1. IBC Section 29A needs more clarity, says SBI’s Rajnish Kumar
State Bank of India (SBI) chairman Rajnish Kumar said Section 29A of Insolvency and Bankruptcy Code (IBC), which disallows defaulting promoters and related persons from bidding for assets, is being “stretched too far”. Speaking at an event in Mumbai, he said most of the litigation at present are due to Section 29A. “But this section, in my view is being stretched too far and there is a need that more clarity is brought about,” he said.
According to him, while the intent of IBC Section 29A is very clear that the defaulting promoters should not be in the driver’s seat once again, it has become the most contentious issue.
2. NCLAT upholds insolvency proceedings against Alok Industries subsidiary
The Mumbai Bench of NCLT had admitted insolvency proceedings against Alok Infrastructure, a subsidiary of Alok Industries, while Corporate Insolvency Resolution Process (CIRP) against Alok Industries is still underway. In an appeal filed against the said order, the NCLAT has upheld the admission order passed by the NCLT.
CIRP was initiated against Alok Infrastructure in October 2018, while its parent company Alok Industries has been under CIRP since July 2017. Alok Industries happens to be one of the dozen companies referred for insolvency by the Reserve Bank of India in June 2017. Alok Industries by itself has had an eventful CIRP. While it was due to be liquidated for not having secured 75% votes, the IBC Ordinance 2018 lowered the voting threshold to 66%, and after being given a second chance, the resolution plan was approved.
The admission proceedings against Alok Infrastructure were challenged on the grounds that since CIRP for its parent company has not yet been completed, admission against the subsidiary is not allowed under the IBC. In the proceedings before the NCLT, Alok Infrastructure relied on Section 60(5) of the IBC according to which, “any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India” will vest with the NCLT. While proceedings against the parent are pending before the Ahmedabad Bench, admission against the subsidiary was passed by the Mumbai Bench.
Know More : https://barandbench.com/
3. Death By Delay: Warning Signals Flash For Jet And Essar Steel’s IBC Process
Two stories, both relating to floundering companies, Jet Airways and Essar Steel, underline an important Indian failing where we let things drift to the point where huge losses for everyone concerned are the only outcome.
The story in Essar Steel is that State Bank of India (SBI) has put its Rs 15,431 crore loan on the block, as it is impatient with the endless processes of the insolvency court, the National Company Law Tribunal. Clearly, it believes that Arcelor Mittal, the preferred final bidder, is nowhere near the finishing line for the acquisition of Essar.
In the Jet Airways case, Etihad, the junior equity partner to Naresh Goyal, has set very tough conditions to bail out the floundering airline: a share price of no more than Rs 150 (against a current market price of Rs 260 at mid-morning on 17 January), the complete exit of Goyal, no open offer, and no guarantees to banks on outstanding loans. In other words, Etihad knows it is buying a sinking ship, and is not planning to make things easy for either banks or Goyal.
Etihad should know. In April 2013, the airline bought a 24 per cent state in the airline at a 31.7 per cent premium to the market price of around Rs 573 a share, which means it paid around Rs 750-and-odd for it. The current market price is a third of that, and Etihad is playing hardball because it knows that purchasing Jet means bringing in even more capital to prevent it from collapsing.
Know More : https://swarajyamag.com/
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