Barring Essar Steel and Bhushan Steel, recovery from top 7 IBC cases dips to 34 per cent

Suresh P Iyengar Mumbai | Updated on November 21, 2019

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The sale of Essar Steel and Bhushan Steel alone accounted for nearly 68 per cent of the overall recovered amount

The recovery of bad debt from top seven resolved cases under the Insolvency and Bankruptcy Code will dip to just 34 per cent if the two prime assets of Bhushan Steel and Essar Steel are removed.

Of the total admitted claim of the top seven resolved cases amounting to ₹213,731 crore, the overall recovery works out to 53 per cent or ₹113,876 crore.

The sale of Essar Steel and Bhushan Steel alone accounted for nearly 68 per cent or ₹77,571 crore of the overall recovered amount.

The recovery from remaining five companies — Electrosteel Steels, Monnet Ispat and Energy, Alok Industries, Jyothi Structures and Bhushan Power and Steel — was only 34 per cent or ₹36,305 crore against their admitted claim of ₹108,236 crore.

In 2017, the Reserve Bank of India had directed banks to initiate insolvency proceedings against 12 large accounts with outstanding claims of ₹3.45 lakh crore. Their liquidation value was at ₹73,220 crore. So far, the resolution plan of seven companies have been approved. Liquidation orders were passed against Lanco Infratech and ABG Shipyard. The resolution process of Amtek Auto, Era Infra and Jaypee Infratech are still under process.

Interestingly, even among these five resolved cases, banks are yet to receive ₹19,350 crore from JSW Steel for acquiring Bhushan Power and Steel (BPSL) even after NCLT approving its resolution plan.

So close, yet so far

JSW Steel has sought immunity against the criminal investigations against the promoters of BPSL. As foreseen by JSW Steel, the Enforcement Directorate as part of its investigation attached the properties of BPSL under Prevention of Money Laundering Act. Despite NCLAT directions, ED has refused to lift the freeze on sale of BPSL. The case seems to be headed for a long draw and land in the Supreme Court for a final verdict.

The number of companies undergoing insolvency hit a record 1,497 as of September-end. Almost 36 per cent of the on-going cases have already crossed 270 days.

The government recently extended the mandatory deadline for resolution to 330 days from 270 days. However, the Apex Court held that if the debts are not resolved within the deadline, bankruptcy tribunals could award extension of time under exceptional circumstances.

Banks will be the biggest losers, while the defaulting promoters get to wash their hands off legally.

Published on November 21, 2019

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