NCLT order to revalue Acil assets raises fears of resolution delays

Mumbai: A two-judge bench of the National Company Law Tribunal (NCLT) in Delhi has sought revaluation of assets in a more than three-year old case involving auto components maker Acil Ltd despite an overwhelming number of creditors approving it, raising concerns of judicial overreach in cases that are being settled close to the liquidation value.

Bankers are worried that increasing scrutiny by the government and the media is pushing the NCLT to be overly cautious in approving transactions, leading to unnecessary delays that ultimately destroy the recovery value.


“This trend is now very much visible especially after the Videocon case where the appellate tribunal stayed the approval by NCLT despite creditors overwhelming voting in favour of the resolution process. These things are undermining the bankruptcy process and will be detrimental to the recovery of bad loans,” a senior bank executive said. He was referring to Vedanta group’s ₹2,962 crore offer for Videocon Industries, which was approved by 95% of the creditors but was stayed by the National Company Law Appellate Tribunal because the 4.15% recovery was considered too less for the admitted claims of ₹64,838.63 crore.

In the latest case, creditors had voted in favour of Ramkrishna Forgings’ taking over Acil at ₹129.75 cr, translating into a 94% haircut to the ₹1,762 crore of dues from the company last year. However, instead of giving its okay a two-judge bench has raised doubts over the fair value calculated by creditors.

In an order made public earlier this month, a two-judge bench of Bhaskara Pantalu Mohan and Hemant Kumar Sarangi expressed doubts over the ₹130.50-crore fair value ascribed to assets and asked for a revaluation.

“This bench, after having seen the figures mentioned by the resolution professional, is not convinced that the fair value of the assets have been projected in the proper manner,” the bench said.

“We order the revaluation of the assets of the company by the experts under the supervision of the official liquidator, Ministry of Corporate Affairs incharge of this particular area under whose jurisdiction the company is situated,” the bench said.

Bankers are now in two minds whether to appeal this order or allow the re-evaluation of the assets.

“If we appeal this order it will be as if we want to sell at a lower value. But the courts must understand that these are distressed assets we are dealing with where time value of money is most important. If we find a better value we will sell it but a rupee earned today is more precious than two rupees, which may never come three years down the line,” the senior bank executive quoted earlier said.

Bankers fear such judicial overreaches could become the norm and destroy a resolution process that already has been crippled by delays.

The NCLT’s order is particularly difficult for bankers in this case because in April last year Ramkrishna Forgings after being declared the winning bidder had sought renegotiations of its bid citing demand disruptions caused by the Covid-19 and the lockdown. Bankers had then challenged the company in court following which the company agreed to honour its commitment.

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