NTPC is set to buy Jhabua Power, its first acquisition under the Insolvency and Bankruptcy Code (IBC), after the adjudicating authority upheld a lower bench order that had initially validated the government-owned power producer’s eligibility status to bid for the distressed asset.
State Bank of India, Axis Bank and Punjab National Bank are among the lenders to the stalled project.
On Monday, the adjudicating authority rejected Gautam Thapar-promoted Avantha Group’s claim that NTPC is ineligible to acquire the distressed thermal power unit due to defaults by its affiliate companies – Ratnagiri Gas and Power (RGPPL) and Konkan LNG.
The National Company Law Appellate Tribunal (NCLAT) also upheld the lenders’ decision that rejected the promoter’s settlement offer under Section 12A of IBC. This provision gives tribunals the power to withdraw an application from insolvency proceedings if 90% of lenders by value agree.
The order is a relief to lenders awaiting the resolution of the thermal power company for over three years. Last June, lenders approved NTPC’s resolution plan that offered a staggered payment of ₹1,830 crore and 50% equity. This is also a rare instance under IBC wherein lenders would receive such a high stake in a distressed company to compensate for the lower offer made by the bidder. In December 2019, NTPC had offered lenders ₹1,850 crore as upfront cash, but later lowered its bid.
Although its plan was unanimously approved by all verified lenders in June last year, the sale was delayed due to a petition filed by Jhabua’s promoter Avantha Group. The plea claimed that NTPC was ineligible since two of its affiliate companies – RGPPL and Konkan LNG – defaulted to lenders.
The NCLAT order stated that NTPC is eligible under section 29A of IBC since it submitted a no-due certificate to lenders in April last year. Section 29A disqualifies a defaulting promoter and its relatives from making an offer for a company under IBC.
“The disqualification will apply in the case of errant promoters and cannot be applied to promoters such as NTPC that came in to rescue DPC (Dabhol Power Company) at the instance of the government of India and Maharashtra,” said the National Company Law Tribunal’s order issued on March 8.
Lenders rejected Avantha’s settlement plan in March this year since it was significantly lower than the successful applicant’s bid. Avantha offered upfront cash of ₹200 crore against ₹950 crore by NTPC.
