Insolvency proceedings: NCLT decides to initiate action against Jyoti Structures

BDO will manage the day-to-day operations of the company and will also work with the committee of creditors to come up with a resolution plan, which will need the approval of the committee.

Written by ENS Economic Bureau | Mumbai | Published:July 5, 2017 3:12 am
According to the NCLT order on Tuesday, the board of directors of Jyoti will be suspended and consultancy firm BDO would manage the company.

The National Company Law Tribunal (NCLT) has decided to initiate bankruptcy proceedings against debt-laden Jyoti Structures under the Insolvency and Bankruptcy Code after the company failed to repay its Rs 7,000 crore worth of loans to lenders led by State Bank of India (SBI).

Jyoti Structures has become the first large stressed company from the 12 firms identified by the Reserve Bank of India to go for resolution under the insolvency and bankruptcy law. The application for bankruptcy was filed by its lead lender SBI at the Mumbai branch of NCLT.

According to the NCLT order on Tuesday, the board of directors of Jyoti will be suspended and consultancy firm BDO would manage the company. The company did not oppose the action by the banks so far and informed the court about a potential buyer interested in taking over the company.

BDO will manage the day-to-day operations of the company and will also work with the committee of creditors to come up with a resolution plan, which will need the approval of the committee. When a company is referred to the NCLT under the Insolvency and Bankruptcy Code, an interim insolvency professional is appointed and will take control of the assets and form a creditors committee.

The committee will appoint a resolution professional to oversee the process and could change management of the debtor. The committee also has to come up with a resolution plan (approved by 75 per cent majority of creditors) or decide to liquidate assets. If the resolution plan is not accepted by the NCLT or no plan is formed within 180 days (it can be extended by 90 days), the firm would go into liquidation.

The company had posted a revenue of Rs 856.9 crore and a loss of Rs 1,482 crore for the fiscal ended March 2017. Debt of the Mumbai-based engineering, procurement and construction (EPC) company was restructured in September 2014, but the company was struggling to repay the lenders. The Internal Advisory Committee (IAC) of the RBI recommended the names of 12 larges stressed companies for resolution under the Insolvency and Bankruptcy Code. The committee had proposed IBC reference all accounts with fund and non-fund based outstanding amounts in excess of Rs 5,000 crore, with 60 per cent or more (Rs 3,000 crore or more) classified as non-performing by banks as on March 31, 2016.

The RBI asked banks to discuss the accounts named by the RBI before referring them to the NCLT. As these are large accounts and involve many banks, they will try to take a common view on all administrative requirements before referring these accounts to the NCLT. The remaining 11 companies are expected to come before the NCLT in the coming days. Banks will decide on appointment of insolvency professional (IP) who will later decide on the resolution plan and submit it to the lenders for their consideration.

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