Neeraj Singhal, promoter and vice-chairman of Bhushan Steel, was arrested by the Central Bureau of Investigation (CBI) in August 2014. Singhal’s arrest came days after the agency had arrested S K Jain, the then chairman and managing director of Syndicate Bank on bribery charges.
Soon after, the Bhushan Steel account was referred to a joint lenders’ forum. It was part of the Reserve Bank of India’s (RBI) asset quality review in 2015 before being declared a non-performing asset (NPA) by the end of 2015-16. Three years later, Bhushan Steel is one of the 12 companies recommended for insolvency proceedings by the RBI.
Another complicated case is that of Era Infra Engineering, against which as many as 18 winding-up pleas are pending in courts. The shares of this company were suspended by the bourses over a year ago, implying its troubles are much older.
Essar Steel first defaulted on debt repayment in 1999. It went into a corporate debt restructuring in 2002 and came out of it in 2006. Its shares were delisted in 2007, but it still emerged with a loan book of Rs 37,000 crore. In 2014, Essar Steel’s Canadian acquisition Algoma filed for bankruptcy, two years later Essar Steel Minnesota filed for Chapter 11.
Young defaults versus critically ill
An insolvency expert whose firm is advising the resolution process of one of the large accounts, said, “Each case has to be taken on its merits. While some accounts may be difficult, others might be eminently suitable.”
There is a view in the industry that the law is more suited for “young defaults”, when companies are in a better state of health. When insolvency is taken up as the last option, it may not be effective.