The National Company Law Appellate Tribunal (NCLAT) on Friday adjourned hearing in a bunch of pleas challenging the approved resolution plan of Birla Tyres.
The NCLAT said the pleas will be heard separately during the first week of December and January.
The latest pleas include that of HDFC Bank challenging the plan of Himadri Speciality Chemical Ltd and Dalmia Bharat group to jointly acquire Birla Tyres.
Another petition involves Kesoram Industries Ltd, the parent company of Birla Tyres, contesting the rejection of its claims as a financial creditor in the Birla Tyres insolvency process. Additionally, Manav Investment and Trading Company Ltd, a shareholder, is raising a worker’s claim in its case.
HDFC Bank’s plea:
In its plea, HDFC Bank contended that the distribution of shares among financial creditors in the resolution plan was based on the value of the security of interest, which it argued went against the law. The bank claimed that the Committee of Creditors (COC) justified this distribution by citing their commercial wisdom.
The COC said HDFC Bank’s petition had no merit as it challenged the majority decision of the committee without contesting the resolution plan itself. The COC asserted that its decisions cannot be overturned, even by NCLAT, unless the resolution plan violated the provisions of the Insolvency and Bankruptcy Code (IBC).
However, HDFC Bank clarified it had challenged the resolution plan. The tribunal issued notices to the involved parties, seeking replies and rejoinders, and the hearing has been deferred until January.
Kesoram Industries’ plea:
The parent company challenged its exclusion from the list of financial creditors by the new Resolution Professional (RP) in the Birla Tyres case. Initially recognized as a financial creditor with ₹516 crore worth of claims and a 30% voting share, Kesoram claimed the new RP overturned the decision. They argued that the RP lacked the authority to revisit admitted claims. The partner company cited loan bifurcation post-demerger with Birla Tyres as the basis for their claim. The tribunal deferred proceedings to early December, urging Kesoram to clarify how their inter-company loan qualifies as a financial claim against Birla Tyres.
Manav Investment and Trading Company Ltd’s plea:
The company challenged the resolution, arguing that workers were not paid equally with financial creditors, and the plan violated IBC provisions. The RP disputed, claiming Manav Investment was not an aggrieved party or creditor, and questioned its position in representing workers who haven’t approached the tribunal. The court deferred the hearing to early December, seeking an affidavit from the RP.
What these mean for Birla Tyres
These pleas assume significance as there is still no clarity on the business revival of the company even post-acquisition by Dalmia Bharat Group. The fate of Birla Tyres’ workers hangs in the balance due to the alleged unilateral rejection of their claims by the resolution professional in the approved resolution plan.
In May 2022, SRF Ltd, an operational creditor, initiated insolvency proceedings for Birla Tyres, owed over ₹1100 crore to creditors, including Axis Bank, State Bank of India, ICICI Bank, and Yes Bank.
Various expressions of interest were received from potential applicants, including Ceat, Bain-Piramal-backed India Resurgent Fund, Jindal Steel & Power, Bommidala Enterprises, Purnendu Chatterjee-promoted MCPI, and Himadri Speciality Chemicals to acquire the company.
Following NCLT’s approval, the consortium of Himadri and Dalmia reportedly took physical possession of Birla Tyres’ plant and machinery in Balasore, Odisha, after completing the transaction with the creditors. Subsequently, Birla Tyres’ shares were also delisted from the stock exchanges.
Established in 1991 as a subsidiary of Kesoram Industries, Birla Tyres became a separate entity in 2019 after being separated from its parent firm.