NCLAT rules against operational creditors’ claim for Monnet Ispat

New Delhi
Updated: August 20, 2019

The company’s operational creditors, including Bharat Petrosources, GAIL India and Bharat Heavy Electrical Ltd (BHEL), had moved the NCLAT earlier this year.

The National Company Law Appellate Tribunal (NCLAT) on Monday ruled against operational creditors of Monnet Ispat and Energy, appealing the committee of creditors’ (CoC) decision to award them only Rs 25 crore against claims of Rs 444 crore. The company’s operational creditors, including Bharat Petrosources, GAIL India and Bharat Heavy Electrical Ltd (BHEL), had moved the NCLAT earlier this year.

A plea filed by Industrial Financial Corporation of India (IFCI), a financial creditor, against treating of its secured loans as unsecured debt was also dismissed by the appellate tribunal. Monnet Ispat owes IFCI around Rs 158 crore. The company’s CoC had assigned a nil liquidation value to BHEL’s Rs 15 crore claims, while claims of Bharat Petrosources’ stand at Rs 19 crore.

BHEL contended that though the minimum value to be provided to operational creditors in a resolution plan is the liquidation value due to operational creditors, it cannot be limited only to liquidation value. “… thus, prescription of liquidation value as minimum amount to be given to operational creditors can in no way be construed to mean that the operational creditors at all times shall be provided with only liquidation value,” BHEL said in its petition.

The Insolvency and Bankruptcy Code (IBC) was amended last month to empower the CoC to have the final say on the distribution of funds to various classes of creditors. It may be recalled that in the Essar Steel case, NCLAT had ruled that operational creditors should get a larger share of the proceeds, than had been given to them by the CoC, thereby negating the CoC’s decision.

Under IBC’s waterfall mechanism, in the event of liquidation, dues to secured financial creditors and workmen’s wages are to be paid fully before payments are made to unsecured financial creditors and operational creditors.

Financial creditors of Monnet Ispat & Energy had taken a huge 74 per cent haircut when in July 2018, the Mumbai bench of National Company Law Tribunal (NCLT) approved a Rs 2,875-crore proposal by the AION-JSW Steel consortium. Monnet Ispat owed lenders Rs 11,000 crore while the liquidation value of the distressed steel manufacturer was pegged at Rs 2,365 crore. Section 30 (2) of the IBC says payments of debts ofoperational creditors should be made in such a manner as specified by the board. Monnet Ispat is among the major stressed assets from the first list of the Reserve Bank which were taken up under the resolution process in 2017. —FE

New Delhi: Deloitte Haskins & Sells on Monday moved the National Company Law Appellate Tribunal (NCLAT) against the order of the Mumbai bench of the National Company Law Tribunal (NCLT) that ruled that it had jurisdiction to hear a plea by the Ministry of Corporate Affairs (MCA) praying for a five-year ban on the auditor for allegedly colluding in the IL&FS case.

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The Mumbai bench of NCLT had on August 9 dismissed the plea made by the former auditors of the debt-ridden IL&FS group challenging the tribunal’s jurisdiction to ban them under Section 140 (5) of the Companies Act 2013.

Reference 

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