The diversified group owes collectively over Rs 1 lakh crore to lenders. "…..there is cross creation of the security interest by all lenders in other business assets of Videocon Group treating it as a single economic entity," NCLT has said.
The National Company Law Tribunal (NCLT) has ordered the inclusion of Videocon Industries’ overseas oil and gas business in the ongoing insolvency process being conducted in the country. Videocon was in the first list of the 12 largest accounts that the Reserve Bank of India referred for bankruptcy in late 2016. The diversified group owes collectively over Rs 1 lakh crore to lenders. “…..there is cross creation of the security interest by all lenders in other business assets of Videocon Group treating it as a single economic entity,” NCLT has said. “… we have concluded that foreign oil and gas assets of the group held through VOVL, VHHL, VEBL and VINI, are in fact, the assets and property of VIL…. Therefore, the assets held by them can be said to be ‘its’ assets, which is under the insolvency,” the order noted.
VIL’s overseas oil and gas companies are VOVL Ltd, Videocon Hydrocarbon Holdings Ltd (VHHL), Videocon Energy Brasil Ltd (VEBL), Videocon Indonesia Nunukan Inc (VINI). The tribunal also directed the resolution professional (RP) to include the assets, liabilities, claims of the above mentioned overseas assets/companies in the information memorandum of Videocon Industries. The two-member bench comprising Suchitra Kanuparthi and Chandra Bhan Singh allowed a moratorium on the foreign petroleum assets of the group which will restrain its lenders from selling the conglomerate’s overseas assets. In addition, the order cited that since some time has passed in deciding the application, the time spent in deciding this application from August 22, 2019 until the date of the order, is added in the permitted timeline for the completion of the ongoing insolvency process.
Venugopal Dhoot had moved NCLT after State Bank of India invited bids in August 2019 for the group’s overseas assets, which were offered as collateral for loans to Videocon entities. The proposed sale was outside the insolvency process of group entities, and lenders, including SBI, had opposed Dhoot’s plea. Dhoot opposed the sale on the grounds that they belonged to Videocon Industries’ overseas arms, which were set up as special purpose vehicles to act as trustee and hold the assets on behalf of the parent. Videocon Industries had jointly applied for acquisition and extended payments for acquisition of overseas assets in 2007.
Lenders opposed Dhoot’s application citing that the overseas subsidiaries were the owners of the oil and gas assets. They said Videocon Industries had no rights over the assets. SBI had argued that extension of moratorium to the overseas assets could delay recovery of money from sale of the assets. Earlier, the NCLT had allowed consolidation of 13 of the 15 Videocon group companies into a single entity in August 2019, based on similarity in operations, debt repayment obligations, management, assets and liabilities and interlacing of financial structure among the Videocon entities. The tribunal also allowed consolidation of overseas assets based on the same parameters which were framed by it during the consolidation of the insolvency proceedings.
The flagship Videocon Industries’ debt stood at Rs 19,506 crore as of March 2018. The group is among the 40 largest defaulters identified by the Reserve Bank’s first list for insolvency in late 2016. The company has its core businesses in consumer electronics and oil & gas exploration, while the subsidiaries are into manufacturing, sale and distribution of consumer goods. The lenders plan to first auction the electronics business estimated to be worth USD 2 billion.