NCLAT gives Nod to the Liquidation of Kamineni Steel & Power

As per the latest updates, the National Company Law Appellate Tribunal today has ordered liquidation of Kamineni Steel & Power (KSPL) thus dismissing the Hyderabad bench NCLT's order to clear a debt resolution plan of the company despite not having the mandatory approval of 75% of the company's lenders - a prerequisite of IBC (Insolvency and Bankruptcy Code).

KSPL which is a part of the Hyderabad headquartered Kamineni group has 350,000 tonnes of billet plant in Hyderabad. In August 2017, the company had moved to the NCLT (National Company Law Tribunal) seeking resolution of its loan accounts that were declared nonperforming by lenders. The company faces claims of INR 1,500 crore from the financial creditors with Indian Bank having the highest exposure of INR 337 crore, followed by Indian Overseas Bank at INR 223 crore.

Hyderabad bench NCLT approves resolution plan with 66.67% approval

In Nov'17, the Hyderabad bench NCLT had approved the resolution plan of Kamineni Steel & Power which was approved by only 66.67% of the committee of creditors in value. The resolution plan proposed by the company involved pumping in fresh funds, rescheduling of certain loans and moratorium on a few other payments.

SBI Capital Markets, which was appointed by the lenders to study the plan, had advised KSPL management to infuse at least INR 150 crore for an early revival of the company.

However, a majority of the lenders did not accept the resolution plan submitted by the company and advised it to improve on the offer. Subsequently, the company filed a revised plan that involved a one-time settlement scheme of INR 525 crore.

Indian Overseas Bank challenges NCLT's order

While Indian Bank, JM Financial, Allahabad Bank, Andhra Bank and Oriental Bank of Commerce, having 66.67% voting power in the Committee of Creditors, approved the plan. Lenders with 26.97% votes did not approve it, while a lender with 6.36% votes remained open to approve the plan.

Lenders who opposed the resolution plan felt that they will be able to recover more by the sale of assets. Also, they felt that there would be some uncertainty about the recovery of dues payable after a year.

Indian Overseas Bank having the voting power of 15.15% rejected the resolution plan and challenged the NCLT's decision by moving to the appellate body (NCLAT). This is because as per section 30(4) of the Insolvency and Bankruptcy Code, 2016, a resolution plan can be approved by the Committee of Creditors by not less than 75% of the total voting share.

On 4 Jan'18, NCLAT had stayed the order passed by National Company Law Tribunal (NCLT) that allowed the resolution professional to implement the resolution plan even at approval of 66.6% lenders and fast forward to 13 Sep'18, NCLAT today announced its final verdict of scrapping the NCLT's order thus ordering liquidation of Kamineni Steel & Power.