26 March 2019: The Mumbai bench of the National Company Law Tribunal (NCLT) Tuesday accepted the amended resolution plan for Jyoti Structures, following an order to this effect by the appellate tribunal, a move opposed by DBS Bank saying it will move the Supreme Court.
Jyoti Structures, which owes Rs 7,010.55 crore and interest to the lenders, is among the first 12 large accounts referred to NCLTs by the Reserve Bank in June 2017.
The sole bidder Sharad Sanghi, who heads the software firm Netmagic, Monday submitted a revised bid as per an order of the National Company Law Appellate Tribunal (NCLAT) last week. In the amended bid, Sanghi will pay Rs 3,965 crore in 12 years against the original bid of 15 years.
As per this first bid, the company has a liquidation value of just Rs 1,112.52 crore, leaving the bankers with a 43 percent haircut.
However, DBS Bank, which is the first charge-holder in the case, opposed the NCLT move and said it will challenge the same in the Supreme Court. The bank is peeved by the fact that the amended plan does not distinguish between the first charge-holder and the second charge holder.
The company owes Rs 53.77 crore to DBS Bank.
It cannot noted that last week the NCLAT had set aside an NCLT Mumbai bench’s July 31, 2018 order to liquidate Jyoti Structures, and asked the bench to consider the Rs 4,000-crore resolution plan submitted by Sanghi and others.
“The case is remitted to the Mumbai NCLT to approve the revised resolution plan,” said the NCLAT order.
It can be noted NCLT Mumbai on July 31,2018, rejected the Sanghi’s resolution plan and ordered liquidation of the company which owes Rs 7,010.55 crore to the lenders.
According to the Rs 3,965.06-crore resolution plan by Sanghi, who is the managing director and chief executive of IT solutions provider Netmagic, along with others, Rs 50 crore would be paid upfront, followed by Rs 75 crore over the next 12 months and the remaining in staggered payments over the next in 15 years. Under the revised plan, he would pay the remaining amount in 12 years.
On March 26 and 27, 2018, Sanghi’s resolution plan was voted by 62.66 percent of lenders, while 23.12 percent voted against, and 14.21 percent abstained. But later, on April 2, 2018, some lenders changed their minds and agreed to accept the proposal, taking the final tally of those lenders accepting the proposal at 81.31 percent.
But Sanghi’s resolution plan was rejected by NCLT on the two grounds, citing delays beyond the mandated 270 days and the absence of required majority of 75 percent at the March 26 & 27, 2018 voting when only 62.66 percent of the lenders had accepted the bid.
Following this, Sanghi had in August moved the NCLAT, which stayed the liquidation process, saying the NCLT did not consider the eight-day gap between the firm being admitted for bankruptcy and appointment of interim resolution professional.
The appellate tribunal staying the liquidation, also noted that the application was admitted on July 4, 2017 and was uploaded on July 12, and the interim RP joined thereafter.
“If the aforesaid period of eight days is excluded, the resolution plan was approved within 270 days which the NCLT has failed to note,” it said.