If the surprise offer fructifies into a deal, banks could recover nearly 65% of their loans to Vidarbha.
However, the offer from Mumbai-based CFM ARC, an asset reconstruction company, is conditional. It offered upfront payment to the consortium leader Axis Bank only if all lenders agreed to sell their loans.
The ARC’s offer comes within months of a landmark Supreme Court order that rejected a petition by Axis Bank to admit the company for insolvency.
The company has ₹1,550.5 crore in loans as on March 31, 2022. These include ₹1,191 crore principal and ₹359 crore as interest overdue, according to the disclosures made by Reliance Power, which holds 74% of the company.
Rosa Power Supply Company owns the remaining 24% of the company that operates two coal power plants of 300 MW each at Nagpur in Maharashtra.
Axis Bank and CFM ARC did not respond to ET’s request for comment.
State Bank of India, Bank of Baroda, Canara Bank, Punjab National Bank and Bank of Maharashtra are among other lenders.
CFM ARC, which recently came under the glare of investigative agencies, acquired several large ticket loans in the last two years. It acquired MSP Metallics for ₹470 crore and later acquired JBF Industries from lenders for ₹825 crore. In both cases, it offered upfront cash. Lately, it was declared the winning bidder for State Bank of India’s ₹341 crore loans of Atibir Industries at an uncontested Swiss auction despite the steelmaker opposing the auction process at the Kolkata High Court.
While the offer has rekindled hopes of recovery, bankers are keeping their fingers crossed, given that the companies have seen several twists and turns in the past, one of the lenders said.
Justices Indira Banerjee and JK Maheshwari of the Supreme Court dismissed Axis Bank’s petition to admit Vidarbha Industries for insolvency proceedings, stating that the Insolvency and Bankruptcy Code (IBC) gives the adjudicating authority discretionary power to admit or reject admission despite a default. It further stated that the bankruptcy court should have considered extraneous factors before admitting a company to insolvency.
The Supreme Court also said that the tribunal should have factored that the power producer had won an award of ₹1,730 crore from the Appellate Tribunal of Electricity which exceeded the ₹553 crore claimed by Axis Bank. In its petition, Vidarbha contended that it could not pay the lender because the award was challenged by the Maharashtra Electricity Regulatory Commission and was pending before the apex court.
Following the apex court’s order, several lower courts dismissed petitions from creditors to admit defaulting companies to insolvency. The most prominent case was GTL Infrastructure.
