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NCLT admits lenders' petition against Monnet Ispat

NCLT had raised concerns on how the claims of the bank on the company were higher than the default amount

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A bench of the National Company Law Tribunal (NCLT) has admitted the application filed by the State bank of India (SBI)-led consortium of creditors to resolve Monnet Ispat’s debt under the Insolvency and Bankruptcy Code (IBC) 2016. NCLT had raised concerns on how the claims of the bank on the company were higher than the default amount.

The SBI counsel clarified the claim amount to be Rs 1,539 crore, the default by the company as on July 18, 2017, in SBI’s books. The balance Rs 704 crore is payable later as it is not a default yet. A lawyer representing SBI said they would claim the balance Rs 704 crore before the committee of creditors as it is still payable

When the application came up for the hearing last week, the NCLT had questioned an anomaly in SBI’s petition as the claim put forth by the bank was higher than the stated default of Rs 2,242 crore. The counsel appearing for SBI said the company had defaulted on loans of Rs 1,539 crore. The bench asked the counsel to file a written submission clarifying how much the bank was claiming from the company.

However, the case came up for hearing on Monday unchanged, citing a precedent in the matter of Starlog Enterprises and ICICI bank where the claim amount was also stated to be higher than the amount in default.

The NCLT bench came hard on the counsel saying that the comparison to the Starlog case was “suicidal”. This is because the tribunal, in its order in the Starlog matter, had said the NCLT’s ascertainment of default “suffers from non-application of mind given the apparent and conspicuous mismatch between the amount demanded by the Respondent from the Appellant in its demand notice dated 6th February 2017 and the amount stated to be in default in the said application.”

The bench said that SBI’s petition against Monnet had not been drafted properly and suggested a “lack of seriousness” on the part of the petitioner. It said the matter had already seen two adjournments and told the bank that if an appropriate clarification is not filed by SBI in the next hearing, the bench will rule in line with the precedent set by the NCLT in its Starlog order.

Monnet Ispat, promoted by Sandeep Jajodia, has a debt of nearly Rs 12,500 crore which rose primarily due to the fall in commodity prices and huge surge in steel imports from China.

Earlier, lenders had invoked the strategic debt restructuring (SDR) scheme to convert its debt into equity in August 2015. They now control 51% of Monnet Ispat.

As per the IBC, 2016, once the application filed by a financial creditor under Section 7 of the IBC is admitted by the NCLT, a moratorium period of 180 days commences, extendable up to 270 days. During the moratorium period, the IRP takes operating and financial control of the defaulting entity’s Board till the resolution process is completed.

The lenders have appointed Grant Thronton as its insolvency professional.

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