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non performing power plants

Is Resolving Non-Performing Power Plants a Matter of Public Interest?

The recent order of the Allahabad High Court has made it mandatory for the Banks to initiate insolvency resolution process for 34 stressed assets with a cumulative debt of INR 1.74 Trillion.

It is yet to be seen as to whether the resolution of these non-performing assets would be smooth or not. The proceedings under the Insolvency Proceedings are mired by several challenges, which would be addressed by the Adjudicating Authority in several ongoing cases. These issues revolve around the resolution of insolvency by sale to a prospective buyer, and some of the challenges are:

  • Whether a competitor could be allowed to bid for a company under insolvency and offer to buy out the promoters?
  • Whether the promoters could raise money from third parties outside the proceedings and close a deal in respect of the assets while Insolvency Resolution Professional is taking the resolution process forward?
  • Whether the acquirer is eligible regarding the law to buy the non-performing asset or not?

Upon satisfactory resolution of the issues above, the Adjudicating Authority will be able to address the issues concerning the resolution of the non-performing assets. It appears that the journey of the resolution of the assets relating to the power sector would be long and tedious. The buyers will also have to keep in mind whether the state or the central authorities are making regular payment in respect of offtake of electricity or not. Such action of the State and the Central Government would determine the viability of these assets. The resolution of these assets is not a private matter but as state government and public sector banking institutions are involved, it’s a matter of public interest.

Contributed by Mr. Aditya Tiwari, Director – Legal Vertical

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