bids has been revised four times.

The first bid was opened in November 2017, the second on March 1, the third on March 12 and the fourth on March 17.

A source close to the development, one of the bidders, alleged that with only five days left before Facor goes for liquidation, the company's resolution professional K G Somani changed the format of the application to split-bids and gave the bidders a 24-hour deadline to submit their bids.

However, Somani rejected the allegation and said that the format was the same and he had not asked bidders to submit split-bids. 

A split bid is one where the bidder instead of placing a consolidated resolution plan opts to provide the resolution plan in part for different units of the company.

Asked why the CoC was not able to select a H1 bidder, Somani explained the bid from Balasore Alloys (BAL), one of the initial contenders, was rejected by the CoC as it was a wilful defaulter. BAL pressed its case in the NCLT for allowing its bid. The tribunal, on March 8, allowed BAL to place its bid.