NCLAT order: Vedanta’s bid for Videocon rejected

The matter will now go back to the committee of creditors (CoC) which will have to invite fresh bids and complete the corporate insolvency resolution process (CIRP) as per law.

The NCLT had also 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.
The NCLT had also 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.

The National Company Law Appellate Tribunal (NCLAT) on Wednesday set aside the approval granted by the Mumbai bench of the National Company Law Tribunal (NCLT) to Vedanta Group’s Twin Star Technologies’ bid for bankrupt Videocon Group.

The matter will now go back to the committee of creditors (CoC) which will have to invite fresh bids and complete the corporate insolvency resolution process (CIRP) as per law.

The NCLAT had stayed the NCLT’s approval to Vedanta’s bid in July 2021 following an appeal filed by dissenting creditors, Bank of Maharashtra and IFCI. Both the lenders had expressed unhappiness with the value being realised through the resolution plan.

Setting aside the NCLT’s order, the appellate tribunal said the approval given to the Rs 2,900-crore plan by Twin Star, both by the CoC as well as the adjudicating authority, was not in accordance with Section 31 of the Insolvency and Bankruptcy Code. The NCLAT also said Twin Star’s resolution plan did not fulfil the requirements set out under Section 30(2)(b) of the IBC.

Section 31 of IBC lays out the procedure as per which the adjudicating authority needs to approve a resolution plan. Among other procedures, it stipulates that the authority before passing an order for approval satisfies itself that the resolution plan has provisions for its effective implementation.

Similarly, Section 30(2)(b) of the IBC requires resolution professional to confirm that the ‘dissenting financial creditor’ will get an amount, which shall not be less than the amount to be paid to such creditors in the event of liquidation of the corporate debtor.

Appealing against the NCLT’s approval to Twin Star’s bid, Bank of Maharashtra and IFCI had stated in their plea that the value ascribed to the company was very close to the liquidation value and even a part of the payment to dissenting creditors was through non-convertible debentures rather than cash.

Though the NCLT had on June 8, 2021, approved the resolution plan of Twin Star, it had observed that the firm was “paying almost nothing” as the amount offered is only 4.15% of the total outstanding claim. It had noted that the haircut for all the creditors is 95.85% and had suggested to both the committee of creditors and the successful applicant to increase the payout.

The NCLT had also 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.

State Bank of India, the lead lender of Videocon Industries, had also later urged the NCLAT to allow fresh bids for the group.

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