Union Bank of India moves NCLT against Gammon

Union Bank of India has approached the dedicated bankruptcy court against Gammon India Ltd for a default of about Rs. 315 crore as financial woes mount on the infrastructure and engineering company. Mumbai-based Gammon India had failed to repay a term loan and interest, totalling Rs. 315 crore, to the state-run bank.

According to the bank, the infrastructure company first defaulted in October 2015. Subsequently, the lenders had initiated various methods to recover the dues, including Corporate Debt Restructuring (CDR) and Strategic Debt Restructuring (SDR).

BSE-listed Gammon India owes around Rs. 7,000 crore to its lenders, including Union Bank of India.

The company incurred consolidated net loss of Rs. 1,153.77 crore on net sales of Rs. 1667.62 crore, according to its FY17 results.

The Mumbai bench of the National Company Law Tribunal (NCLT) presided by M.K. Shrawat will hear the case on 27 September.

“The Term Loan Consortium Agreement (TLCA) was executed between Gammon India Ltd and United Bank of India as the Lead Bank and Union Bank of India on January 28, 2013,” said the lender in its petition filed in the tribunal, which was reviewed by Mint.

Gammon’s troubles began after February 2018 when the Reserve Bank of India (RBI) put an end to restructuring of loans outside bankruptcy courts and set tight deadlines for companies that are just slipping into default. It said all cases above ₹ 2,000 crore have to be settled within 180 days, failing which they have to be taken to the bankruptcy courts.

Emailed queries to Gammon, as well as Union Bank of India, remained unanswered till press time.

When contacted, Nishit Dhruva, managing partner of law firm MDP and Partners, and Prakash Shinde, partner of MDP and Partners, who is representing the bank in the dispute, confirmed the development, but refused to divulge further details since the matter is subjudice.

“It is a challenge for the lenders to find buyers for infrastructure or EPC companies as a whole, especially if there are onerous contracts in the company. However, they will get buyers for specific profitable projects of these companies,” said Ashish Chhawchharia, partner and head of restructuring services, Grant Thornton. “In most cases, the companies have little or no tangible assets and lenders’ sacrifice may be high for such companies.”

Founded in 1922 by John C. Gammon, the company was instrumental in building many landmark structures in the country, including the iconic ‘Gateway of India’, the country’s first cable-stayed bridge at Akkar in Sikkim, Hebbal flyover at Bengaluru and also India’s longest Span Cantilever bridge in Meghalaya.