Paltry payout: NCLAT stays Vedanta takeover of Videocon

By: |
July 20, 2021 4:20 AM

The matter will be next taken up on September 7 and till then the company will continue to be managed by the interim resolution professional.

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 Monday stayed the Vedanta Group’s winning bid for the bankrupt Videocon Industries 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.

“Considering the observations of the adjudicating authority (NCLT) and the submissions made by the learned senior counsel for appellants in both these appeals and the grounds raised in these appeals, and considering the exceptional facts of present matter the impugned order is stayed till the next date and status quo ante as before passing of the impugned order is directed to be maintained,” a two-member NCLAT bench, headed by acting chairperson justice AIS Cheema, said.

The matter will be next taken up on September 7 and till then the company will continue to be managed by the interim resolution professional.

Though the National Company Law Tribunal (NCLT) had on June 8 approved the resolution plan of Vedanta Group’s arm, Twin Star Technologies, 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 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.

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.

In December the committee of creditors had approved Twin Star’s resolution plan of around Rs 3,000 crore after 95.09% of the creditors had voted in its favour.

Twin Star’s resolution plan of Rs 2,962.02 crore meant a haircut of over 95% on admitted claims of Rs 64,838.63 core.
As per the resolution plan approved by the CoC, assenting secured financial creditors would get only 4.89% of the amount, dissenting secured financial creditors would get 4.56%, assenting unsecured financial creditors would get 0.62% and operational creditors only 0.72%. Dissenting unsecured financial creditors would get nil amount.

During the course of the proceedings in the NCLAT on Monday, Bank of Maharashtra argued that as per the resolution plan, it was getting less than what it would have got in case the companies went for liquidation. This is in violation of the law. The law says a dissenting financial creditor could not have been paid less than the liquidation value.

IFCI also supported Bank of Maharashtra. “The plan provided meagre amount of Rs 2,900 crore for admitting liability of Rs 65,000 crore and the waiver itself was Rs 62,100 crore whereby public money has been lost,” IFCI said.

The NCLAT has asked respondents in both these appeals to file reply-affidavits within two weeks. “Rejoinder, if any, may be filed within a week, thereafter. Parties to file brief written-submissions not more than three pages and copies of judgments which they want to refer or rely on, within three weeks,” the NCLAT said.

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