Sejal Chaturvedi –
After failing to repay bank debts, Videocon Industries, which encumbered a debt of Rs 35,000 crore, was put to debt resolution in December 2017. The NCLT ordered the insolvency resolution procedure of Videocon and 12 other group to be consolidated in November 2019.
The National Company Law Tribunal (NCLT) had approved the resolution plan of the Vedanta entity, the Twin Star Technologies.
The Court stated, “Since this is the commercial wisdom of the CoC and as per the various judgments of the Hon’ble Supreme Court and by following the judicial precedents, discipline, the adjudicating authority approves the resolution plan.”
However, the NCLT was surprised to note that out of 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 has been approved is only for Rs 2,962.02 crore, which is only 4.15 per cent of total outstanding claim amount and the total hair cut to all the creditors is 95.85 per cent.
Thus, the NCLT has ordered to both the Committee of Creditors and the resolution applicant to increase the pay-out amount to operational creditors, as majority of these include MSMEs.
Further, the Bench which was presided over by H P Chaturvedi and Ravikumar Duraisamy, noted that by paying Rs 262 crore, or 8.84 percent of the total money to be granted under the proposal, the successful resolution applicant will be handed ownership of all 13 entities of Videocon group. The Videocon group has a cash balance of Rs 200 crore in its bank account.
However, the Mumbai bench of NCLT was suspicious of breach of confidentiality clause.
According to the Bench, the CIRP guidelines and rules indicate that the liquidation value and fair market value is kept confidential and only communicated to the CoC members when the resolution plan is finalised.
Nevertheless according to the NCLT order, the resolution bids were opened in the 15th CoC meeting, held on September 2020, where members of the CoC were notified of the liquidation value and fair market value.
Thus, the NCLT was requested, the intervention of Insolvency and Bankruptcy Board of India (IBBI) to ensure that the congeniality clause was maintained.
The NCLT held, “Therefore, even if the confidentiality clause is in existence, in view of the facts and circumstances as discussed above, a doubt arises upon the confidentiality clause being in real-time use; therefore, we request the IBBI to examine this issue in depth so as to ensure the confidentiality clause is followed unscrupulously, without any compromise in letter and spirit by all the concerned parties, entities connected in the CIRP.”
The Videocon Industries owner, the DHOOT family, faced a financial crisis when the Supreme Court disbarred its licence for wireless telephony in 2012. Further the loans obtained by this wing of Videocon Industries from the Indian banks became non-performing assets (NPA).
Hence, the group submitted an application to the CoC under Section 12A of the Insolvency and Bankruptcy Code (IBC) last year but failed to get the mandatory 90 per cent votes from the lenders.It was only in December last year, that the lenders approved the plan of Twin Star Technologies.
The NCLT in its order, stated that the Value Industries and Videocon Industries (VIL) will be delisted. In other words, as in the case of Dewan Housing Finance Corporation, equity shares will be worthless (DHFL).
VIL shares had been trading in the upper circuit for at least the previous five days, having nearly doubled from a recent low of Rs 3.86 (on May 6) to Rs 7.43 on Monday. On Tuesday, the upper circuit reopened, and the stock ended 2.4 percent lower at Rs 7.25.
Thus, according to a notification posted on the NSE on Tuesday evening, the members of the exchange were informed that trading in equity shares of Videocon Industries “Shall be suspended w.e.f June 16, 2021 pursuant to order dated June 08, 2021 passed by the NCLT.”
Also a notice on the BSE mentioned, “The company has fixed Friday, 18th June 2021 as the Record Date for the purpose of delisting of equity shares from BSE and NSE.”