ABG Shipyard Ltd, once India’s biggest private shipbuilder, is headed for liquidation after a lenders panel rejected the resolution plan submitted by London-based Liberty House for the debt-laden shipbuilder.

Sundaresh Bhat, the resolution professional for ABG Shipyard, has filed an application with the Ahmedabad bench of the National Company Law Tribunal (NCLT) seeking liquidation of the Gujarat-based shipbuilder under Section 33 (2) of the Insolvency and Bankruptcy Code (IBC), according to papers filed with the bankruptcy court.

The Committee of Creditors (CoC) led by ICICI Bank has approved a resolution backing the liquidation plan. The yard owes some Rs 18,245 crores to a clutch of banks led by ICICI Bank. The NCLT is expected to issue a final order on liquidation shortly.

ABG Shipyard is among the 12 large companies that the Reserve Bank of India (RBI) had identified in June 2017 for banks to refer to the bankruptcy court for resolution or liquidation. The resolution of ABG Shipyard was to be completed by April 2018 according to the time line set by NCLT, which was set up to oversee the bankruptcy law aimed at fixing the country’s mounting bad bank loans. The time line has since been extended.

ABG is the second shipyard to go down after Bharati Defence and Infrastructure which was liquidated by an insolvency court in Mumbai in January this year. Both the yards had the coveted permits to build warships for the Indian Navy. Like Bharati Defence, ABG’s collapse would render hundreds of workers jobless. It also comes at a time when the government is looking to bolster local shipbuilding as part of its flagship ‘Make in India’ initiative.

In February, the Nitin Gadkari-led shipping ministry overhauled a cargo support policy extended to local fleet owners by giving top preference to Indian-built ships for carrying export-import (EXIM) cargo or providing other services such as dredging and offshore oil exploration support activities to state-run entities. Till then, the first preference in tenders issued by state-owned entities was given to Indian flagged ships, irrespective of whether they were built in India or overseas.

Despite their infrastructure and potential to book orders from local customers, both ABG and Bharati failed to attract serious buyers during the corporate insolvency resolution process mainly due to over-capacity in the global shipbuilding industry amidst a continued downturn in shipping.

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