Videocon resolution: Lenders say NCLAT has powers to allow committee of creditors to review decision

Refuting the contention that a resolution plan once approved cannot be reconsidered as ‘untenable’, lenders to the bankrupt Videocon Industries on Wednesday said it was very much within the powers of the appellate tribunal (NCLAT) or the adjudicating authority (NCLT) to allow the committee of creditors (CoC) to reconsider the decision.

Solicitor General Tushar Mehta, appearing on behalf of the CoC before the NCLAT on Wednesday, said the power to revoke the approval is inherent within the power to approve of the CoC as well, even as the insolvency and bankruptcy code (IBC) did not expressly state so.

“The Code need not expressly state powers, by way of separate provisions, which are understood to be implied in the powers expressly provided under the Code,” he said, arguing for over one-and-a-half hour before the appellate tribunal.

Even after approving Vedanta Group firm Twin Star’s resolution plan in which lenders were taking a 95.85% haircut for Videocon Industries, on behalf of the CoC, lead bank State Bank of India (SBI) moved NCLAT seeking to remand Videocon’s resolution back. Making a U-turn, the lenders want a fresh round of bidding for the bankrupt firm. The move follows adverse comments from both NCLT and NCLAT for agreeing to approve a plan for a paltry sum.

Though the NCLT approved Twin Star’s resolution plan on June 8, it asked the Insolvency and Bankruptcy Board of India to see whether confidentiality was maintained during the corporate insolvency resolution process as Twin Star’s bid was very close to the liquidation value, which was meant to be confidential. NCLAT had on July 19 stayed the approval on an appeal filed by dissenting creditors Bank of Maharashtra and IFCI. Both the lenders were unhappy with the value being realised through the resolution plan.

Twin Star has contested the lender’s contention.

During the course of the proceedings, apart from a number of observations made earlier by the Supreme Court to drive his point home, Mehta said the Insolvency Law Committee Report, 2018, also re-emphasised that the objective of the Code is to respect the commercial wisdom of the CoC. The apex court has also affirmed that the CoC’s commercial wisdom is paramount.

“Thus, if the CoC in its commercial wisdom considers it appropriate to have a reconsideration of its decision, the appellate tribunal may consider the same and remand the matter back to it in the larger interest of all stakeholders and public money,” Mehta said.

NCLAT has fixed the matter for further arguments for two consecutive days starting October 28. “Interim order will continue till the next date of hearing,” it said.