NCLAT remains NCLT’s sign of assent to Twinstar’s resolution plan for the Videocon group
The National Company Law Appeals Tribunal (NCLAT) has suspended the approval granted by the Mumbai chamber of the National Company Law Tribunal (NCLT) to the resolution plan submitted for the Videocon group besieged by Twinstar Technologies, an entity promoter of the Vedanta Resources group. This follows an appeal from the Bank of Maharashtra, one of the dissenting creditors. The case is due to be heard on September 9.
Last month, the NCLT approved Twinstar’s resolution plan, but expressed concerns that the successful resolution requester was “paying next to nothing” as the amount offered represents only 4.15% of total claims outstanding. He noted that the haircut for all creditors was 95.85% and suggested to the Creditors Committee (CoC) and the successful claimant to propose an increase in the payment.
Out of the total claim amount of Rs 71,433.75 crore, the admitted claims were worth Rs 64,838.63, and the approved resolution plan was for only Rs 2,962.02 crore, barely 4.15% of the total amount of the overdue claim. In fact, the total hair cut to all creditors is 95.85 percent.
The Bank of Maharashtra, in its appeal, alleged that the NCLT order approving the resolution plan was “ex-facie unlawful”, against the law and contrary to the established provisions of the Insolvency and Bankruptcy Code. from 2016.
In its appeal, the appellant stated at the various meetings of the creditors’ committee that the lenders raised concerns about the mechanism for allocating dissenting financial creditors and that they were not following the IBC procedure. Despite this, the resolution professional dismissed the concerns raised and proceeded to vote on the plan.
The appellant alleged that the “resolution plan” provided for payment to dissenting financial creditors by way of non-convertible debentures (NCDs) and shares, which is not permitted under the IBC.
According to the resolution plan, against the claim of Rs 61,773 crore made by financial creditors, an amount of Rs 200 crore in initial cash and thereafter NCD of a value of 2,700 crore which will be repayable in 5 installments, with a coupon rate of 6.65 percent was promised by the successful resolution request.
In addition, the plan provides that dissenting financial creditors will be paid on liquidation in a phased manner. The appellant alleged that he ordered the CoC to make liquidation value payments to all dissenting creditors in advance cash before any payment was made to willing financial creditors, but did not respond. to a specific concern raised by him regarding the actual liquidation value.
The appellant said, according to SBI CAPS, the process advisor, that he would have received Rs 59.27 crore, of which Rs 8.14 crore was reportedly in initial cash and Rs 51.13 crore via NTMs, if he had approved the plan. In addition, the liquidation value of the appellant’s stock was Rs 41.85 crore in the event of disagreement with the plan. But, he pointed out that there was some discrepancy in FORM H, which showed that the total amount payable to dissident financial creditors, which included IFCI, was 105.23 crore rupees. But, according to SBI CAPS calculation, the amount payable to Bank of Maharashtra and IFCI was Rs 111.85 crore
Bank of Maharashtra has an exposure of Rs 1,216.88 crore to the Videocon group.
Interestingly, the NCLT asked the Insolvency and Bankruptcy Board of India (IBBI) to review whether confidentiality was maintained during the Corporate Insolvency Resolution (CIRP) process, having been surprised at the made the Twin Star offer so close to the liquidation value, which was meant to be confidential.