Govt. makes Last ditch efforts to save Voda-Idea

by Harish Gupta, National Editor, Lokmat Group

Govt. makes Last ditch efforts to save Voda-Idea

Harish Gupta

New Delhi, Feb 17

Efforts at the highest level in the government are being made to convince the Vodafone-Idea telecom company not to declare bankruptcy before the NCLT.

Vodafone-Idea has made it clear it is unable cough up Rs 53000 crores old dues of AGR and can pay only in 15 to 20 equal installments. Accordingly, it deposited Rs 2500 crores as first tranche. The Bharti Airtel owes Rs 35000 crores and willing pay in installments running into ten year without penalty & interest. It deposited Rs 10000 crores. The Tata Group has also made part payment of over Rs 2,190 crore to the telecom department towards statutory dues.

The government is making serious efforts to save the sector which is facing huge financial crisis. The Prime Minister, Narendra Modi had summoned the Telecom Minister Ravi Shankar Prasad to update himself of the consequences of a British telecom company winding up its operations in view of huge liability slapped at the company. Prasad briefed the PM last week. Unconfirmed reports also suggest that Prasad paid a courtesy call on Justice Arun Mishra on Sunday last who headed the Supreme Court bench which had strongly rebuked temecom companies for not paying dues running into over Rs one lakh crores. Both had also bumped into each other at the marriage reception of son of late Arun Jaitley on Saturday last. What transpired between them is not known.

But Vodafone-Idea has made it clear that if the SC doesn't grant relief on March 17, it will knock at the doors of National Company Law Tribunal (NCLT) and go for insolvency..

The operations of Vodafone-Idea had been taken over by the Aditya Birla group's Idea and holds 45% equity. But the company says it has no monies to pay and would prefer to shut shop. Aditya Birla was in the city last week and held prolonged parleys with his legal team headed by noted lawyer & former Attorney General of India Mukul Rohtagi.

Ends

Fly on the Wall : Modi brings Chinese Acupuncture to India

by Harish Gupta, National Editor, Lokmat Group

Modi brings Chinese Acupuncture to India

Prime Minister Modi's love for China is growing faster than expected after the unprecedented and historic meet at Wuhan between President Xi and Modi. In a major decision, the Modi Government cleared the Chinese therapy –Acupuncture – to be taught and practiced officially in India. If the Chinese can practice Yoga why can't Indian take advantage of the Chinese medical science, goes the argument. The Indian Council of Medical Research (ICMR), after months of discussions and studies, has given its consent that the Acupuncture can be taught and practiced. A full-fledged degree course has been cleared and soon one may find acupuncture Hospital and clinics. Though a couple of state governments had allowed Acupuncture to be practiced. But it was never recognized by the Government of India. The file moved before Modi's visit to China and after confabulations, it has now been cleared. Acupuncture will be an Independent therapy like other forms of treatment. It will be five year degree course. The move was opposed by Yoga and Ayurveda practitioners tooth and nail. They suggested that it be made part of the Naturopathy since its like Acupressure. However, the ICMR expert committee felt that its an intrusive technique and different from the acupressure.

Dalit Out-reach given quiet burial

Prime Minister Modi's pet project of “Dalit Out-reach” has been given quiet burial. The PM wanted that BJP Mps and top leaders and even workers should interact with the Dalits, go to their homes, mingle and have dinners/lunches at their homes. The idea was to bring them closer to the party. The program was launched with big fanfare after serious backlash from the Dalit community who were attacked by the activists considered close to the BJP. But the Dalit Out-reach program made headlines in newspapers and juicy TV stories of a different kind. Sensing that it is proving counter-productive and coming under criticism, it has now been decided toi shelve for some time. Even the RSS chief Mohan Bhagwat suggested that Dalits be invited for dinner/interaction rather than people going to their houses who themselves have meagre means. It is learnt that the program has been given a burial.

How P K Sinha’s extension opened new possibilities

The one year extension to Cabinet Secretary P K Sinha has opened new possibilities for IAS officers who were two notches down the ladder in seniority. By the time Sinha completes his four year extended tenure, the entire 1980 batch of IAS officers would retire including K D Tripathy, Rita Tiwetia and even Hasmukh Adhia. Similarly, some of the 1981 batch officers, too, would attain superannuation in January and March next year. Prominent among them are Rajiv Nayan Choubey and Rakesh Srivastava. This will open immense possibilities for the 1982 batch IAS officers to be new Cabinet secretary post Lok Sabha polls 2019. Irrespective of who wins the 2019 Lok Sabha polls, the officers for such coveted posts are selected on merit. P K Sinha was no Modi-Bhakt and had almost given up the hope when the call came from PMO that he had been selected. And he will be Cabinet Secretary for four years.

It transpires that Cabinet Secretary will be for the 1982 batch that include Union Home Secretary Rajiv Gauba and Telecom Secretary Ms. Aruna Sundararajan. Gauba, by virtue of topping the merit list of the batch, will be best positioned to get the job. Of course, everything will depend on NaMo’s fortunes in the next General Election. For Hasmukh Adhia, there are many possibilities after November 2 when he retires. Either he will continue for extended term of one more year in the Finance Ministry after superannuating or may move to the PMO.

NCLT new power center

If you thought Supreme Court is the biggest grosser place for senior advocates who charge astronomical fee from clients, you may be in for some surprise. It transpires that National Company Law Tribunal (NCLT) which came into being on June 1, 2016 is the most crowded place. Be it lawyers, businessmen, professionals, companies, advisers all are making a bee line for the big mega bucks. There are around 600 companies which are up for the grab under the Insolvency and Bankruptcy Code (IBC) through a cumbersome process of bidding. These 600 odd-companies have NPAs of almost Rs 10 lakh crores of the banks. Now the banks have initiated the process of recovering their monies through the NCLT. In the first phase, 12 major companies involving Rs 2 lakh crores are to be settled within the next 60 days. The deadline for these 12 companies was 270 days which is now coming to an end. Interestingly, the lender banks are taking a haircut of as much as 75% of loan amount. Obviously, the buyers are surely making a killing. The big money is on the table and hence the big line up. The lawyers and Insolvency Professionals are making a killing, sources say and almost all senior counsel preferring to be at the NCLT building rather than at the SC.

Sword hangs over contractual employees in Prasar Bharati

After the Information & Broadcasting Ministry sent a missive early this year suggesting that Prasar Bharati stop engaging consultants on contract and also not grant extension/ renewal to them, it created a flutter. The Prasar Bharati has more than one thousand contractual employees on its rolls. The number in Doordarshan and Prasar Bharati as on 31st January, 2018 was as high as 336 and 885 respectively. It had been alleged that consultants are hired in Prasar Bharati at whims & fences without assessment of need, formal approval or selection by transparent manner with reference to a set of qualification, skills and experience. The ministry pointed out in its letter that the engagement was without ‘assessment of need, the formal approval or selection by a transparent manner with reference to a set of qualifications, skills and experience’. Though the ministry made it clear that it is not issuing a directive to Prasar Bharati to terminate the services of the contractual employees. But asserted that such contractual hiring contravenes the order of Department of Expenditure.

A TOUGH ACT TO FOLLOW

by Harish Gupta, National Editor, Lokmat Group

In Britain, the law to register a joint stock company, instead of waiting for a Royal charter, was enacted in 1844. The same year saw the Joint Stock Companies Winding-up Act that could bring a company to an end and liquidate the assets. 

India inherited so much of its financial processes from its colonial masters yet it remained a laggard in the handling of failed businesses, thus crippling the banks’ resolve to find new borrowers. Sadly, having an economist prime minister trained in Britain didn’t help much. In 2014, India’s toxic loans stood at Rs 13 lakh crore ($195 billion), or a good $20 billion more than the GDP of New Zealand. The government of Dr Manmohan Singh collapsed under a cloud of controversy about sweetheart deals in licences for natural resources, and the consequent ruining of banks. 

This is the background to Prime Minister Narendra Modi’s daring Insolvency and Bankruptcy Code 2016 (IBC) which ought to have come a couple of decades earlier—but better late than never. It is the first step in clearing the mess in which the economy is stuck, in which 240 of the top 500 borrowers belong to the stressed or Elevated Risk of Refinance (ERR) categories. These 240 entities, in their turn, hold about 42 per cent of the total outstanding debt of Rs 28.1 lakh crore. Rather than criticising the Prime Minister for “going slow” on reform, it is time his critics asked if the economy could be back in motion without unclogging the money pipes to and from the banks. 

However, the IBC architecture is complex. It requires armies of Insolvency Professionals (IP) National Company Law Tribunal (NCLT) and the regulator, the Insolvency and Bankruptcy Board of India (IBBI). These professionals will be directed to takeover a troubled company and run its affairs with as much authority as its CEO. And they will of course remain in consultation with a Committee of Creditors. But it is the IP who has to decide the way forward—with either a saving formula (“resolution”), or liquidation. It is different from the existing (and ineffective) business rescue or winding-up procedures, like BIFR and SICA. What is lacking in them is the speed element, which puts IBC in a different league. After being assigned by IBBI, the Insolvency Professional must send his report within 180 days, with an extension of 90 days if the creditors have no objection. But that must lead to the final solution. Its novelty is charmingly spectacular in a city like Mumbai where the pre-Independence textile mills, all falling irretrievably sick in the Sixties, took almost half-a-century to let their creditors sell off the land for residential buildings, offices and shopping malls. 

Led from the front by the Prime Minister, his administration’s urgency to clean up the credit market is evident from the beginning. Last week itself, the Reserve Bank of India, with prodding from PMO, sent a list of 12 stressed accounts to bankers for urgent resolution through IBC. The holders of these ‘dirty dozen’ accounts, with names as familiar as Jyoti Structures, Monnet Ispat, Bhushan Steel and Essar Steel, account for 25 per cent of the current gross Non-Performing Assets (NPA). In India, as in Britain, the process of insolvency resolution has historically been biased on rescue. But, with a rigid time line for resolution or liquidation, IBC leaves no room for dodgy promoters to keep dawdling over airy-fairy rescue plans. In a way, it wouldn’t have allowed liquor baron Vijay Mallya to spend years in India on the excuse of trying to ‘save’ his bankrupt KingFisher airline, and then flee to England. 

The IBC is superior to anything similar in existence in the past. It exhibits a clear understanding of the real-life situations prevailing for asset quality to deteriorate in stages, from doubtful to outright bad. The PSU banks, host to most of the stressed assets, are manned by a crop of cautious bankers who’d give the difficult borrower one more chance before reporting his account to RBI as an NPA. Such extreme step also involves a personal risk. Sniffing a banker-client corrupt linkage, the CBI may knock at the very banker’s door one day. Under the new IBC, however, criminal proceedings are not permitted to interfere with the resolution of the existential problems of an insolvent company. This should give bankers the spirit to report a loan that doesn’t seem right before it gets rotting. 

Still, what is not clear yet is the government’s readiness with the IBC architecture. While IBBI, the regulator, may develop the required personnel and skill sets with time, the NCLT will have a tough time. Its mandate is to hear cases earlier dealt with by the Company Law Board (CLB), in addition to the new IBC cases. In March 2015, the CLB had 4,200 pending cases. All this will now go to NCLT, plus 4,000 IBC cases annually. The latter number may multiply with old BIFR and Debt Recovery Tribunal (DRT) being channeled to NCLT. This may raise workload on the NCLT benches quite sharply, with its solution being large scale fresh recruitment of NCLT judges, many of whom are required to be technically knowledgeable. 

The Indian business professionals—executives, shareholders, lawyers, finance experts—have a mindset coloured by the past culture of being reckless with bank loans. It led to the joke of a borrower visiting his banker in a rickety Maruti 800 to negotiate a loan, but, after defaulting, returning to the bank to restructure the debt, but in a Mercedes this time. One hopes Modi’s IBC will restore parity between the size of the debt and the length of the defaulter’s car.