The prospect of reviving Reliance Naval and Engineering Ltd (RNaval), the bankrupt shipyard earlier owned by Anil Ambani’s Reliance Group, under India’s bankruptcy law, has reached a tipping point with the yard receiving termination notices for land leased by the facility.
Port authorities have issued termination notices on RNaval for non-payment of lease rentals on land and waterfront area leased by the State government to the yard from where it was running the dry dock and ancillary facilities for ship construction.
The resolution professional for E Complex Pvt Ltd, a 100 per cent unit of RNaval which is undergoing a separate bankruptcy process under the Insolvency and Bankruptcy Code (IBC), has also issued a termination notice on RNaval for defaulting on lease rentals on SEZ land leased to the yard for running a fabrication facility.
RNaval had leased 95 hectares of the 121 hectares of special economic zone (SEZ) land owned by E Complex, located adjacent to the yard, to set up the fabrication unit.
“The fabrication unit is a very integral part of the entire shipbuilding process, without that ship construction cannot happen,” said a shipbuilding industry official tracking the resolution process.
A fabrication unit is where steel cutting, blasting, painting, outfitting work, etc, are done. “If the yard cannot operate that facility, it is difficult to build ships,” he said.
To reverse the termination, the land leases will have to be worked out afresh at higher rates, which could hurt the financial viability of the yard.
The land lease complications come at a time when the resolution professional for RNaval has extended the deadline for submission of resolution plans for the yard to March 15.
The Ahmedabad bench of the National Company law Tribunal (NCLT) has granted an extension of 153 days for the completion of the resolution process of RNaval till August 2021, citing the Covid pandemic.
RNaval is being sold under the Insolvency and Bankruptcy Code (IBC) to recover unpaid dues of ₹43,587 crore. Of this, the resolution professional has admitted ₹10,878 crore of dues of financial creditors while another ₹32,693 crore is under verification.
Operational creditors have claimed another ₹1,922 crore from the company, of which only ₹485 crore has so far been admitted.
Potential applicants such as Navin Jindal-led Jindal Steel and Power Limited and Russia’s state-owned United Shipbuilding Corporation have separately inspected the shipbuilding site in the last few days.
Some of the potential bidders are seeking assurances from the government ministries and agencies such as the Indian Navy and Coast Guard to award contracts on nomination basis (without tender) to the yard before putting money on the table.
“Awarding contracts to a private yard on nomination basis is impossible. It should be on competitive bidding basis only. Currently, even State-run yards have to participate in tenders for securing contracts,” the industry official said.