The resolution plan for bankrupt Alok Industries offered by Reliance Industries and JM Financial Asset Reconstruction is not a done deal yet. Some creditors have objected to the contours of the proposal and this would delay the process. The proposal says the lenders should assign their entire debt in favor of JM Financial ARC, which if done would take away their right to invoke personal guarantees given by the promoters of Alok Industries.

The dissenting creditors, around 18 per cent of the lenders in terms of the total debt, are opposed to assigning their debt in favor of JM Financial ARC. The sole bidder had offered a Rs 5,050 crore cash payment to settle the company’s debt of Rs 29,500 crores, implying that the lenders would get only 17 per cent of what Alok Industries owes them. However, in case of liquidation, the creditors would receive less as the liquidation value is only Rs 4,200 crores.

In almost all cases, banks have done a one-time settlement of loans while retaining the right to recover dues from promoters, but in this case, assigning debt means transfer of debt along with security from the books of the lenders to ARC.