Vedanta’s holding company Twin Star Technologies, the winning bidder of the Videocon Industries and its 12 units, are preparing to appeal against the appellate tribunal’s order to restart the resolution process of consumer durable companies while financial creditors are apprehensive that prolonged litigation could fetch them lower offers.
National Company Law Appellate Tribunal on Wednesday directed the committee of creditors to restart the resolution process following an appeal by them that Twin Star’s plan is “not feasible.”
Twin Star Technologies is set to argue that the CoC is Functus Officio – implying that the role of the committee of creditors ends soon after a plan is approved – by adjudicating authority. Thus, any appeal by the CoC is not maintainable, said people aware about the matter.
Twin Star will also argue that once a plan is approved by National Company Law Tribunal, it is binding on all the stakeholders in line with a landmark Supreme Court judgement in September on Ebix Singapore, which stated that a NCLT approved plan cannot be withdrawn or modified.
Twin Star did not respond to requests for comment.
The CoC appeal, made after it was endorsed by the tribunal, was primarily driven by the criticism that Videocon and its units were sold at a throwaway price. The recovery for lenders was to 4.15% of the admitted claims.
Some lenders too fear restarting the process in hope of getting an improved offer could backfire.
“It’s been three years since the company was admitted and now it will take another year to complete the process. This will impact the valuation and thus the recovery. Also, the CIRP cost has crossed Rs 90 crore for Videocon and its 12 units and now, some more money will be spent in the process, which too would be deducted from the recovery,” said a banker to the company.
“Following the court’s order to restart the process, lenders will consider appointing a new resolution professional (RP) and seek fresh report on liquidation and fair value,” said another banker. Abhijit Guha Thakurta, backed by Deloitte India, is currently the RP.
The CoC suggested to the court either to set aside its order that approved the plan or to remit the resolution plan back to themfor reconsideration and compliance. In an affidavit, CoC stated that “they feel duty-bound to reconsider their decision in the larger public interest resulting from an unprecedented haircut of 95%.”
On 8 June Twin Star’s resolution plan, which was approved by 95.09%, was endorsed by Mumbai NCLT. On 19 July NCLAT gave an interim stay on implementing the plan after it was challenged by dissenting creditors- Bank of Maharashtra and IFCI-regarding inequitable distribution of proceeds.
The tribunal judge raised questions about the confidentiality of the liquidation value since the offer made by Twin Star was Rs 2962 crore, marginally above the Rs 2568 crore liquidation value.
