January 6, 2022 1:30:48 am
The National Company Law Appellate Tribunal (NCLAT) on Wednesday set aside Vedanta arm Twin Star Technologies’ resolution plan for Videocon Industries and its 12 group companies and sent the plan back to the committee of creditors (CoC) for the process to be completed in accordance with the provisions of the Insolvency and Bankruptcy Code (IBC).
Wednesday’s judgment came on an appeal filed by Bank of Maharashtra, Small Industries Development Bank of India (Sidbi) and IFCI, previously known as Industrial Finance Corporation of India. The NCLAT decision overturns a June 8, 2021 decision by the Mumbai Bench of the National Company Law Tribunal (NCLT), which had approved Rs 2,568 crore resolution plan submitted by Twin Star. The decision had come under scrutiny as lenders were taking more than 95 per cent haircut, on which even the NCLT had noted that the resolution applicant was paying “almost nothing”.
In its judgment, though the NCLT had approved the plan, it had expressed doubts about the confidentiality of the resolution plan clause, and said the plan was very close to the liquidation amount. “Even if the confidentiality clause is in existence, in view of the facts and circumstances, a doubt arises on the confidentiality clause being in real time use. Therefore, we request 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 NCLT had said.
As per the Twin Star’s resolution plan then approved by the lenders, assenting secured financial creditors would get only 4.89 per cent, dissenting secured financial creditors would get only 4.56 per cent, assenting unsecured financial creditors would get only very meagre amount of 0.62 per cent, dissenting unsecured financial creditors would get “nil” amount and operational creditors would also get a very meagre amount of only 0.72 per cent.
The objections came from Bank of Maharashtra, Small Industries Development Bank of India (Sidbi) and IFCI, which contended that the amount being paid to them as financial creditors was close to the liquidation value of the bankrupt firm and that they cannot be paid so less.
The two-judge Bench of Justice Jarat Kumar Jain and technical member Ashok Kumar Mishra ruled that approval was “not in accordance with Section 31 of the Code.”
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