JSW may revise bid for Monnet Ispat as lenders move NCLT over stressed loans

Lenders led by State Bank of India (SBI) are reported to have moved the National Company Law Tribunal (NCLT), which could bring the stressed asset closer to acquisition by JSW Steel.

JSW Steel, which had made an unsuccessful bid to acquire Monnet Ispat, could put in a revised offer to acquire the stressed assets if the lenders are ''serious'' about selling the assets, say reports.

Creditors to Monnet Ispat had rejected JSW's initial offer, but the company is ''waiting for the progress of the case in the National Company Law Tribunal (NCLT) and would file a revised offer based on the seriousness shown by the banks,'' reports quoted sources familiar with the development said.

On Tuesday, the NCLT admitted the insolvency proceedings against Monnet Ispat and Energy after the lenders led by SBI confirmed the default amount to be Rs1,539 crore.

SBI had earlier made a Rs2,243 crore claim on Monnet Ispat, but failed to clarify a mismatch between the claim and the default amount of Rs1,539 crore. This has now been revised after the NCLT told the SBI lawyer to take the case ''seriously.''

SBI counsel later clarified that the default amount stood at Rs1,539 crore, and that the balance Rs704 crore had not yet been declared a non-performing asset.

Monnet Ispat, which reported a Rs400-crore loss for the April-June quarter – the 12 successive quarter of losses – amidst falling sales and rising interest cost, said the company has no objections to the insolvency proceedings based on the revised NPA.

Net sales of the company fell 17.7 per cent to Rs346 crore. As of March 2017, the company had a total debt of Rs6,567 crore, it said.

Monnet Ispat turned loss-making after the Supreme Court cancelled the allocation of its five captive coal mines in 2014. It had commissioned the steel plant at Raigarh after the mine licences were cancelled.

Monnet Ispat is among the 12 defaulting companies prioritised by the RBI for proceedings under the Insolvency and Bankruptcy Code (IBC).

These companies together owe lender banks about Rs7,00,000 crore in unpaid loans. The NCLT will take up almost all the cases over the next few weeks.

Reserve Bank of India (RBI) has constituted an Internal Advisory Committee (IAC), which arrived at an objective, non-discretionary criterion for referring accounts for resolution under Insolvency and Bankruptcy Code, 2016 (IBC).

In particular, the IAC recommended for IBC reference all accounts with fund and non-fund based outstanding amount greater than Rs5,000 crore, with 60 per cent or more classified as non-performing by banks as of 31 March 2016.

Accordingly, Reserve Bank of India has issued directions to certain banks for referring 12 accounts, qualifying under the aforesaid criteria, to initiate insolvency process under the Insolvency and Bankruptcy Code, 2016.  As regards the other non-performing accounts which do not qualify under the above criteria, the IAC recommended that banks should finalise a resolution plan within six months. In cases where a viable resolution plan is not agreed upon within six months, banks should be required to file for insolvency proceedings under the IBC.

However, the names and details of borrowers are not disclosed as prescribed under section 45E of the Reserve Bank of India (RBI) Act, 1934 and Banking Laws, which provide for the obligation of a bank or financial institution to maintain secrecy about the affairs of its constituents.