Let There Be Light

NCLT and court orders have cleared the confusion around new bankruptcy laws as first few resolutions get under way.

- Dipak Mondal

The Synergies Dooray Automotive case, the first in which a resolution plan has been approved under the new insolvency law, had all the elements of surprise, drama and confusion. This Visakhapatnam-based maker of automotive parts, garage and service station equipment owed ₹972 crore to Edelweiss ARC, Alchemist ARC, Millennium Finance and Synergies Castings. The case first made headlines for creditors taking a haircut of more than 94 per cent as part of the debt recast. But there was more drama in store, when one of the financial creditors — Edelweiss ARC — moved the National Company Law Appellate Tribunal (NCLAT) against the National Company Law Board’s (NCLT’s) decision accepting the debt recast plan. It requested the NCLAT to scrap the plan, which was approved by 90 per cent financial creditors, alleging that Synergies Casting, being a related party, did not have a voting right but transferred 93 per cent of its debt to Millennium Finance to reduce its (Edelweiss’) voting share in the committee of creditors. Edelweiss ARC even accused the resolution professional in the case, Mamta Binani, the past president of the Institute of Company Secretary in India, of siding with the corporate debtor. Though the NCLAT dismissed the plea of Edelweiss ARC, the case raised many important questions. Should creditors take such large haircuts even if it means resolution? Can the NCLT allow an arrangement between a financial creditor and a related party just before the initiation of the insolvency petition? Can a creditor question an arrangement between two creditors?

The case of Synergies Dooray, a lesser-known company, managed to grab headlines. Imagine what will happen when the 12 large cases — involving the likes of Essar, Jaypee Infratech, Bhushan Steel and ABG Shipyard, which account for 25 per cent non-performing assets, or NPAs, of ba