Any move to liquidate Facor, one of India’s oldest producers of ferro alloys undergoing insolvency resolution, can be implemented only after the National Company Law Appellate Tribunal (NCLAT) rules on Facor’s appeal against an NCLT Kolkata order for initiation of bankruptcy resolution process.
Facor’s committee of creditors (CoC) rejected all resolution plans and conveyed this to the NCLT on April 2. Following this, NCLT Kolkata passed an order fixing the next date of hearing as April 11 and, in the interim, directed the resolution professional to continue management and affairs at Facor.
In a notification on April 3, Facor informed the stock exchanges that “the CoC has, after evaluation of resolution plans received from resolution applicants, rejected resolution plans received and taken a decision to liquidate the company.”
Facor was referred to the NCLT after its largest financial creditor, Rural Electrification Corporation (REC), filed an application against it, which was admitted for commencement of corporate insolvency resolution process (CIRP) as per a July 6, 2017 order of NCLT Kolkata. Accordingly, KG Somani managed company affairs from July 6, 2017 to April 2, 2018, the 270–day period of the CIRP.
Facor had appealed against the NCLT decision to the NCLAT. In a detailed hearing on March 5, the NCLAT New Delhi, while reserving its judgement, said, “In the meantime, if any order is passed, it shall be subject to decision of the appeals.” However, this observation should not be treated as interim order of stay, it added.
REC had extended financial assistance of Rs 510.98 crore to Facor Power (FPL), a subsidiary of Facor. The loan, besides other securities, was also secured by corporate guarantee of Facor for financial assistance received by FPL.
After FPL defaulted on loan repayment, REC filed an application against Facor under Section 7 of IBC with NCLT Kolkata. “This case is different from other NCLT cases. Here, the lender has gone after the guarantor without exercising claim from the borrower,” a top source close to the developments pointed out.
The Saraf family has been running Facor, which was established in 1955, and has carved out a niche for itself in the ferro alloys business, both within India and abroad. Facor, along with Facor Power, which operates the power plants, has nearly 2,000 employees. The impending court order will, thus, go a long way in deciding their fate and that of the company.
Source: Economic Times