Bad loans: Cases filed against Essar Steel, Monnet Ispat
MUMBAI: Essar Steel Ltd and Monnet Ispat and Energy Ltd have become the first firms — among the 12 big bad loan cases identified by the Reserve Bank of India —where bankruptcy proceedings have been filed on Tuesday, said people aware of the matter.
In Essar’s cases, the filing was a bit unexpected, since it is StandardChartered Bank, an unsecured creditor and not the lead banker, State Bank of India, which filed the suit. In Monnet’s case, SBI, which led the lending consortium, filed the case, these people said.
StandardChartered Bank and SBI declined comment. An Essar spokesperson said he wasn’t aware of the matter, while Monnet’s chairman and managing director Sandeep Jajodia didn’t respond to calls and text messages seeking comment.
At the end of March 2017, Monnet Ispat had debt of ₹10,333 crore. For Essar Steel, debt at the end of March 2016 was ₹31,211 crore. These are two among the 12 cases, which account for a quarter of the banking system’s bad loans, where RBI wanted banks to quickly initiate the bankruptcy proceedings.
Since the RBI notification, joint lending forums’ of banks had met and approved taking these defaulters to the National Company Law Tribunal.
In the case of StandardChartered, as it is was an unsecured creditor of Essar, it was not a part of the joint lenders’ forum, said the people cited earlier.
“We are not sure why StanChartered decided to jump the gun when the JLF had decided to take Essar to court,” said one of the persons cited earlier.
StandardChartered’s exposure to Essar Steel is “limited”, this person said without specifying details.
On October 19, Bloomberg had reported that StandardChartered was one of the biggest winners from Essar Group’s deal to sell its refinery arm and related facilities to a group of investors including Rosneft PJSC at a $13 billion enterprise value. Essar was to use part of the proceeds to pay off creditors. This deal was stuck pending approval from local banks and the Life Insurance Corp of India. On Friday, Press Trust of India reported that a consortium of 23 lenders led by State Bank of India (SBI) on Friday cleared the sale, which was expected to close in July.