NCLAT stays NCLT’s nod to Twinstar’s resolution plan for Videocon Group
The National Company Law Appellate Tribunal (NCLAT) has stayed the approval granted by the Mumbai Bench of the National Company Law Tribunal (NCLT) to the resolution plan submitted for the beleaguered Videocon Group by Twinstar Technologies, a promoter entity of Vedanta Resources.
This came after an appeal by Bank of Maharashtra, one of the dissenting creditors, the matter is slated to be heard on September 7.
“… the impugned order is stayed till the next date status quo ante as before passing of the impugned order is directed to be maintained,” said the NCLAT, in its order on Monday. It has asked the respondent to file reply affidavits within two weeks.
Bank of Maharashtra, in its appeal, has alleged that the order of NCLT approving the resolution plan is “ex-facie illegal”, bad in law, contrary to the settled provisions of the Insolvency Bankruptcy Code (IBC) of 2016. The bank has an exposure of Rs 1,216.88 crore to the Videocon Group.
In its appeal, the appellant has said, in the various committee of creditors (CoC) meetings, lenders raised concerns regarding the distribution mechanism for the dissenting financial creditors.
Despite that, the resolution professional dismissed the concerns raised moved ahead with the voting on the plan.
The appellant has alleged that the “resolution plan” provided for payment to the dissenting financial creditors by way of non-convertible debentures (NCDs) equities, which is not permissible under IBC.
Also, the plan provides that the dissenting financial creditors will be paid the liquidation in a staggered manner. The appellant has said that the NCLAT directed the CoC to make payments according to liquidation value to all dissenting creditors in cash upfront before any payment is made to the assenting financial creditors.
However, it failed to address the fact that such directions amount to modification in the resolution plan, which according to the Supreme Court, is impermissible.
The only option available before the adjudicating authority, if it observes that the plan is contrary to the provisions of the IBC, is to send back the plan to the CoC for reconsideration of appropriate modifications.
The appellant said, according to SBI CAPS, the process advisor, it would have received Rs 59.27 crore, out of which Rs 8.14 crore would have been upfront cash Rs 51.13 crore through NCDs, had it assented to the plan.
Also, the liquidation value of the appellant’s share was Rs 41.85 crore in case of dissent to the plan. However, it highlighted that there was some discrepancy in FORM H, which showed that the total amount payable to the dissenting financial creditors, which included IFCI, was Rs 105.23 crore.
But, according to SBI CAPS calculation, the amount payable to the Bank of Maharashtra IFCI totaled Rs 111.85 crore.
Last month, NCLT had approved the resolution plan of Twinstar Technologies for Videocon Group but had raised concerns that the successful resolution applicant is “paying almost nothing” as the amount offered is only 4.15 per cent of the total outstanding claims. It noted that the hair cut for all the creditors is 95.85 per cent suggested to both the CoC the successful applicant an increase in the payout.
Of the total claim amount of Rs 71,433.75 crore, claims admitted were to the tune of Rs 64,838.63 crore, the resolution plan that was approved was only for an amount of Rs 2,962.02 crore.
According to the resolution plan, against the claim of Rs 61,773 crore made by financial creditors, an amount of Rs 200 crore as upfront cash thereafter NCDs worth Rs 2,700 crore that will be redeemable in 5 installments, with a coupon rate of 6.65 per cent, has been promised by the successful resolution application.
The fair value of the Videocon Group was Rs 4,069.95 crore, whereas the liquidation value was Rs 2,568.13 crore.