Supreme Court of India stays Telangana High Court judgment in an insolvency case of Oil Country Tubular (OCTL)

• With a total loan outstanding of close to INR 150 crore owed to three of the large public sector banks in the country, the decision will enable timely and speedy resolution to the insolvency process pending since last four years

Hyderabad, March 18, 2021: The Supreme Court of India (“Supreme Court”) in a Special Leave Petition filed by a Prospective Resolution Applicant (PRA) through its order dated 03.03.2021, stayed the operation of the order passed by the High Court for State of Telangana, Hyderabad (“Telangana High Court”). The Telangana High Court through its order dated 16.11.2020, in a Writ Petition filed by the ex-promoter of (“OCTL Corporate Debtor”), had restrained the Committee of Creditors (CoC) of the Corporate Debtor (“CoC”) from considering any other proposal other than the One Time Settlement (“OTS”) as proposed by the ex-promoter.  

OCTL is in the business of Seamless Pipe finishing and has been shut since 2016. The Banks and the promoters have been negotiating OTS for the past 4 years, however, the promoters repeatedly failed to honor their assurances leaving the company in shambles. The total loan outstanding is close to INR 150 crore owed to three of the large public sector banks in the country- State Bank of India, Indian Overseas Bank, and Indian Bank. The inordinate delays in the Corporate Insolvency Resolution Process (CIRP) process goes against the spirt of IBC (Insolvency and Bankruptcy Code) and is further deteriorating the fundamental value of the OCTL. The Banks have been actively considering OTS of approximately INR 70 crore even though the market intelligence seems to indicate that open bidding as per CIRP could fetch a total of over INR 80 crore.  

Earlier an application was filed before the National Company Law Appellate Tribunal, New Delhi against the delay in the CIRP process, which then by its order dated 07.12.2020 directed that the CIRP of the Corporate Debtor to be carried forward in accordance with the provisions of the IBC 2016 and as per the timelines prescribed. However, National Company Law Tribunal, Hyderabad adjourned the CIRP of the Corporate Debtor in view of the order passed by the Telangana High Court restraining the CoC from considering any other proposal other than the OTS.
 
A Special Leave Petition was filed before the Supreme Court and obtained stay on the operation of the order dated 16.11.2020 passed by the Telangana High Court.

Mr. Shashank Manish, Advocate on Record for PRA, Supreme Court of India, quote – “The Supreme Court observed that there should not have been restraint on the CoC and thus stayed the operation of the order. The order of the Supreme Court should result in the timely resumption of CIRP of the Corporate Debtor and there should be a time bound resolution of insolvency process.”