In this edition, we bring two extensive researches on the NCLT processes: the first one reveals how companies with high projected revenues are conspiratorially pushed into the Corporate Insolvency Resolution Process (CIRP) while the second details the implementation of the IBC status in the real estate sector and its damaging impact on homebuyers.
ArcelorMittal’s acquisition of Odisha Slurry Pipeline Infrastructure Ltd (OSPIL) through the NCLT process raises many questions about the role of the Resolution Professional (RP), whose actions pushed OSPIL into insolvency proceedings. OSPIL, a pipeline company had agreements with Essar Steel India Ltd (ESIL). The latter was using OSIL pipeline for transportation of iron-ore from its mines to pellet plant at Paradeep. It was bound by agreement to pay usage charges to the tune of Rs 600-720 crore annually. The agreement was for a period of twenty years. Of such importance was this agreement that it was factored in as a pre-eminent proposition in valuations of OSPIL assets and for attracting investments.
However, after making some initial payments, ESIL stopped making payments to OSIL, and itself was admitted into the CIRP process as a ‘going concern’. To maintain this status, the RP continued to pay operational creditors barring OSPIL, thus running it to the ground. What was the role of lenders? What were the details of agreements, cancellation deeds, sale/restructuring amounts? Under CIRP, ArcelorMittal acquired this asset for Rs 2,360 crore; it did not pay outstanding usage charges of Rs 2,604 crore? Given its projected revenues and importance for transportation, was OSPIL intentionally made sick and if so, who were responsible for it?
The second research shows the appalling state of the real estate sector. No data is available in the public domain. The research did a deep collation from diverse sources and fora of relevant information and formulated its analysis based on it.
Time-bound disposals under both RERA Act, and IBC exist only on paper. Pendency is high and in general, (other sectors included) haircuts as steep as 70 per cent have been taken by creditors. The research presents CIRP status of 47 real estate companies.
