Indian Oil Corporation set to acquire assets of Mercator Petroleum
Public sector oil marketing company — Indian Oil Corporation – has emerged as the successful resolution applicant in the corporate insolvency resolution process of Mercator Petroleum after the lenders voted in favour of the former’s resolution plan.
Insolvency process against Mercator Petroleum was initiated by Halliburton Offshore Services Inc, a Cayman Islands-based company engaged in the business of providing services in the upstream oil industry, in August 2021. Mercator Petroleum, which is engaged in upstream oil industry through block ownership and project execution services, had defaulted on a payment of Rs 2.87 crore.
As per the resolution plan of Indian Oil Corporation, the PSU company will make an upfront payment of Rs 135 crore to financial creditors of Mercator Petroleum as against admitted claims of Rs 411crore from them. The corporate debtor (Mercator Petroleum) owed a total of Rs 483 crore to all creditors including financial and operational creditors.
This is probably the first time a state-owned company has acquired assets through bidding process under IBC, if one leaves NARCL’s bid for SREI Infrastructure Finance and SREI Equipment Finance.
The government has been pushing PSU firms to use IBC for not just recovery of dues but also for closure of loss-making units through voluntary liquidation process.
The acquisition of Mercator Petroleum assets by Indian Oil Corporation comes as a big milestone for IBC as it is for the first time a PSU company has acquired an asset through CIRP.
Reacting to the development, former chairman of the Insolvency and Bankruptcy Board of India (IBBI), says: “In the initial days, there was doubt whether the IBC process can be initiated against a corporate debtor which is a PSU. There was also doubt about whether a PSU can be a resolution applicant. Now it is clear. A PSU may undergo the IBC process and it may submit resolution plans, in the IBC process, as any private enterprise. It may also initiate the IBC process of any defaulting enterprise. This is both a challenge and an opportunity for each PSU.”
He further says: “For decades since independence, PSUs had a different operating environment as compared to private enterprises. Thanks to reforms, both types of entities now operate on a level playing field. The dispensation available for both types of entities is almost the same today at least under the resource allocation laws, namely, securities law, competition law, and insolvency law.”
