R-Naval resolution bids: Nikhil Merchant’s Swan Energy ineligible under Section 29A of IBC

Pipavav Shipyard, the largest drydock in India owned by R-Naval, is currently undergoing NCLT driven debt resolution process.

Swan Energy, in consortium with Hazel Mercantile Limited, is one of the two Resolution Applicants shortlisted by the Resolution Professional of R-Naval. Swan Energy, owned by Mumbai based businessman, Nikhil Merchant owns a 76 per cent stake in the special purpose vehicle (SPV) that has bid for the shipyard.

The other resolution applicant is the Navin Jindal-led JSPL.

According to banking sources, the consortium of Swan Energy and Hazel Mercantile is ineligible under section 29A of the IBC. The Swan Energy-Hazel Mercantile consortium filed its resolution proposal in September 2021, without disclosing that Nikhil Merchant, Managing Director of Swan Energy, has been a Director in Navi Mumbai Smart City Infrastructure Limited, from 2015 till December 2021. Navi Mumbai Smart City Infrastructure Limited, a company promoted by Nikhil Gandhi and Bhavesh Gandhi, is a non-performing, wilful defaulter under the RBI Guidelines. Therefore, Nikhil Merchant is ineligible to participate in the resolution process of R-Naval under section 29A of IBC.

Based on the review of the latest available audited financial statements available on the ROC and MCA records, it is evident that Navi Mumbai Smart City Infrastructure Limited has defaulted in its loans and the same has already been classified as NPA by the banks.

Evidently, Swan Energy and Navi Mumbai Smart City Infrastructure were under common directorship and control during the resolution period. When questions were raised on Nikhil Merchant’s eligibility under Section 29A, he resigned from the Board of Navi Mumbai Smart City Infrastructure Limited retroactively.

Surprisingly, Resolution Professional (RP) of R-Naval, Sudip Bhattacharya, who was aware of these facts, conducted several meetings of the Committee of Creditors (COC) during September to December 2021, but he did out bring out the fact that Merchant was on the Board of a wilful defaulter company, promoted by Nikhil Gandhi.

Incidentally, Pipavav Shipyard is also promoted by Nikhil Gandhi.

According to sources, Nikhil Merchant is not the only partner of the consortium, who is section 29A non-compliant.

Minesh Shah, a Director on the Board of Hazel Mercantile – the minority partner in the consortium, has also continued on the board of various companies of HDIL Limited, another wilful defaulter and with fraud red-flag, whose promoters have already been jailed. Therefore, even Hazel is ineligible to participate in the resolution process under section 29A of IBC.

Incidentally, acting in tandem with the modus operandi adopted by Nikhil Merchant to resign retroactively from the Board of defaulter company, Minesh Shah also resigned retroactively on December 8, 2021 from the board of defaulter companies

Thus, the consortium of Swan Energy-Hazel Mercantile is ineligible under Section 29A of IBC, on account of being an entity connected to defaulter companies namely, Navi Mumbai Smart City Infrastructure Limited and HDIL.

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