NARCL gives binding offer of Rs 600 crore for Rolta's local debt

Mumbai: The government-owned bad bank has given a binding offer to acquire the debt of Rolta India, the bankrupt military-focused software developer, said two people aware of the development.

The National Asset Reconstruction Company (NARCL) has offered ₹600 crore in a combination of cash and security receipts (SR), the people said.

"The resolution of Rolta would be very difficult given that its management has escaped insolvency thrice in the last four years," one of the persons said. For this reason, lenders would be very keen to sell the loans, the person added.

Promoted by Kamal Singh, Rolta India has an outstanding due of ₹5,712 crore with banks and senior notes (overseas borrowings) of ₹3,382 crore, as of March 31, 2022, according to a disclosure made by the company to the stock exchanges. The offer by NARCL is for domestic loans.

NARCL did not respond to a request for comment.

In 2018, Union Bank of India filed a petition with National Company Law Tribunal (NCLT) in line with the the Reserve Bank of India's February 12 circular that mandated banks to admit defaulting borrower for corporate resolution. However, in May 2019, the tribunal rejected it after Supreme Court pronounced the circular 'ultra vires'.

Subsequently, in November 2019, the tribunal admitted an application by overseas bondholders under Section 7 of the Insolvency and Bankruptcy Code (IBC). However, the Bombay High Court cancelled the admission stating that due procedures were not followed whule admitting the company.

In May 2021, the tribunal admitted the company for insolvency proceedings based on an application filed by trade creditors under Section 9 of IBC. The trade creditors were former employees of the company seeking arrears.

Rolta entered into a settlement with the employees after the company was admitted for insolvency but before the committee of creditors was formed. As per the settlement terms, the company would make payment only on approval of the withdrawal of their application by the tribunal. The NCLT rejected the withdrawal of the trade creditors in the interest of the creditors.

Subsequently, the Supreme Court overturned the NCLT's order. The apex court was of the view that a settlement between the corporate debtor and the trade creditor prior to the constitution of the committee of creditors was a justifiable ground to permit withdrawal under Section 12A of the IBC. The section gives the tribunal power to withdraw a company from insolvency proceedings.

Six overseas subsidiaries of Rolta too, are facing bankruptcy proceedings.