In a First, Firm Liquidated as a Going Concern
NEW CHAPTER Move helps lenders recover more money against unpaid loans
For the first time under the Insolvency and Bankruptcy Code, Kolkata-based Keshav Sponge and Energy has been liquidated as a ‘going concern’, marking a new chapter in the evolving Insolvency and Bankruptcy Code that provides the framework to extricate billions of dollars stuck in bad loans. This move has twin-benefits: It helps lenders recover more money against the unpaid loans, and creates future job opportunities for those employees who used to work for the company.
‘A going concern’ or ‘a slump sale of the assets’ enables the sale of business of the company including all its assets and properties. The business of the company is continued during the liquidation process by the liquidator. “The process of selling all fixed assets is over. It will take some more time to complete the entire process,” said Anil Agarwal, the official liquidator, who works for AAA Insolvency Professional, a Delhi-based firm. He declined to divulge further details.
The lenders are said to have received about ?48 crore against total default of ?92 crore. Some more recoveries are likely to be made with the completion of the entire process.“A Raigargh-based steel company has bought the entire lot of fixed assets. It is likely to revive the business by employing new people and deploying capital,” said a person with direct knowledge of the matter.
Normally, a liquidator sells company assets on a piece-meal basis. For example, it sells machinery or plant or a land parcel. This is expected to attract less value realisation compared to the collective approach, known as a ‘slump sale or a going concern’ in market parlance. A simple liquidation process would have fetched about one-fifth of the default in Keshav, experts said.
Earlier, the National Company Law Tribunal for the first time directed that a liquidator be appointed in place of an existing resolution professional in the case of a company which has no feasible resolution plan in sight, marking a new chapter in the evolving Insolvency and Bankruptcy Code.
The tribunal directed the winding up of Keshav Sponge and Energy, whose petition was admitted on February 16 this year. The company had filed the petition after it failed to repay more than ?85 crore to its creditors, including Punjab National Bank.Delhi-based Adesh Kumar Mehta was appointed as the resolution professional.
“Since the committee of creditors has unanimously approved Mr Anil Agarwal as the liquidator for initiation of liquidation, the resolution professional already appointed is to be replaced,” judicial members Vijai Pratap Singh and Jinan KR said in their order at NCLT Kolkata.
The Economic Times, New Delhi, 05th June 2018