Mumbai: The National Company Law Tribunal (NCLT) has approved the bid of AION Capital-JSW Steel to acquire Monnet Ispat & Energy Ltd, providing major relief to the consortium.
The country’s largest lender, State Bank of India (SBI), approached the Mumbai bench of NCLT in July last year to recover its dues under the Insolvency and Bankruptcy Code (IBC).
This is the third major stressed asset from the so-called first list issued by the Reserve Bank of India (RBI) to be taken over by new investors under the resolution process.
In May, Tata Steel announced its acquisition of Bhushan Steel Ltd (BSL) through its wholly owned subsidiary Bamnipal Steel Ltd (BNPL), completing the resolution of the first case under the IBC.
On Thursday, the division bench of NCLT presided over by B.S.V. Prakash Kumar and Ravikumar Duraisamy had approved the resolution plan for Monnet Ispat & Energy Ltd in an oral order with some modification.
Sole bidder AION Capital-JSW Steel had offered ₹2,875 crore so far to acquire Monnet Ispat and Energy Ltd, while the company owes more than ₹11,000 crore to its lenders.
AION Capital holds a 70% stake in the consortium while JSW Steel holds the rest.
Before the court ruling, the tribunal had also dismissed the miscellaneous applications filed by Deutsche Bank, an unsecured financial creditor that is part of the consortium of creditors, and had voted in favour of the JSW-AION resolution plan with the knowledge that it would get 2.58% return on its debt.
However, the bank filed a petition registering that it was aggrieved by the court’s earlier decision in relation to payment outside the plan to small operational creditors that worked out to a 21.7% return on debt of unsecured operational creditors.
“We are an unsecured financial creditor to whom the company owes ₹151 crore but we will get around ₹3.96 crore,” argued senior counsel Mustafa Doctor who was appearing for Deutsche Bank. “If the tribunal now keeps the provision of ₹25 crore for small operational creditors, they will get around 21% of their dues back which is prejudicial to us. The tribunal is creating an artificial disparity between two unsecured lenders namely operational creditors and unsecured financial creditors.”
The tribunal had rejected Deutsche Bank’s claim ruling that it was part of the consortium and privy to the decision approving the resolution applicant’s plan and hence could not be considered aggrieved or its rights violated thus, quashing its petition.
Last week, the JSW Steel-AION Investments consortium agreed to pay small operational creditors, or small MSME vendors, around ₹25 crore, thereby pushing up the total acquisition amount to ₹2,875 crore.
Chhattisgarh-based Monnet Ispat & Energy, once the country’s second-largest coal-based sponge iron plant maker by volume fell in trouble after the coal mine attached to the plant was cancelled in 2014.
Later, like many other steel manufacturers, the company fell in troubled waters as the steel prices crashed because of Chinese steel being dumped globally, forcing the company into bankruptcy.
Rajiv Bakshi, senior vice-president and group general counsel of JSW Steel Ltd, declined to comment on the ruling as the full order is yet to be uploaded.