National Company Law Tribunal's (NCLT's) Hyderabad-bench has appointed the interim resolution professional (IRP) for Lanco Infratech Limited (LITL) based on an application filed by IDBI Bank.
The bank moved the insolvency petition against LITL last month after the Reserve Bank of India (RBI) identified a dozen large corporate debtors, including Lanco, for initiating bankruptcy proceedings against them on a priority basis.
With a combined debt of over Rs 44,000 crore, Lanco Infratech, which is a holding company for a large number of power and infrastructure project subsidiaries, had accepted the move.
However, the company requested the NCLT bench, as it had requested the RBI and the Union Finance Ministry in June, that a similar process might be initiated simultaneously for the special purpose vehicles (SPVs) of four of the five under-construction projects falling under the Hyderabad bench's jurisdiction.
"LITL is essentially a holding company (whose value is very low compared to the value of its holdings and investments in SPVs), which derives a majority of its consolidated revenue from the SPVs and from the contracts given by these SPVs. Therefore, if the under-construction SPVs are themselves stressed, the petitioner will not yield insolvency resolution and it would lead to liquidation only," the company said. Lanco maintained that it would suffer substantial losses from a stand-alone resolution.
The NCLT bench, however, did not give any directions on LITL's request while initiating the insolvency process for the corporate debtor. The bench appointed Savan Godiwala as the IRP for the company.
Interestingly, IDBI proposed Godiwala's name after NCLT had agreed with Lanco's contention that Vijaya Kumar V Iyer, whose name was originally proposed by the bank, might not do justice to the assignment as he had already been appointed as the IRP for two large corporates.
Iyer was appointed as IRP for Benani Cement and Bhushan Steel in July.
Citing his existing assignments, Lanco informed the NCLT bench that it had serious concerns about Iyer's availability as the IRP to effectively perform his functions and run LITL as a going concern, particularly in light of the fact that its debt structure and operations were very complicated and complex.
The counsel cited the first schedule of the Bankruptcy Board of India (insolvency professionals) Regulations 2016, which says that an insolvency professional must refrain from accepting too many assignments if he was unlikely to be able to devote adequate time to each of his assignments.
The bench posted the case for August 31, directing IDBI and the IRP to report on the compliance of its orders.
Meanwhile, Lanco Infratech informed the stock exchanges that the board meeting scheduled on Friday stands cancelled stating that NCLT's Hyderabad bench has initiated the Corporate Insolvency Resolution Process.