The curious case of Era Infra

Era Infra was one of the 12 large loan default cases referred by the Reserve Bank of India to the National Company Law Tribunal (NCLT) for resolution under the then newly enforced Insolvency and Bankruptcy Code (IBC) in 2017. It has been three years since then, and of the 12 cases, 10 have seen closures – eight of them getting resolved and two going into liquidation.

Of the two cases which are yet to see closure are Amtek Auto and Era Infra Engineering Ltd. Amtek Auto had seen a successful resolution and was even bought by UK-based Liberty House Group.  But Liberty failed to make the promised payments to creditors and Amtek Auto was readmitted for insolvency proceeding. The NCLT approved the resolution plan of Deccan Value Investor’s Rs 2,700 crore bid for Amtek Auto on 10 July 2020.

The trials and tribulations of Era Infra case

Meanwhile, it is the Era Infra Engineering which has not seen any kind of closure even after more than three years. Era infra, against which insolvency proceeding is undergoing, owes Rs 16,832 crore to financial creditors and Rs 777 crore to operational creditors.

It was on 12 April 2017 that the NCLT for the first time admitted the Era Infrastructure Engineering Ltd case for initiating insolvency proceedings on the application of Prideco Commercial project, an operational creditor.

But ever since, it has been stuck in one or another problem.

On 3 May 2017, the National Company Law Appellate Tribunal (NCLAT) set aside NCLT’s order initiating insolvency proceedings on the ground that the operation creditor did not issue the corporate debtor a demand notice of unpaid dues as required under Section 8 of IBC.

The NCLT’s order initiating insolvency proceeding against Era Infra was, thus, dismissed by the NCLAT on the grounds that operational creditor’s application was incomplete.

Later that year in September, Union Bank of India further initiated the process to start insolvency proceedings against Era Infra. However, Era Infra thwarted this attempt by arguing that the NCLT cannot initiate insolvency proceedings against it as several winding up petitions against the company was pending with Delhi High Court, and that it would be a conflict of jurisdiction between the HC and the NCLT.

The NCLT then referred the case a special bench to address the issue of conflict of jurisdiction between HC and NCLT. In February 2018, the special bench passed an order saying that there is no bar on the NCLT to trigger an insolvency proceeding if a winding up proceeding is pending and unless official liquidator has been appointed and winding up order has been passed.

So after a lot of wobble and delays, the NCLT finally admitted the insolvency application of Union Bank of India against Era Infra on 8 May 2018, almost a year after it was referred to it by the RBI.

But things refused to move smoothly as far as Era Infra’s insolvency case is concerned. It hit another wall when a dispute erupted later that year between the resolution professional and ICICI Bank over the former’s refusal to admit the bank’s claims pertaining to a loan purchase agreement between the bank and Era Infra. The resolution professional refused to admit it as financial debt.

The NCLT in December 2018 observed that the ICICI loan of Rs 700 crore to Era Infra qualifies as financial debt, and asked the resolution professional to admit ICICI Bank’s claim and revise the list of financial creditors.

But once ICICI got a favourable decision with NCLT justifying its Rs 700 crore loan as financial debt, the bank went on and filed an application under Section 7 of the IBC to trigger a fresh insolvency proceeding against Era Infra, a request dismissed by the NCLT in May 2019.

The next hurdle came from the Commercial Tax Department, Bilaspur, Chhattisgarh. The Resolution Professional realized that the Chhattissgarh Commercial Tax Department had by an order dated 16 March 2017 frozen three bank accounts of Era Infra and the freeze continued despite initiation of Insolvency proceedings against the company. The resolution professional petitioned the NCLT against the freeze and got a favourable decision in June 2019.

In the meantime, the courts gave the RP a 215-day extension for completing the process given it has been mired in one dispute after another.

And then came Steel Authority of India Limited (SAIL) plea asking for modification of the adjudicating authority’s May 2017 order of initiating insolvency proceedings and enable the arbitral tribunal to adjudicate the claims and counter-claims of the respondent company and the applicant. That plea was dismissed by NCLT.

In between all these, resolution professional Rajiv Chakraborty received two resolution plans one apparently from an ARC. Even as these plans were being discussed by the CoC, the resolution professional continued to its firefight as more hurdles came up.

NIT, Tiruchirapalli moved against the company for not co-operating in giving measurement of the work done. Era Infra had built the hostel complex of the NIT. Then NTPC filed a plea at NCLT seeking admissions of its claims, which the NCLT rejects in March 2020.

It also had to get into a legal tussle with the Enforcement Directorate, which as attached some properties in money laundering case. In June this year, the NCLT ordered lifting of the attachment order based on the fact that UCO Bank, on whose complaints ED had attached the properties, has already filed claims with the resolution professional.

It now remains to be seen when we finally see a closure in the case.

Fate of 12 large NPA Cases

Name	Claims Admitted (Rs cr)	Realised (Rs Cr)	% realisation	Successful Bidder
Electrosteel	13175	5320	40.38	Vedanta
Bhushan Steel	56022	35571	63.5	Bamnipal Steel Ltd
Monnet Ispat & Energy	11015	2892	26.26	Consortium of JSW and Energy Limited AION Investments Pvt. Ltd.
Essar Steel	49473	41018	82.91	Arcelor Mittal India Limited India Pvt. Ltd.
Alok Industries	29523	5052	17.11	Reliance Industries Ltd Limited JM Financial Asset Reconstruction Company Ltd, JMFARC – March 2018 – Trust
Jyoti Structures	7365	3691	50.12	Group of HNIs led by Limited Mr. Sharad Sanghi
Bhushan Power & Steel	47158	19350	41.03	JSW Ltd.
Jaypee Infratech	23176	23223	100.2	NBCC
Lanco Infratech	Under Liquidation
ABG Shipyar	Under Liquidation
Amtek Auto	NCLT approves resolution plan
Era Infra	Under CIRP