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Govt panel to suggest fewer creditor votes to pass insolvency plans

Veena Mani & Surajeet Das Gupta/ 13 Mar 18 | 12:52 AM

Resolution plans under the Insolvency and Bankruptcy Code (IBC) are likely to get easier approvals from creditors’ committees, with a government panel agreeing to recommend that only 60 per cent of their members needed to pass these. At present, the requirement is 75 per cent votes. In a meeting on Monday, the panel, headed by Corporate Affairs Secretary Injeti Srinivas, also decided to recommend “creditor" status to homebuyers in insolvency cases of real estate companies, a source said. Homebuyers of Jaypee Infratech projects had moved the Supreme Court, after the company went in for insolvency resolution. 

At present, homebuyers can only submit their claims, but these are not given priority.

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This was allowed after they protested against being excluded from the recovery process.

Discussion is on to tweak the clause on “connected party" (29A), which would mean only those promoters of a company would be stopped from bidding for a stressed asset if they were managing or in control of the business.

But, further discussions are expected on this clause. A revised 29(A) clause may allow ArcelorMittal to bid for Essar Steel. It is facing an eligibility test as it and its promoter, L N Mittal, had investments in Uttam Galva Steels and KSS Petron, respectively. They had, however, sold these stakes before bidding for Essar Steel.  However, it is not clear if the creditors are expected to call for a second round of bidding for Essar Steel, or whether they will wait for the changes. 

ArcelorMittal and Numetal Mauritius, a company in which VTB Bank of Russia has a majority state, are fighting a legal battle to take over Essar Steel.

ArcelorMittal sold its 29 per cent stake in Uttam Galva Steels just before the bidding deadline closed. Mittal, too, sold his 33 per cent personal stake in KSS Petron’s parent company in Kazakhstan before taking part in the process. ArcelorMittal has claimed that its bids for Essar Steel are eligible.

Numetal’s bid has also been found ineligible, as a trust with Rewant Ruia as a beneficiary owns a 25 per cent stake in company. The Ruias were promoters of Essar Steel when the company’s debts turned into a NPA. 

The Ruia trust has offered to sell its stake to VTB Bank so that Numetal becomes eligible for bidding. Mittal and VTB Bank executives met top government leaders to lobby for their bids.  The committee will submit its recommendation in the next four or five days.

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