NCLT initiates insolvency against SEL, first company under RBI’s second list

The Insolvency Petition filed against SEL Manufacturing, the first company under the Reserve Bank of India’s (RBI) second list to have been referred to the National Company Law Tribunal (NCLT), has now been admitted..SBI referred the case to Chandigarh Bench of the NCLT on October 12, 2017 under Section 7 of the Insolvency and Bankruptcy Code, 2016, (IBC) owing to a debt amounting to ₹ 1,136 crore..SEL, a company which was under the Corporate Debt Restructuring (CDR) mechanism, heavily contested the application on several grounds. Apart from defending itself by deflecting the petition on procedural grounds, SEL blamed the tight liquidity policy of banks for its misfortunes..SEL said that the term “default” has to be interpreted differently from the term “loan/dues”. It submitted that SBI (and bank consortium) itself failed to provide the full amount required to be disbursed as per the financial plan due to its own failure to fulfil certain financial criteria specified by RBI. And therefore, SBI shouldn’t be allowed to take benefit of its own wrong and allege any default on the part of SEL..SEL further contended that the consortium of banks had sanctioned a term loan of ₹2248.70 crores but the amount disbursed initially was only ₹1403.36 crores..It is also averred that the consortium sanctioned working capital of approximately ₹627.70 crores only up to September, 2013 and failed to provide balance working capital loan of ₹794.27 crores..SEL further claimed that it was eligible for TUFS interest subsidy of 5% for all the term loans and thus the effective rate of interest for the company was 3.25% to 6.50%. Accordingly, SEL’s business plan was built around this effective rate of interest. Under the policy, the claim of interest subsidy was to be made with the Ministry of Corporate Affairs by all the Banks..However in many cases, the banks, allegedly, did not file the claims with the concerned authorities or the same were filed after a considerable delay. The loss of TUFS subsidy has been calculated to the tune of ₹191.64 crores by SEL..However, dismissing all arguments of SEL, the NCLT ruled, that.“ We find that it is not the case of the Corporate Debtor that the subsidy has been received by the petitioner but not credited to its account. The Corporate Debtor is alleging delay in filing of claims of interest subsidy. This by itself, cannot mean that there is a counter claim of the Corporate Debtor.. As regards non-provision of further working capital, the same cannot be said to be in the nature of a counter claim. Therefore, the contention of the Corporate Debtor cannot be accepted ”.Accordingly, the petition was admitted..Advocates Misha, Nitin Kaushal, Siddhant Kant and Tanvi Talwar represented the State Bank of India. Whereas Senior Advocate Anand Chhibbar along with Advocates Arvind Gupta, CS Chauhan and Gaurav Mankotia represented SEL..(Read the order)

NCLT initiates insolvency against SEL, first company under RBI’s second list

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