Alok Industries will soon be heading towards liquidation. The textile company, which did not get any suitable bidder within the 270-day period stipulated under the Insolvency and Bankruptcy Code (IBC), is likely to let go of about 12,000 permanent jobs. Meanwhile, the employees have moved the National Company Law Tribunal (NCLT) to prevent liquidation.
In a stock exchange filing, the company said Alok Employees Benefit And Welfare Trust has moved an application objecting to the liquidation. The NCLT has now listed the matter for May 11.
According to a report in The Economic Times, the employees earned an average salary of Rs 1.45 lakh a year. “While considering the resolution plans, lenders are looking at only the recovery aspect,” the report quoted Manoj Kumar, partner & head – M&A and Insolvency Service at Corporate Professionals.
“If they feel that an offer does not meet their expectations, they refuse to approve the resolution plan and the company goes into liquidation. While lenders must protect the commercial interest, they should also look at the collateral damage of liquidation,” Kumar added.
Last week, in a regulatory filing, Reliance Industries Ltd (RIL) said that its joint bid with JM Financial Asset Reconstruction Company Ltd did not meet with the approval of the Committee of Creditors (CoC) to Alok Industries.
The Ahmedabad bench of the National Company Law Tribunal (NCLT) had admitted insolvency proceedings against Alok Industries in July 2017. It was among the 12 ‘dirty dozen’ companies on RBI’s first list. The consortium of lenders, led by SBI, is claiming dues of over Rs 23,000 crore from the beleaguered textile company.
RIL-JM Financial ARC was the sole bidder and its initial offer of Rs 4,950 crore on April 12 had reportedly been rejected by 30 per cent of the CoC on the grounds that it was too low. Under the IBC, a resolution plan needs approval from at least 75 per cent of the lenders to be eligible for the next stage, which is the NCLT’s approval.
What happens next will also set the benchmark for the fledgling IBC. If the NCLT goes soft and allows a further extension, other pending and future cases will also expect similar leniency, which does not bode well for its whole speedy redressal promise.businesstoday