NCLT declines EPJL Rs1,200 cr settlement proposal against debt of Rs 5,600 cr

The National Company Law Tribunal has rejected Rs 1,200 crore offered by the former promoters of Essar Power Jharkhand Ltd (EPJL) for one-time settlement with the lenders and take the debt-ridden company out of insolvency proceedings. After the Committee of Creditors (CoC) of EPJL, in which leading private sector lender ICICI Bank has over 90 per cent voting rights, declined Rs 1,200 crore settlement proposal against a total debt ranging around Rs 5,600 crore, a two-member principal bench of NCLT headed by President Justice M M Kumar rejected promoter's offer.

"A proposal made by the ex-promoter/director pursuant to the direction issued on March 11, 2019, and subsequently clarified by filing one affidavit dated May 16, 2019, does not find favour of the ICICI Bank - Financial creditor who constitutes 99.34 per cent voting share of the CoC," said NCLT. It further said: "There are plausible reasons given for not accepting the proposal. Accordingly, we are unable to accept any such proposal and the same is hereby rejected."

On March 11, 2019, NCLT had allowed Essar Power promoters to file a revised proposal to the resolution professional of EPJL, which was supposed to place it before in a CoC meeting for consideration. Earlier, the promoters had offered Rs 900 crore.

EPJL, a stepdown of Essar Power, is setting up 1200 MW coal-fired power plant at Chandwa in Latehar district of the state. It would have two units of 600 MW each. Its promoters had offered to settle the amount with the lenders under Section 12 (A) of the Insolvency and Bankruptcy Act and take the company out of insolvency.

Section 12A of the IBC allows one more chance to the corporate debtor to settle its defaults and get the company out of insolvency proceedings after settling the claims of the lenders. However, it requires 90 per cent votes from CoC.

ICICI Bank has 99.34 per cent votes in CoC and had not agreed with the proposal, hence the NCLT rejected the offer. In April 2018 NCLT had allowed to initiate insolvency proceedings against EPJL over the ICICI Bank plea, claiming a debt of Rs 3626 crore.