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Gujarat NRE Coke seeks NCLT nod for asset sale

LiveMint logoLiveMint 28-07-2017 Arkamoy Dutta Majumdar

In a striking turn of events, a company that had moved the Kolkata bench of the National Company Law Tribunal (NCLT), voluntarily declared itself insolvent and got an administrator appointed, is now seeking lifting of the moratorium on the sale of its assets in the “interest of its creditors”.

Gujarat NRE Coke Ltd was one of the early birds in moving NCLT. Its application for appointment of an interim resolution professional (IRP), or an administrator, was admitted in early April without any of the creditors opposing it. While appointing chartered accountant Sumit Binani as IRP to take control of the company’s assets and operations, NCLT imposed a moratorium on the sale of the company’s assets for 180 days.

On Friday, Gujarat NRE moved the Kolkata bench of NCLT seeking partial lifting of the moratorium so that it could execute a deal to sell its 60 windmills for Rs180 crore. The company said in its application that a potential buyer had already paid 25% of the consideration and given a bank guarantee for the remaining 75%, and that unless allowed to divest these “non-core assets”, lenders’ losses will only widen.

State Bank of India (SBI), one of the company’s main lenders, said it was not opposing the application because unless sold, the value of the windmills will diminish. Rishav Banerjee, counsel for SBI, submitted to the bench on Friday that there was a provision under the Insolvency and Bankruptcy Code for IRP to sell assets even after a moratorium had been imposed if the value of the asset is found to be “rapidly diminishing”.

A key Gujarat NRE official, who didn’t want to be named, said the windmills had not operated for the past 25 days, and that on account of the suspension of operations, the company had incurred a loss of Rs5-7 crore already. Things are only going to worsen if NCLT doesn’t allow the company to conclude the deal, he added.

The bench, however, wasn’t immediately convinced that the moratorium could be lifted. Lawyers for both the company and SBI said the sale of the windmills should be allowed in the interest of creditors. Gujarat NRE owes its creditors close to Rs5,000 crore, and it has been recently assessed that liquidation of all its assets will lead to recovery of less than a tenth of that amount, according to the official cited above.

Gujarat NRE said its plan to sell the windmills was approved by its lenders in March 2015. Thereafter bids were invited and a potential buyer identified.

But even before the deal was executed, the company referred itself to NCLT to secure its operations in Gujarat and Karnataka through bankruptcy protection, chairman and managing director Arun Kumar Jagatramka had written to the company’s shareholders in March.

When Binani, as IRP, met the company’s committee of creditors in early May, lenders gave approval to executing the deal to sell the windmills. Appropriate steps are being taken by IRP to “ensure completion of the sale”, Gujarat NRE said in a statement on Friday, adding that the company didn’t declare itself insolvent to obstruct the sale of its windmills. “The company is working with banks to have the wind mills sold,” Gujarat NRE said in its statement.

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