Though set up for speedier resolutions to clean up bank balance-sheets, the NCLT is also proving to be time-consuming with arbitrary judgements prolonging cases
National Company Law Tribunal (NCLT) is proving that they are no different from regular courts when it comes to resolving cases.
Though set up for speedier resolutions to clean up the bank balance-sheets by helping them get rid of the burgeoning non-performing assets (NPAs), the NCLT is also prolonging cases; sometimes, almost arbitrarily.
Recently, when a State Bank of India (SBI)-led consortium of 23 lenders along with the corporate debtor Anrak Aluminium mutually agreed to liquidate the company, the Hyderabad bench of the NCLT disallowed a dissolution in the name of national interest.
The court told the company along with the banks to pursue with the Andhra Pradesh government to revive the project, which has been stalled for seven years and seen an investment of Rs 5,712 crore.
The bench felt that the company and the banks had not pursued strongly with the state government to release the supply of bauxite, a raw material required for aluminium production. The project, which was set up in 2007, was also registered with the monitoring group for stalled projects since 2013.
Anrak Aluminium was incorporated in March 2007 to install a 1.5 million tonne per annum aluminium refinery along with a 225-megawatt power plant at Rachapalle village in Visakhapatnam. Ras Al Khaimah Investment Authority (Rakia), an investment body of Ras Al Khaimah in the United Arab Emirates, set up this unit in collaboration with Indian partners Penna Cement group, establishing a special purpose vehicle in the name of Anrak Aluminium to take up the implementation of aluminium refinery for the manufacture of alumina in the first stage. Rakia owned 30% in the company while Penna group owned the remaining 70%.
The company had earlier contested Andhra government's refusal to supply bauxite for the refinery in the Andhra Pradesh High Court. The court passed an interim order questioning the government's power to interfere. The company's refinery in Visakhapatnam, Andhra Pradesh, could not commence commercial operations after the state government failed to abide by the court order to supply bauxite.
Despite the court's order and banks pursuing the case, Andhra Pradesh Mineral Development Corporation (APMDC) stifled bauxite supplies to the company. Bankers in a meeting with the APMDC officials requested the allotment of the Jerrela mines or acquisition of mines as they had financed about Rs 4,000 crore to the project. APMDC, however, never took a decision on either of the suggestions.
Sameer Kakar, partner, Insolvency Professionals, said, "This is a strange order where the company and lenders agree for a liquidation but the NCLT bench says no in the name national interest."
A special audit conducted by State Bank of India (SBI) revealed that the total money invested in the project as on March 31, 2017, was Rs 5,712 crore as against the project cost of Rs 4,608 crore. The debt portion was Rs 3,461 crore and the balance was internal accruals and equity. The company has repaid Rs 1,334 crore of debt and the outstanding with all banks is about Rs 2,905 crore. The company was restructured in 2012 and then they came up with a proposal for a one-time settlement of Rs 1,100 crore, which was rejected by the lenders.
DIVERGENT VIEW
- The Hyderabad bench of the NCLT disallowed a dissolution in the name of national interest
- NCLT told the company along with the banks to pursue with the state government to revive the project
- The bench felt that the company and the banks had not pursued strongly with the state government to release the supply of bauxite, a raw material required for aluminium production
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