Bengal food grain procurer First PSU to resolve debt under new bankruptcy law

MUMBAI/KOLKATA: West Bengal Essential Commodities Supply Corporation will possibly become the first government owned company to resolve credit disputes under the new bankruptcy law, settling Rs 360 crore loans from nine banks including State Bank of India, two people in the know said.

Dedicated bankruptcy court National Company Law Tribunal's Kolkata chapter has approved the resolution plan for loans that remained non-performing asset (NPA) in the books of all these lenders for the past five-six years, a person with the direct knowledge of the matter said.

This possibly could be a sign of things to come when many small state-run units have been in default, but lenders have been hesitant to pull the plug.

West Bengal Essential Commodities Supply Corporation ( WBECSC), the state’s special purpose vehicle to procure paddy and other food grains from farmers at fair price, has paid about Rs 186 crore as per the debt resolution exercise, marking a major success of the Insolvency and Bankruptcy Law.

Anil Goel, founder of AAA Insolvency Professionals that acted as resolution professional for WBECSC, said the resolution has benefitted all the banks as well as the company. “The settlement will also help the company to raise a fresh Rs 1,000 crore of bank loan, which can be deployed for the welfare of farmers,” he told ET.

WBECSC took the loan from a consortium of nine banks including SBI, Union Bank of India, Allahabad Bank, Uco Bank, Bank of Maharashtra, Canara Bank, Central Bank of India, Oriental Bank of Commerce, and Syndicate Bank.

A senior official at WBECSC confirmed the debt resolution. Individual banks could not be contacted immediately for comment.

The corporation had suffered a financial loss when China cancelled an iron ore exports consignment shipped for 2008 Beijing Olympics. It had to sell the iron ore as scrap and suffered a loss. Since then, it started failing to repay the debt.

National Company Law Tribunal ( NCLT) ordered corporate debt resolution proceedings against the company in May, acting upon a petition filed by Bank of Maharashtra.

The process got over within the stipulated 180 days, signalling a huge success as government-run enterprises typically need approvals at multiple levels.

Legal consultant Arun Gupta represented resolution professional AAA Insolvency at Kolkata NCLT.