IL&FS to RKM Power, six stressed power projects move courts to buy time

To avoid insolvency proceedings, six stressed power projects, which claim to be in the last lap of resolution, have moved courts seeking extension of the September 11 deadline.

While RKM Power and IL&FS have approached Chennai High Court, Essar (Mahan), GMR (Raikheda), RattanIndia for its Nashik and Amravati projects, and KSK Mahanadi have submitted petitions in the Allahabad HC. These assets have said documentation work and final touches to regulations governing their resolution plans would need time and, hence, they are looking for interim relief. 

According to the February 12 circular of the Reserve Bank of India (RBI) under the Insolvency and Bankruptcy Code (IBC), it was mandated to treat one-day payment failure as a default and initiate insolvency proceedings. The RBI allowed 180 days for the same, else the asset is to be submitted to the National Company Law Tribunal (NCLT). 

Sources said State Bank of India and Punjab National Bank had separately written to the RBI seeking more time for getting consensus of other lenders on a resolution plan for the stressed power assets. “Banks had also written to the Indian Banks’ Association (IBA). The IBA, too, requested the RBI for an extension, but the RBI has been silent. Most of the stressed assets will not be taken to the NCLT,” a public sector banker said. 

With the RBI maintaining silence, sources said, the power firms decided to move courts. A recent judgment by the Allahabad HC denying any relief to power producers against the February 12 circular mentioned that any firm could plead in personal capacity for relief. 

 

KNOCKING HC DOORS

  • While RKM Power and IL&FS have approached Chennai High Court, Essar (Mahan), GMR (Raikheda), Rattan India, and KSK Mahanadi have moved the Allahabad HC 

  • The petitions argue that the assets need more time for documentation and final touches to regulations governing their resolution plan 

In the case of GMR Raikheda and KSK Mahanadi, the bids are in final stages; Essar has petitioned on grounds of a committee finalising relief for its unit. A high-powered committee (HPC) set up by the Gujarat HC for analysing cost pass through of imported coal price in the final power price. The panel has submitted a report to Gujarat for a final decision. It has also mentioned that the high-level empowered committee (HLEC), formed under the Cabinet Secretary, is looking at resolution for stress in the sector.

“In this view of the matter, it would not be just and proper for lenders of Essar Power Gujarat to file any application for initiating insolvency resolution process against Essar Power Gujarat till such time the HLEC and the HPC submit their reports and a decision is taken by the power ministry and/or Gujarat,” said the plea filed by Essar in Allahabad HC, reviewed by Business Standard.

GMR Raikheda (1,370 Mw), KSK Mahanadi (2,400 Mw), which were put on sale by Power Finance Corporation, did find buyers. Their bids were rejected by the lenders as they found them to be too low. The project owners, however, are hopeful that a bid can be finalised if a time extension is given. Sources in PFC said these two projects could land in NCLT as no resolution has been achieved.