The National Company Law Appellate Tribunal has ordered liquidation of Kamineni Steel & Power (KSPL), scrapping the lower bankruptcy court’s decision clearing a debt resolution plan that didn’t have the approval of 75% of the company’s lenders.
The order came on a challenge by Indian Overseas BankNSE 2.45 %, which moved the appellate body after the National Company Law Tribunal (NCLT) in last November approved the resolution plan.
KSPL, part of the Hyderabad-headquartered Kamineni group, had earlier moved the NCLT seeking resolution of its loan accounts that were declared nonperforming by lenders. It also submitted a resolution plan to Indian BankNSE 0.93 %, which heads a consortium of lenders consisting of Oriental Bank of Commerce, Allahabad BankNSE 1.51 %, Indian Overseas Bank, Central Bank of India, Andhra BankNSE 1.94 %, Bank of Maharashtra, Karur Vysya Bank and JM Financial Asset Reconstruction Company. The resolution plan proposed by the company involved pumping in fresh funds, rescheduling of certain loans and moratorium on a few other payments.
SBI Capital Markets, which was appointed by the lenders to study the plan, had advised KSPL management to infuse at least ₹150 crore for an early revival of the company.
However, a majority of the lenders did not accept the resolution plan submitted by the company and advised it to improve on the offer. Subsequently, the company filed a revised plan that involved a one-time settlement scheme of ₹525 crore.
At a meeting in October last year, Indian Bank, JM Financial, Allahabad Bank, Andhra Bank and Oriental Bank of Commerce, having 66.67% voting power in the Committee of Creditors, approved the plan. Lenders with 26.97% votes did not approve it, while a lender with 6.36% votes remained open to approve the plan. After the NCLT cleared the proposal, Indian Overseas Bank moved the appellate tribunal pointing out that the resolution plan was not approved with 75% of votes and that it should be rejected so that liquidation could be initiated.
Currently, a resolution proposal can be cleared with 66% of votes in its favour at the committee of creditors – a lender’s voting power is based on its share of the outstanding debt. At the time, NCLT cleared the proposal, the cut off was 75%.
Source: Economic Times