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Hyderabad High Court stays proceedings against Anrak Aluminium

BS Reporter/Hyderabad 13 Mar 18 | 01:05 AM

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The Hyderabad High Court has stayed the proceedings against ailing Anrak Aluminium Limited in the National Company Law Tribunal (NCLT), which is currently examining an application filed by State Bank of India (SBI) under section 7 of the Insolvency and Bankruptcy Code (IBC), seeking the initiation of insolvency resolution.

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The court admitted a writ petition filed by the company requesting the court to declare the Reserve Bank of India(RBI)’s August 28 directive involving a specific set of large corporate borrowers, including Anrak, and the consequent action of State Bank of India(SBI), as illegal, arbitrary and violative of Article 14 of the Constitution of India.

Justice A V Sesha Sai issued the interim orders after the petitioner- director(finance) and the company secretary claimed the company was dragged to NCLT even though a scheme of one time settlement (OTS) in respect of the outstanding loans was agreed to by the consortium of lenders and the same was being put into action even before the banking regulator ruled out the extension of deadline.

“It is submitted by the learned senior counsel that having made the petitioner herein to pay a sum of Rs 1.25 billion under ‘One Time Settlement’  Scheme, there is no justification on the part of respondent number 2(SBI) to initiate proceedings before the National Company Law Tribunal, Hyderabad bench.

It is further submitted by the learned senior counsel that shortly, the petitioner herein is going to deposit another sum of Rs 2.75 billion by the end of March, 2018," the judge said while considering the matter for examination.

The court, however, made it clear that the stay orders will no longer exist if the petitioner fails to pay Rs 2.75 billion as agreed under the OTS.

Anrak Aluminium, a joint venture between Hyderabad-based Penna Cement Group and Ras Al Khaimah Investment Authority, had set up a 1.5 million tonne capacity alumina plant in Andhra Pradesh way back in 2013 at an investment of Rs 57.12 billion.

As the plant remained idle due to non-supply of bauxite ore by the AP Mineral Development Corporation(APMDC), close to Rs 40 billion of outstanding loans taken by the company were subsequently reclassified as substandard.

Citing these conditions, Anrak management in July 2017 approached the NCLT seeking recast or closure of the project under Section 10 of IBC. However, the bench refused to admit the petition while directing the company to explore the options that could potentially keep the project alive.

Subsequently on September 8, 2017, SBI had convened a meeting of the consortium of lenders to discuss a scheme of OTS amounting to Rs 12.50 billion offered by the company.

A second meeting was convened on October 25, 2017 and the OTS was raised to Rs 12.75 billion and the same was accepted by all the members of the consortium, except one member, with exposure amounting to 94.80 percent of the outstanding loan. Payment schedules were also fixed in the same meeting, according to the company.

The petitioner informed the court that after the latest RBI directive, SBI told the company that approval of competent authorities from 6 of the 17 banks for the OTS were pending and therefore it had decided to file an application before NCLT on December 29, 2017.

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