Reliance Naval and Engineering Ltd (RNaval), erstwhile Pipavav Shipyard Ltd, the largest drydock of India, is undergoing corporate insolvency resolution process (CIRP) for the past more than two years, or from January 2020.
Hazel Mercantile Ltd, in consortium with Swan Energy Ltd, is one of the resolution applicants (RAs) and they had filed their proposal in September 2021 without disclosing that Nikhil Merchant is non-compliant of Section 29A of IBC. The RA is Navin Jindal group company, Jindal Steel and Power Ltd.
Nikhil Merchant, MD of Swan Energy, has been a director in Navi Mumbai Smart City Infrastructure Ltd, a company promoted by Nikhil Gandhi and Bhavesh Gandhi (a non-performing, wilful defaulter under the Reserve Bank of India -RBI guidelines and, thus, ineligible to participate in CIRP process under Section 29A of Insolvency and Bankruptcy Code (IBC)) from 2015 till December 2021.
During September to December 2021, resolution professional (RP), Sudip Bhattacharya had conducted several meetings of the committee of creditors (COC) and, at no point of time, did RP bring out the fact of Mr Merchant continuing on the board of a wilful defaulter company, promoted by Mr Gandhi.
Incidentally, Pipavav Shipyard is also promoted by Mr Gandhi and Mr Merchant is ineligible and, therefore, Swan Energy is ineligible to participate under the CIRP process.
RNaval is undergoing process under the IBC and facing claims of over Rs43,587 crore from several financial creditors, including the State Bank of India (Rs1,965 crore), the Union Bank of India (Rs1,556 crore) and the IDBI Bank (Rs1,375 crore).
Similarly, Minesh Shah is a director on the board of Hazel Mercantile. Without disclosing that Mr Shah is non-compliant of Section 29A of IBC, as he was also continuing on the board of various companies of Housing Development and Infrastructure Ltd (HDIL), another wilful defaulter and with fraud red-flag, whose promoters have already been jailed. Therefore, even Hazel is ineligible to participate in CIRP process under Section 29A of IBC.
In the wisdom of a few lenders, they directed Mr Bhattacharya, the RP, to get a report from independent accountant to confirm whether the consortium of Hazel and Swan is eligible to participate under CIRP process or not.
Accordingly, the RP appointed Amit Ray & Co, chartered accountants (CA). They, in their report, have informed the RP and COC about these facts and not given any categorical finding that these two companies are eligible.
It is the RP, who in his wisdom, decided to classify and give clean chit to the consortium of Hazel & Swan as being eligible, sources told IANS.
Questions have arisen on why did the RP not bring these points immediately in the first COC held after submission of such plans. It is mandatory and an obligation on RP to undertake the strictest diligence for examining eligibility, which the RP failed.
Had the lenders in the COC not demanded examination, the said facts would have never come to light, sources told IANS.
In spite of no categorical confirmation from the independent CA's report, the RP has decided to proceed on the assumption that they are eligible.
It is shocking that at the COC meeting held on 23 February 2022, in spite of Punjab National Bank (PNB), Bank of India (BOI) and SBI with more than 25% of voting strength of COC and SBI being de facto lead or largest lender to give sufficient time to examine the proposals in details and seek their respective internal approvals, the RP summarily dismissed this request.
The question arises about why RP did not order or ask for a forensic audit for the period from 2011 to FY16, the period in which the erstwhile promoters, Nikhil Gandhi, Bhavesh Gandhi and their group company, SKIL, had siphoned off thousands of crores of rupees, which is on record, similar to what has been done by ABG promoters.
There are enquiries going on but RP has made sure that they are buried. Had this forensic audit been conducted, even the nexus with the lenders would have come out in the open, sources told IANS.
In this case, over 92% haircut is being taken by lenders. This is nothing but a deferred liquidation and similar to what has been observed by the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLT) in the matters of Shiva Industries, Twin Star (Videocon), and Aircel.
The RP has taken four extensions, i.e., till the time RP become confident (on receipt of revised resolution plans, i.e., after knowing the competition bid) that his conspiracy in league with Nikhil Merchant will be successful, he refused to give time to lenders and extend the voting schedule, sources told to IANS.
Sources said a new large-scale scam/scandal in the process of fructifying if immediate steps are not taken by COC, IBBI and all other relevant agencies. It is similar to what has now been unearthed in ABG.
Earlier in March 2015, Anil Ambani-owned Reliance Infrastructure Ltd bought a 17.66% stake in Pipavav Shipyard. Subsequently, Reliance Infrastructure launched an open offer to acquire additional shares to control 25.1% of Pipavav Shipyard. The open offer has been completed and Reliance Infrastructure now holds 36.5% equity in Pipavav Shipyard.
On 3 March 2016, Pipavav Shipyard was renamed to Reliance Defence and Engineering. Again on 6 September 2017, the company's name is changed to Reliance Naval and Engineering-RNaval.
