Ind-Barath Energy lenders, JSW Energy may renegotiate resolution plan

Lenders to distressed borrower Ind-Barath Energy (Utkal) and JSW Energy, the asset’s successful bidder, are likely to renegotiate the resolution plan after the tribunal observed in its order that parties can ‘sit across the table’ and take stock of the situation.
The observation was made by the tribunal in the context of an application filed by the BSE-listed JSW Energy, which sought to terminate its own plan with the arguments that the assets of the company have deteriorated beyond Rs 300 crore.

The Hyderabad bench of the National Company Law Tribunal (NCLT) had allowed an application filed by the resolution professional of Ind-Barath Energy to approve the resolution plan submitted by the Sajjan Jindal-promoted company.

Ind-Barath was admitted for bankruptcy proceedings on August 29, 2018, following a plea filed by Bank of Baroda. On October 9, 2019, the Committee of Creditors (CoC) approved JSW Energy’s revival plan, with 82.70% votes in its favour.

JSW Energy is paying about Rs 1,025 crore to the lenders of the company. Also, JSW Energy has estimated that an additional Rs 1,650 crore must be infused by way of additional funds for commencing the sustainable commercial operation of the project.

However, In February 2021, JSW Energy filed an application in the tribunal seeking a termination of the resolution plan on the account of the occurrence of material adverse change (MAC).

The company argued in its application that its resolution plan approved by the CoC had a clause of MAC. That clause defined MAC as events or circumstances that could lead to an aggregate monetary impact of more than 10% of the total resolution amount. Such an event entitled JSW to terminate the resolution plan.

“The claim…that there has been a serious deterioration of assets beyond Rs 300 crore cannot just be brushed aside, but at the same time, the bench at this time is incapable of going into such details,” observed the tribunal in its July 25 order. “Therefore, it is for the parties to sit across the table and take stock of the situation and in case there are any lapses on the part of the RP or any party, the same may be considered and a proper evaluation of the current situation can be done.”

Since the total value of the resolution amount is Rs 1,025 crore, 10% of that amount stands at Rs 102.05 crore.

When contacted, JSW Energy's spokesperson declined to comment on the future course of action.

“The tribunal does not impose an obligation on the creditors to renegotiate the plan but it only suggests that parties should sit across the table to discuss the alleged lapses committed by the RP and assess the situation,” said Sudip Mahapatra, partner at S&R Associate. “It is entirely at the discretion of the creditors to offer any concessions. JSW may ultimately need to appeal to the NCLAT and Supreme Court for relief.”