Comments
A legal contradiction is threatening to play spoil sport in the liquidation of Varun Resources Ltd — once India’s biggest liquefied petroleum gas (LPG) ship operator — which owes ₹3,844 crore to a consortium of banks led by State Bank of India.
The Admiralty Court in Mumbai has put up eight LPG ships of Varun Resources under the hammer, a decision the lenders as secured creditors agreed to, though the shipping company was referred to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC).
Bid for ships
This is not a sale under the IBC, this is a sale under the Admiralty Court, according to lawyers.
“Therefore, technically there would be no bar on Y D Khatau (the Chairman and Managing Director of Varun Resources) to bid for the ships,” a maritime lawyer briefed on the process told BusinessLine .
Shipping industry circles reckon that Khatau could be considering participating in the bid not in his name but by putting up some other company.
“Khatau will probably do it, but he will not be formally with that company, so you will not know that he is associated with that company,” the lawyer mentioned earlier said.
“When any distressed asset is sold as per NCLT process, the promoter or his associates are not allowed to bid for the assets directly or indirectly. However, in the auction sale of ships owned by Varun Resources arising out of a court order, there is no such provision.
Potential opening
“Hence, there is a potential opening for the promoter of Varun Resources to buy the ships in the auction through a front company, yet at the same time, get rid of all the liabilities to the banks,” an industry expert dealing with insolvency cases told BusinessLine .
“The court-driven process permits the defaulting promoter a back-door entry to get back the ships completely debt-free,” he said.
Payments to banks
The auction, according to the shipping industry officials, is not going to fetch even one-tenth of the amount that Varun Resources owes banks given the market for LPG ships and the condition of the vessels because they are not in operation for many months.
Banks will get money from the auction proceeds only after the ships’ crew and the ships’ manager have been paid, according to an earlier order of the Admiralty court, which had arrested the ships at their behest to recover their dues.
Khatau could not be reached for comment.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.