In an unprecedented act of co-operation among lenders, State Bank of IndiaBSE -1.13 % and a dozen other lenders agreed to be “sale ready” for bankrupt companies on which lenders have agreed on the resolution plan to ensure that civil litigation does not delay the revival, said two people familiar with the matter.
This agreement between banks is essential since there are a lot of formalities like board approval and clearances from various committees of lenders before the committee of creditors could cast a final vote on the proposal cleared by the resolution professional, said those people who did not want to be identified.
All lenders in a consortium would complete the formalities including board approvals for resolution plans even if a loser challenges the Resolution Professional’s plan in a civil court.
The fact that the process has to be completed in 270 days, according to the bankruptcy code, makes bankers believe that courts would rule before the deadline even if decisions are challenged.
“SBI has said that banks should take board approval for the bidder which could be subject to changes based on the court ruling,” said a person present at the meeting. “This is to mitigate risk in situations where there is a litigation by one of the bidders and if the court passes an order just a few days ahead of 270 days bankers should be ready so that they don’t miss out on the deadline.”
Instances such as Larsen & Toubro seeking court intervention against Bhushan SteelBSE -5.61 % resolution plan after lenders approved, UltraTech CementBSE 0.37 % questioning the evaluation process, and Liberty Group challenging the decision on Bhushan Power and Steel, have shaken banks who were expecting the new bankruptcy process to quicken their recovery process.
