Electrosteel Insolvency case: IBBI fines Electrosteel resolution professional

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From: Financial Express By: Vinay Siwach Published at: April 15, 2018
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The Insolvency and Bankruptcy Board of India (IBBI) has imposed a monetary penalty on the resolution professional (RP) of insolvent Electrosteel Steels for “failure to consider” the claim of an operational creditor, and also for “disregarding” repeated requests of the Board for a response on the complaint. Passing an order, dated April 13, the bankruptcy board imposed the penalty, which is equal to one-tenth of the total fee payable to Dhaivat Anjaria, a partner at PwC, as the IRP and the RP in the corporate insolvency resolution process of the bankrupt steel maker.

National Sales, an operational creditor of Electrosteel Steels, had submitted a complaint to the Board, seeking a direction under the norms of Insolvency and Bankruptcy Code (IBC) to Anjaria after he allegedly “failed and neglected” to consider its claim. “Failure to consider a claim not only deprives the claimant of his rights, but also deprives the potential resolution applicants to have complete information required to submit a complete resolution plan. While implementing the resolution plan, if the resolution applicant discovers a liability to a claimant which has not been factored into the plan, the resolution plan will be frustrated.”

“This failure on the part of Anjaria is serious dereliction of the duty cast on an IP under Section 23 read with Section 25(2)(e) and 29 of the Code and regulation 36 of the IBBI Regulations, 2016. This has potential to vitiate the entire CIRP and frustrate the objectives of the Code,” the Board stated in its order. “Section 220(3) of the Code envisages a penalty which can be three times the amount of loss caused or likely to have been caused to the person concerned. In this case, Anjaria ultimately admitted a claim of Rs 72,09,150. Thus, Rs 72,09,150 is the amount of loss likely to have been caused to the claimant, ignoring for a moment the potential damage to the resolution plan. Considering the fact that Anjaria is new to the insolvency profession and the claim was ultimately admitted, a penalty equal to one tenth of the total fee payable to him as IRP and RP in the CIRP of Electrosteel Steels would meet the ends of justice,” the order said.

When contacted, Anjaria declined to make any comment on this matter. National Sales’ claims fell in the category of 31 operational creditors for which claims are under ‘dispute’ in the pre-corporate insolvency resolution process. The Board, in its order, observed the resolution professional also disregarded repeated requests of the Board for a response on the complaint. “He responded to the Board only after a show-cause notice was issued to him. He made the stakeholder as well as the Board helpless,” said the April 13 order. Notably, the resolution professional had received bids from Vedanta, Edelweiss Alternative Asset Advisors, Tata Steel and Renaissance Steel in January this year. On July 21 last year, the NCLT had admitted State Bank of India’s (SBI) insolvency petition against Kolkata-based steel company. The company had been referred to the bankruptcy court under Section 7 of the IBC following a nudge from the Reserve Bank of India ( RBI ).

Anjaria submitted Vedanta’s Rs.5,320 crore resolution plan before the Kolkata bench of the National Company Law Tribunal (NCLT) on April 2 for its final disposal after the committee of creditors (CoC) selected the Anil-Agarwal promoted company as the highest bidder. Renaissance Steel is opposing the lenders’ decision that Vedanta is an eligible bidder for the insolvent steel maker. The tribunal has reserved its order on Renaissance Steel’s application, opposing the decision of the CoC. For Electrosteel, the 270-day deadline for insolvency resolution process completion will expire on April 17. As per the details on Electrosteel Steels’ website, financial creditors of the company had claimed Rs 13,581.88 crore, while the amount admitted stood at Rs 13,175.15 crore. For operational creditors, the amount claimed was Rs 1688.40 crore, while the amount admitted stood at Rs. 783.41 crore.

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