The Kolkata bench of the National Company Law Tribunal (NCLT) has admitted a petition filed by steelmaker Ramsarup Industries for initiating the corporate resolution process, even as India’s largest private-sector lender ICICI Bank had opposed the insolvency petition of the company.
The Kolkata bench of the National Company Law Tribunal (NCLT) has admitted a petition filed by steelmaker Ramsarup Industries for initiating the corporate resolution process, even as India’s largest private-sector lender ICICI Bank had opposed the insolvency petition of the company. This is probably the first instance of a major bank opposing a defaulter’s appeal to initiate insolvency proceedings under the Insolvency and Bankruptcy Code (IBC). Ramsarup Industries owes financial creditors Rs 3,379.77 crore, of which ICICI Bank’s exposure is a relatively small Rs 36.03 crore. The city-based firm, engaged in manufacturing of wires, TMT bars and steel, had filed an insolvency application under Section 10 of the IBC on the basis of its board resolution dated May 5, 2017. However, ICICI Bank alleged that the application had been filed with ‘malicious intent’ for purposes other than for insolvency resolution.
Admitting the company’s petition for commencing corporate resolution process by an order dated January 8, a division bench of the tribunal comprising justices Vijai Pratap Singh and Jinan KR said: “It is undisputed that the corporate debtor is not ineligible under Section 10 of the IBC to file application under Section 10 of the Code… Every ingredient of Section 10 is complete, and all the information is provided by an applicant as required under Section 10 in Form VI. The corporate applicant is otherwise not ineligible under Section 11. Thus application filed under section 10 deserves to be admitted.”
Section 11 of the IBC deals with the persons not entitled to make insolvency application. Ashish Jhunjhunwala, MD, had filed the application on behalf of the company. The application was in the nature of reference, which was pending before BIFR and abated on account of the coming into effect of the SICA Repealing Act. “We passed an order for a declaration of the moratorium and public announcement under Section 13 of IBC, 2016,” the bench said. Nilesh Sharma has been appointed the interim resolution professional (IRP) for the insolvent firm.
Notably, appearing before a tribunal bench on July 20, 2017, ICICI Bank counsel Siddhartha Datta had said the CBI had been investigating the firm. “The company is not a going concern, its plants are non-operational for a couple of years. And therefore, the company is not serious about resolution,” Datta had said. “Sarfaesi Act has already been invoked by the bank and steps are ongoing. But the bank has been facing some opposition from the company for taking possession of assets,” he said in his submission.
Countering the Mumbai-based private-sector bank’s arguments, Ramsarup Industries’ counsels Jishnu Chowdhury and Sidhartha Sharma had said the ICICI Bank, which has been making an objection to admission of the insolvency petition, is having an exposure of less than 1% of the total outstanding amount of the firm. Further, since the company was under BIFR, it is imperative to hear other financial creditors of the firm, they said. Significantly, in her submission before the bench, Manju Bhuteria, counsel for Asset Reconstruction (Arcil), had said the asset reconstruction firm was not opposing the admission of the petition. “For Arcil, the total outstanding amount stands at around Rs 1700 crore,” he had said.
Apart from ICICI Bank, other lenders to the company include State Bank of India, Punjab National Bank, IDBI Bank, Axis Bank, Bank of India, Vijaya Bank, Canara Bank, Allahabad Bank, United Bank of India and SREI Equipment Finance. Axis Bank and Arcil had separately filed applications before the tribunal under Section 7 of the IBC for initiating corporate insolvency resolution process against Ramsarup Industries. Issuing an order on January 8, the tribunal dismissed both the petitions on the ground that no second application against the same corporate debtor was ‘maintainable’ as the company’s insolvency plea under Section 10 had already been allowed.