In a win for Bank of Maharashtra, IDBI Bank and IFCI; NCLAT has set aside the approval granted to Vedanta’s subsidiary Twin Star Technologies’ (TST) resolution plan to acquire debt-ridden Videocon Industries. NCLAT order has remanded the case back to lenders, who will now be able to reconsider the resolution plan.
Lenders which had agreed to Twin Star Technologies’ (TST) resolution plan earlier, wanted to reconsider it citing up to 95% haircuts. NCLAT had sought a reply from Vedanta’s subsidiary TST on a request by a Bank of Maharashtra-led Committee of Creditors (CoC) which wanted a fresh round of bidding for the resolution plan.
Case background
On 19th July 2021, NCLAT had stayed the NCLT (National Company Law Tribunal) Mumbai order which had allowed the Rs. 3,000 crore bid for Videocon in June this year. Back then, NCLAT had issued notices on the appeals by the Bank of Maharashtra and IFCI, which had termed steep haircuts up to 95% as “tonsure”. The Resolution Professional had been asked to continue managing the corporate debtors as per IBC provisions till further orders.
On 13th August last year, the Supreme Court had refused to lift the stay by turning down TST’s appeal against the NCLAT order. TST’s arguments pointing to CoC’s approval to its resolution plan and allegations of a u-turn by lenders had failed to cut ice before the top court.
The appeals by lenders against the NCLT order termed the haircut of almost 90% to 95% approved in the resolution plan as a “tonsure”, as the plan provided a meagre amount of Rs. 2900 crores for admitting a liability of Rs. 65,000 crores and the waiver itself was Rs. 62,100 crores where public money had been lost. Arguing that the financial creditors were being settled for merely 5% to 10% of the total dues, the appeals submitted that no upfront payment was provided even to meet basic legal compliances, claiming that non-convertible debentures (NCDs) were adopted as modality to repay debt to lenders.
The appeals raised concerns that the corporate debtors in the consolidated proceedings had cash of Rs. 200 crores, claiming the successful resolution applicant would bring in just 262 crores and from that too, the first payment of Rs. 200 crores will be brought in 25 months. The appeals contended that beyond Rs. 262 crores, rest of the amount was being brought in only by way of NCDs, to be paid in six years.
The resolution process has further slowed down due to multiple appeals against the NCLT order. NCLAT had also sought replies from the Centre and Videocon’s administrator to reply on former promoter Venugopal Dhoot’s appeals against the NCLT nod to the resolution plan and its order to attach his assets. NCLT had ordered attachment of assets of former promoters of Videocon, including Venugopal Dhoot, an order which will affect resolution of the bankrupt company till it is revoked.
