Comments
National Company Law Tribunal, Chennai, admitted the application filed by State Bank of India (financial creditor) against Coastal Energen (corporate debtor) — the power generating flagship company of the Dubai-based Coal and Oil Group — to initiate Corporate Insolvency Resolution Process (CIRP) against the company, declare moratorium, and appoint an Interim Resolution Professional (IRP).
The company has defaulted an amount of ₹1,458 crore to SBI. The counsel for the bank submitted that the company had availed financial facilities from a consortium of 15 banks and financial institutions — including the SBI and the erstwhile State Bank of Mysore, State Bank of Patiala and State Bank of Hyderabad — for setting up of a coal-based thermal power plant with 1200 MW capacity at Tuticorin in Tamil Nadu.
The original cost of the project was estimated to be ₹4,297 crore (with debt of ₹3,323 crore and equity of ₹859 crore). However, due to over-run, the project cost was revised to ₹7,870 crore (with debt of ₹6,296 crore and equity of ₹1,574 crore).
The bench consisting of R Sucharitha, Member (Judicial), and Sameer Kakar, Member (Technical), in its order said that the finance creditor has proposed Radhakrishnan Dharmajarajan as IRP. The IRP will take forward the process of CIRP of the corporate debtor.
The order added that the counsel for the company said that the corporate debtor is operating as a going concern and the plant is operating without further sanction of working capital by bankers. Further, it was submitted that the corporate debtor’s average turnover since 2017 has been ₹1,700 crore. Though the Corporate Debtor was sanctioned the one time settlement twice in 2018 and 2019, however, it could not honour the same for some or the other reasons, order said.
Further, major accounts of Coastal Energen were locked with TANGEDCO of which more than 50 per cent was realised during 2020 and 2021 and were used to pay towards the one time settlement (OTS), even without investor support.
The counsel for the company prayed for dismissal of the application on the ground that OTS was a better option than insolvency at this stage.
The company’s counsel, during a hearing on January 24, stated that there was no default. However, a question was put by the bench to the counsel whether the account of the company was NPA in the books of the applicant’s bank. The respondent’s counsel refused to answer and directed the same to be answered by the applicant’s counsel.
The applicant’s counsel replied that the company is an NPA with the applicant and the amount of default was ₹1,458 crore. Respondent’s counsel could oppose this answer, the order said.
“Taking into consideration the facts and circumstances of the case as well as the position of Law, we are of the view that this application as filed by the applicant - financial creditor - is required to be admitted,” the order said.
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.