The Government of India’s ministry of corporate affairs (MCA) has filed a fresh petition in the Mumbai’s National Company Law Tribunal (NCLT) seeking permission to attach the assets of Videocon promoters to increase recovery in the case where lenders were facing a 95% haircut.
In a plea the MCA has sought that the court ask Videocon promoters to disclose their movable and immovable properties in India and abroad. The petition seeks directions from the Central Depository Services Ltd (CSDL), National Securities Depository Ltd (NSDL), the Central Board of Direct Taxes (CBDT), the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) among others to disclose the Videocon assets under their watch and be frozen with immediate effect in order to be used for recovery.
The government’s move to directly petition the court in a case in which an overwhelming number of creditors had voted in favour of the winning bidder is an unprecedented one and follows an outcry due to the absymally low recovery in the case. “This will mean that the recovery is now delayed since the case will go on for sometime. It remains to be seen whether lenders get more due to this government move,” said a lawyer involved in the case. The MCA has approached the Mumbai bench against Venugopal Dhoot and other former directors and senior officials of Videocon Industries under Section 241 and 242 of the Companies Act that deals with the oppression and mismanagement in the company.
The goverment’s intent is to attach assets and disgorge money from the erstwhile promoters of the Videocon Group, including Venugopal and his brother Pradipkumar Dhoot and other former Key Managerial Personnel (KMP) of the group. The case refers to the take over of the debt laden Videocon Industries by Anil Agarwal’s Vedanta Group. In December over 94% of the creditors by value voted for Vendanta arm Twin Star Technologies as the preferred bidder to take over Videocon. Vedanta’s offer of a little over Rs 3,000 crore was a haircut of more than 95% on admitted claims of Rs 61,770 crore.
NCLT had approved the plan in June this year but had commented that Vedanta had paid “almost nothing” to take over the company, noting the huge haircut the lenders had taken. Vedanta’s offer includes NCDs of Rs 2700 cr and cash unfront of Rs 551 crore. It also includes some equity to financial creditors in the company. Last month following an outcry regarding the huge haricut lenders were taking, the National Company Law Appellate Tribunal (NCLAT) stayed Vedanta Group’s winning bid after an appeal by dissenting creditors who were unhappy with the value realised through the resolution. A two judge bench headed by officiating NCLAT chairman Ashok Iqbal Singh Cheema stayed the implementation of the resolution plan and adjourned the matter to September 7 responding to a plea by Bank of Maharashtra and IFCI opposing the existing plan.
The plea by the MCA is a fresh twist in the case. However, since it is led by the government public sector banks are supporting the review. SBI represented by Bishwajit Dubey, partner Cyril Amarchand Mangalda supported the petition filed by the government. SBI is the lead lender in the case holding 18% of the debt. In its plea, the ministry is seeking interim relief from the tribunal to restrain all erstwhile promoters from selling or creating any third party rights on their personal assets. Under Section 241, if the Central Government is of the opinion that the affairs of the company are being conducted in a manner prejudicial to the public interest, it can approach the NCLT to seek relief. Apart from Videocon Industries Ltd, the MCA has also made Sky Appliances Ltd, Value Industries Ltd, Evans Fraser And Co. (India) Ltd, Ce India Ltd, Century Appliances Ltd, Videocon Telecommunication Ltd and Millennium Appliances India Ltd, all affiliate companies as parties in the case.
Five more companies will be added to the petition as all 13 group companies and assets will be brought under the purview of the case, the lawyer cited above said. The MCA has clarified that they are not seeking any reliefs against the corporate debtor (companies) but they are impleaded and the reliefs are only against erstwhile promoters and key managerial personnel of the group but not against the company.
Sanjay Shorey, Director for Legal & Prosecution at the MCA, while appearing for the government argued that after the company was admitted for the insolvency resolution, the audit report has found several instances of divergence and siphoning of funds. Before the ruling, Krishnendu Datta, senior advocate, while appearing for a former company secretary of one of the companies opposed the petition filed by the MCA and sought time to file the response in the matter. His plea was not considered. “The National Company Law Appellate Tribunal (NCLAT) has stayed the earlier order of NCLT that had approved the resolution plan and had said that the RP will oversee the company, which means currently the company is under the moratorium and hence, any such petition under the Section 241 & 242 is not maintainable,” argued Datta.
“There is no urgency to give any interim relief in this case and we would like to file our response.” Lawyers said the case will now have to be consolidated. “In view of the insolvency proceedings initiated against some of the promoters and moratorium has come into play, the proceedings of this nature will be affected and will also be overlapping. There will be other issues also which will require consideration,” said Ashish Pyasi Associate Partner of law firm Dhir & Dhir Associates.
