NCLAT Discarded Videocon Acquisition by Anil Agarwal Led by Twin Star Technologies
New Delhi:
A bankruptcy appeals court has scrapped the winning bid by billionaire Anil Agarwal led by Twin Star Technologies to acquire Videocon Industries Limited on a plea from some creditors that the money offered imposed a hefty haircut of Rs 62,000 crore for banks.
The National Company Law Appellate Tribunal (NCLAT) has asked creditors to initiate the new sale of Videocon, a consumer durables company that manufactures products ranging from air conditioners to washing machines, for the recovery of their unpaid Rs 64,637.6 crore.
While a majority of lenders had previously accepted Twin Star Technologies’ bid of Rs 2,962.02 crore, Bank of Maharashtra (BoM) and IFCI Limited disagreed, saying that the amount offered is close to the liquidation value of the bankrupt company and that they are not less than the liquidation value.
After the nod of Videocon’s Committee of Creditors, the Mumbai bank of the National Company Law Tribunal (bankruptcy court) had approved the takeover bid of Twin Star Technologies (called Resolution Plan under the bankruptcy law) in June last year.
That order was challenged by the BoM and IFCI before the NCLAT, which Wednesday overruled the NCLT’s order that the provision of the Insolvency and Bankruptcy Code (IBC) had not been complied with.
A two-member bank of Jarat Kumar Jain and Ashok Kumar Mishra said the approval of the acquisition plan “was not in accordance with Article 31 of the Code” and set aside “the approval of the resolution plan by the Committee of Creditors (CoC) as well as the Court of Justice (NCLT)”.
It has referred the matter back to CoC for completion of the process in accordance with the provisions of the Code.
Essentially, this means that the CoC will now seek new bids for Videocon unless the NCLAT injunction is challenged in the higher court and overturned.
“We heard about the injunction and it will further delay Videocon’s resolution,” Twin Star advocate Gopal Jain said, commenting on the injunction on behalf of the company. “We are awaiting the written order and will then take appropriate action.” BoM, which has 1.97 percent voting rights in the CoC, and IFCI Ltd. with 1.03 percent voting rights, also objected that most of Agarwal’s company’s payment was made through non-convertible bonds rather than cash.
Twin Star was required to pay Rs 500 crore within 90 days and the rest as non-convertible bonds over a specified period. Videocon’s shares would be delisted as part of the plan.
Videocon was one of the first 12 companies to go bankrupt following a 2017 directive from the Reserve Bank of India (RBI) to auction off companies that had unpaid dues.
The NCLAT injunction said that creditors have filed a total of Rs 72,078.5 crore on Videocon, of which claims of Rs 64,637.6 crore have been verified and accepted for the purposes of insolvency.
“It was stated that the plan provides for a meager amount of Rs 2962.02 crore against an acknowledged liability of approximately Rs 65,000 crore. The said exemption is nearly Rs 62,000 crore from acknowledged claims and Rs 69,000 crore from total claims involving this public money is lost , the haircut is about more than 95 percent.
“Even the claims of the financial creditors have settled below 5%, while that of OC (Operational Creditor) is barely 0.72 percent,” it said.
