The National Company Law Tribunal (NCLT) has given the go-ahead to a consortium of banks led by State Bank of India to initiate bankruptcy proceedings against Jyoti Structures. The company is thus the first company to face such proceedings under the new bankruptcy law.

The Reserve Bank of India (RBI) had identified 12 large stressed accounts, including Essar Steel, Bhushan Steel, Monnet Ispat, Alok Industries, Lanco Infratech, and ABG Shipyard, against which banks will move under the new Insolvency and Bankruptcy Code in a bid to recover dues amounting to about ₹7,000 crore. With these large accounts getting referred to the NCLT, the RBI’s internal advisory committee now wants banks to focus on other large stressed accounts.

It is believed to have prepared a list of 33 large accounts with debt aggregating about ₹2.61 lakh crore, for reference to the Tribunal by September 2017.

Negative net worth

Jyoti Structures is into engineering, procurement and construction in the power sector. Its consolidated net loss widened to ₹1,426 crore in FY17 from a ₹704 crore consolidated net loss in FY16.

According to the report of the company’s independent auditor, it is facing a financial crunch due to losses incurred and inadequate liquidity, which resulted in delays in implementing contracted projects during the year (FY17). The company’s net worth was negative at ₹1,384 crore as of March 2017.

Further, the auditor said the company’s total liabilities exceeded its total assets by ₹6,850 crore. “On account of its operational and financial position, the company has delayed payments to various parties and dues to statutory authorities and interest on such delays is not determined. These factors might impact the aspect of the going concern,” it said.

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