A committee of creditors tasked with examining a bankruptcy resolution plan for textiles company Alok Industries Ltd has approved an offer submitted by Reliance Industries Ltd and JM Financial Asset Reconstruction Co Ltd.
The offer got 72.19% votes from the committee of creditors, Reliance Industries and Alok Industries said in stock-exchange filings.
The resolution plan will need the clearance of the National Company Law Tribunal (NCLT).
The favourable voting brings fresh hope to employees and operational creditors of Alok Industries, which was otherwise set to enter liquidation.
This was the second time the committee was considering the bid by Reliance and JM Financial ARC.
On 12 April, Reliance Industries said it had submitted a joint bid, along with JM Financial ARC, for debt-laden Alok Industries. The two had offered to pay Rs 5,000 crore. Alok Industries owes lenders Rs 29,614 crore.
The plan was rejected by the committee of creditors as 30% of the votes were against it and 70% for it. The minimum vote needed in favour of the resolution was 75%.
However, a recent ordinance issued by the government to amend the Insolvency and Bankruptcy Code (IBC) has brought down the threshold to 66% from 75% earlier in order for the committee of creditors to approve a resolution plan.
The 270-day time frame for insolvency resolution had ended on 14 April. The committee, after voting against the plan, decided to opt for liquidation. This was challenged by the employees and operational creditors of Alok Industries in the NCLT.
Last week, the Ahmedabad bench of the NCLT asked the committee of creditors to re-evaluate the previously rejected bid.
The ordinance does not apply to old cases; hence, fresh voting was called for in the case of Alok Industries.
Alok Industries had reported a net loss of Rs 3,502 crore on revenue of Rs 8,326 crore for 2016-17. For the October-December quarter of 2017-18, its net loss stood at Rs 4,745 crore on revenue of Rs 952 crore, according to stock-exchange data.
The company's shares gained 5% to close at Rs 3.37 on the BSE on Friday.