The National Company Law Appellate Tribunal (NCLAT) has stayed Vedanta group's winning bid for debt-laden Videocon Industries Ltd after an appeal by dissenting creditors—Bank of Maharashtra, and IFCI, which were unhappy with the paltry value realised through the resolution.
A two-judge bench headed by NCLAT acting chairman Ashok Iqbal Singh Cheema has stayed the implementation of the resolution plan and adjourned the matter to 7th September, until when the company will continue to be managed by the resolution professional.
The two dissenting creditors had filed an appeal last month opposing the existing plan contending that the value ascribed to the company was very close to the liquidation value. They also pointed out that even a part of the payment to dissenting creditors was through non-convertible debentures (NCDs) which is in contrast to the Supreme Court (SC) order in Jaypee Infratech case that had set a precedent by directing that dissenting creditors should only be paid by cash.
In December 2020, the committee of creditors (CoC) of Videocon had approved Vedanta group unit Twin Star Technologies’ resolution plan of around Rs2,962 crore (which effectively meant a haircut of over 95% on admitted claims of Rs64,838.63 crore) after 95.09% of the creditors had voted in its favour.
On 8th June, the National Company Law Tribunal (NCLT) had approved Twin Star Technologies’ resolution plan for 13 companies of Videocon group under the IBC at close to the liquidation value.
Though the NCLT approved the resolution plan of Vedanta group’s subsidiary, it had observed that the company was 'paying almost nothing' as the amount offered is only 4.15% of the total outstanding claim. It had noted that the haircut for all the creditors is 95.85% and suggested to both the CoC and the successful bidder to increase the payout.
The Tribunal had also asked the Insolvency and Bankruptcy Board of India (IBBI) to check whether confidentiality was maintained during the corporate insolvency resolution process since Twin Star’s bid was very close to the liquidation value, which was meant to be confidential.
The appellants argued that the amount offered to the dissenting financial creditors as per the resolution plan is lower than the liquidation value in violation of the provisions of IBC. The resolution plan offered to pay Rs2,900 crore against the creditors’ total claim of Rs65,000 crore.
Experts suggest that this stay now means that the deal could be stuck for months as it will be caught up in a long-drawn legal battle of replies and counter-replies. It is quite likely that the entire resolution process could restart from scratch.
Legal experts indicate that winning bidder Vedanta-led Twin Star Tech may move Supreme Court against this NCLAT order.
There are 35 financial creditors of Videocon, of which 19 major creditors, including SBI, Union Bank of India, IDBI, Central Bank, BOB and ICICI Bank approved the resolution, which includes the 95.85% haircut. But three minority shareholders, Bank of Maharashtra, SIDBI and IFCI rejected the resolution on the ground of low resolution.
There were 11 bidders for Videocon but only three had bid for the whole of Videocon's group assets. Eight of them had bid for only a particular division of the company. Though there is hope that minority shareholders will recover more money, it is possible that the whole process may take a long time.