Alok Industries Case: SBI may not demand revote on resolution plan

Going by the recent order on Alok Industries from the National Company Law Tribunal (NCLT), it would appear State Bank of India (SBI) has no objection if the resolution plan is not put to vote again. When the plan was voted on, in April, 70% of the lenders voted for it. However, since the law at the time required a 75% majority for a plan to be approved, the plan was turned down. The order, written by the Ahmedabad bench of NCLT, noted that SBI, “being the member of CoC (committee of creditors), filed an affidavit with averment that SBI has no objection, if, resolution plan is not submitted for re-voting by the CoC again, in view of the recent amendment in the code as said above”. FE sent e-mail queries to Ajay Joshi, the resolution professional for Alok Industries, and to SBI seeking clarifications on whether the lender had said it had no objection to the revoting and the order contained a typographical error.

While the email sent to Joshi remained unanswered till the time of going to press, an SBI spokesperson said as a matter of policy, the “bank doesn’t respond on individual accounts”. Alok Industries is in the midst of a CIRP under the Insolvency and Bankruptcy Code (IBC). The tribunal said that considering the new amendment to the Insolvency and Bankruptcy Code (IBC), it is of the “considered opinion that resolution professional is legally expected to present the resolution plan of the sole resolution applicant before the CoC for a relook and for proper consideration…”. The NCLT directed the RP to consider the voting process as per the amended provisions of the Code and to submit its report along with recommendation or resolution of the CoC by June 26. RIL and JM Financial ARC had submitted a resolution plan for Alok Industries which was rejected by CoC as 30% of the votes were against the plan. However, a recent amendment to IBC has lowered the threshold to 66% for approval of a resolution plan. Following the new amendment, employees of Alok Industries and a group of operational creditors have pleaded to NCLT to accept the resolution plan, taking the amendment into account.

Alok Employees Benefit and Welfare Trust has also demanded rejection of the liquidation proposal filed by the resolution professional. The Ahmedabad bench had admitted insolvency proceedings against the textile company under IBC in July 2017. The consortium of lenders is led by State Bank of India (SBI). As per IBC, if no resolution plan is approved within the 270-day period, then the company will be liquidated. Other lenders to the company are Axis Bank, Corporation Bank, UCO Bank, Bank of Maharashtra, Life Insurance Corporation of India, Allahabad Bank, Union Bank, Dena Bank, Oriental Bank of Commerce and United Bank of India. Alok Industries owes lenders Rs 29,614 crore and reported a net loss of Rs 3,502 crore on Rs 8,326 crore in revenues in FY17. In the December quarter of FY18, its net loss stood at Rs 4,745 crore on revenues of Rs 952 crore in the same period.