In a move that has caused a stir among financial institutions, ICICI Bank (NS: ICBK ) has unilaterally invoked the pledged shares of Jaiprakash Associates (NS: JAIA ) Ltd (JAL) to settle part of its outstanding loans. This action has taken the other members of a 32-bank consortium by surprise, leading them to seek explanations from ICICI Bank.
The consortium, which JAL owes a staggering ₹29,272 crore (INR100 crore = approx. USD12 million), is still awaiting a resolution to the ongoing financial debacle involving the conglomerate. ICICI Bank's recent pact on Tuesday to transfer 18.93 crore pledged shares for debt reduction was unexpected and raised concerns among the other lenders.
JAL's financial troubles have been escalating with overdue loans reported at ₹4,258 crore as of October. The company has proposed a debt reduction plan that would see it cut its debt by ₹18,682 crore through the transfer of some real estate assets to a Special Purpose Vehicle, contingent on approval from the National Company Law Tribunal (NCLT).
The Reserve Bank of India (RBI) had initiated insolvency proceedings against JAL in 2017, and ICICI Bank filed an insolvency petition the following year before the Allahabad Bench of the NCLT. Despite this petition still pending admission, ICICI Bank has proceeded with its decision to invoke the pledged shares.
Legal challenges have been an ongoing concern for JAL, including the cancellation of land allotment by Yamuna Expressway Industrial Development Authority (YEIDA) over payment default in December 21, 2019, and the Allahabad High Court's rejection in July 2023 of JAL's proposal to sell land to clear these dues.
Additionally, Dalmia Bharat's attempt to acquire JAL's cement assets has faced legal hurdles due to a shareholder dispute. The NCLT has ordered a freeze on JAL's shareholding in Jaypee Bhilai Cement, which is a joint venture with Steel Authority of India Limited (NS: SAIL ).
ICICI is the principal creditor with ₹3,000 crore in outstanding loans to JAL, followed by IDBI Bank (NS: IDBI ) with an exposure of ₹1,836 crore. The recent developments have brought into question ICICI's authority to sell pledged shares without prior discussion in the Joint Lenders' Forum (JLF), highlighting tensions within the consortium as they navigate through JAL's complex debt resolution process.
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