The National Company Law Appellate Tribunal (NCLAT) on Wednesday set aside the Mumbai bench of National Company Law Tribunal (NCLT) order, which had approved the resolution plan of Videocon Group by Vendata’s Twin Star Technologies. It has remitted the matter back to Videocon’s committee of creditors (CoC) for completion of the corporate insolvency resolution process (CIRP) in accordance with the insolvency and bankruptcy code (IBC).
“…we have come to the conclusion that Section 30 (2)(b) of the code has not been complied with and hence, the approval of the resolution plan is not in accordance with Section 31 of the code”, the two-judge bench presided over by Jarat Kumar Jain and Ashok Kumar Mishra said in their order.
“Accordingly, the approval of the resolution plan by the CoC as well as adjudicating authority is set aside and the matter is remitted back to CoC for completion of the process relating to CIRP in accordance with the provisions of the Code,” they said.
“..it will further delay Videocon’s resolution”, said Gopal Jain, advocate representing Twin Star Technologies. Twinstar may challenge NLCAT’s order in the Supreme Court, a source aware of the development said.
Bank of Maharashtra had appealed against the NCLT order in NCLAT in July 2021, following which the appellate tribunal had stayed the NCLT order. Bank of Maharashtra, Small Industries Development Bank of India (SIDBI), IFCI, and ABG Shipyard Limited were the dissenting financial creditors in the committee of creditors of Videocon Industries.
Further, even the assenting financial creditors had moved the appellate tribunal stating that they feel duty bound to reconsider their decision in larger public interest resulting from an unprecedented haircut of 95 per cent and observations of the adjudicating authority (NCLT) as also this appellate tribunal while granting interim stay.
In June last year, the Mumbai bench of NCLT approved the resolution plan of Twin Star Technologies — a promoter entity of the Vedanta Resources group — for the Videocon group. But it had pointed out that the successful resolution applicant is “paying almost nothing” as the amount offered is only 4.15 per cent of total outstanding claim. It noted that the haircut for all creditors was 95.85 per cent and suggested to both committee of creditors (CoC) and the successful applicant an increase in the payout. In the Videocon matter, out of a total claim amount of Rs 71,433.75 crore, claims admitted were to the tune of Rs 64,838.63 core, and the resolution plan that was approved was for only Rs 2,962.02 crore, which constituted only 4.15 per cent of total outstanding claim amount and the total haircut to all creditors was 95.85 per cent.
“We agree that the CoC, if it has power to approve the plan, has also power to reconsider and review its own decisions on the Resolution Plan. Power to approve, no doubt, carries with it power to reconsider,” the appellate tribunal said in its order.
The appellate tribunal also said the adjudicating authority failed to consider the contentions of the appellant (Bank of Maharashtra), as a result of which the order is ex-facie illegal and contrary to the settled provisions of the code and the regulations framed thereunder.
Bank of Maharashtra in its submission had said the resolution plan of Twin Star Technologies provided the bank a value, which was less than the liquidation value of the corporate debtor, hence it was against the provisions of the IBC, specifically Section 30. Further, the bank said according to the distribution sheet, the amount payable to dissenting creditors was Rs 114.21 crore, whereas due to some discrepancy the amount payable was showing as Rs 105.23 crore. The appellant had alleged that the resolution plan provided for payment to the dissenting financial creditors by way of non-convertible debentures (NCDs) and equities, which was not permissible under IBC.
Source: Business-Standard