Ahmedabad: Bankruptcy proceedings against ABG Shipyard Ltd were approved by the Ahmedabad bench of National Company Law Tribunal (NCLT) on Tuesday.
Justice Bikki Raveendra Babu admitted a plea filed by creditor ICICI Bank Ltd for initiating insolvency proceedings against the company. The tribunal named Sundaresh Bhat, a partner at accounting firm BDO India, as the interim resolution professional for ABG Shipyard.
ICICI Bank approached NCLT last month to initiate bankruptcy proceedings against ABG Shipyard after it defaulted on Rs4,500 crore of loans.
The company admitted to having defaulted on loan repayments and agreed to insolvency proceedings being initiated against it at NCLT.
Upon admission of the petition, a six-month moratorium begins to decide on a resolution plan in accordance with the Insolvency and Bankruptcy Code, 2016. During this period, all existing proceedings against the defaulter are suspended. This moratorium can be extended up to 270 days.
As many as 20 unsecured creditors of the company have approached the Gujarat high court for winding up the company.
Lawyers representing ICICI Bank argued that since no winding-up order had been delivered by the high court or an official liquidator, NCLT can admit the insolvency and bankruptcy petition.
In a 4 July stock exchange filing, ABG Shipyard, while admitting that it was in a “deep financial crisis”, reported a loss of Rs822 crore for the quarter ended December 2016. The firm had posted a net loss of Rs1,266.22 crore in the year earlier. The company said it was facing severe manpower crisis and hence there was a delay in filing the quarterly earnings.
The company also said it had defaulted on repayment of loans and covenants of the corporate debt restructuring (CDR) scheme of lenders. As a result, the CDR scheme was discontinued on 1 March, it said in the July filing.
The company’s lenders had put the shipyard, with debt of about Rs10,000 crore, on the block. They attempted to find a buyer for their 51% stake, which they got after conversion of debt to equity. However, they could not find any buyers.
Apart from ABG Shipyard and Jyoti Structures Ltd, bankruptcy proceedings have also been initiated against Alok Industries Ltd, Monnet Ispat and Energy Ltd, Electrosteel Steels Ltd, Amtek Auto Ltd, Bhushan Steel Ltd and Bhushan Power and Steel Ltd, which are among the 12 large bad loan accounts identified by the Reserve Bank of India.
These 12 accounts constitute about a quarter of the country’s Rs8 trillion of bad loans. These accounts have an exposure of more than Rs5,000 crore each, with 60% or more classified as non-performing assets by banks, as of March 2016.