A recent amendment to India’s bankruptcy law has helped billionaire Mukesh Ambani’s Reliance Industries Ltd win approval from a lenders panel on a ₹5,050-crore resolution plan it had submitted jointly with JM Financial Asset Reconstruction Co Ltd for the debt-laden textile company Alok Industries Ltd.
The approval of the creditors panel will take Reliance-JM Finanancial ARC a step closer to acquiring Alok Industries and bringing a logical conclusion to the bankruptcy proceedings of the textile company.
“In a fresh voting of the resolution plan, 72.19 per cent of the creditors have voted in favour of the plan. The voting started on Wednesday night and ended yesterday late in the evening. We understand that the Resolution Professional will be submitting the facts before the National Company Law Tribunal on Monday,” a source briefed on the development told BusinessLine .
Reliance, separately, notified the stock exchange on the development.
The resolution plan of RIL-JM Financial ARC was favoured by only 70 per cent of the creditors, in an earlier round of voting, which fell short of the then threshold of 75 per cent stipulated under the Insolvency and Bankruptcy Code (IBC) for such a plan to go through and was rejected. Consequently, the resolution professional had filed for liquidation of the company citing a lack of resolution plan within the 270-day period prescribed under IBC.
However, earlier this month, the government re-wrote the rules, among which, it lowered the threshold voting share for resolution plans to gain approval from the creditors panel to 66 per cent from the earlier 75 per cent.
Following the amendment, the Ahmedabad bench of the National Company Law Tribunal ordered the creditors on June 11 to vote afresh on the resolution plan.
Alok Industries — a fully integrated textile company with a large presence in the cotton and polyester segments — could be the first case to sail through after the IBC was amended.
Reliance Industries-JM Financial ARC has agreed to repay some ₹4,000 crore to financial creditors of the ₹5,050-crore plan. Financial creditors have submitted claims worth over ₹29,000 crore, according to claims admitted by the resolution professional to Alok Industries.
The Silvassa-based textile company is one of the 12 large companies referred to the National Company Law Tribunal for insolvency proceedings at the behest of the Reserve Bank of India in June 2017. These companies together accounted for ₹2.77 lakh crore worth of bad loans in the banking system.
Alok currently employs 18,000 (which at the peak was 30,000), generating revenue of ₹35,000 crore and supports 3,500 vendors.