NCLT casts doubt on the confidentiality of Videocon’s liquidation assessment

The NCLT bankruptcy court has cast doubts on the “confidentiality” of the liquidation assessment of the assets of Videocon Industries and its 12 group companies during the insolvency proceedings. The court asked the Insolvency and Bankruptcy Board of India (IBBI) to “examine this matter thoroughly” to ensure that the confidentiality clause is respected without any compromise.

The liquidation value of Videocon Industries and its 12 group companies was Rs 2,568.13 crore and the fair value of the assets was Rs 4,069.95 crore. While the bid amount submitted by Twin Star Technologies in the resolution plan was Rs 2,962.02 crore.

Registered experts valued the assets of the 13 companies in the Videocon group, with diverse business interests ranging from oil and gas assets, consumer electronics and home appliances, telecommunications services, digital solutions, real estate and electronic retail chain.

“Surprisingly, the resolution plaintiff (Twin Star Technologies) also valued all the assets and liabilities of the 13 companies and came up with almost the same value as the registered appraisers,” observed the National Company Law Tribunal (NCLT).

In accordance with the CIRP (Corporate Insolvency Resolution Process) Regulation, the liquidation value is determined by two registered appraisers and is kept confidential along with the fair market value. It is not communicated to the members of the Creditors Committee (CoC) until the offers are finalized.

In the case of Videocon, the resolution offers were opened at the 15th CoC meeting held on September 2, 2020, during which the liquidation value and fair market value were communicated to the CoC members.

“Therefore, even if the confidentiality clause exists, given the facts and circumstances described above, a doubt arises as to the real-time use of the confidentiality clause, therefore we ask the IBBI to consider this issue in depth in order to ensure the confidentiality clause is respected without scruples, without any compromise in letter and spirit by all parties involved, entities related to the CIRP ”, said the Mumbai magistrate of the NCLT in its adopted ordinance June 9.

A bench of two Mumbai members of the NCLT including members – HP Chaturvedi and Ravikumar Duraisamy – had approved Twin-Star Technologies’ resolution plan on June 9 and a detailed judgment was filed by the company on Tuesday.

The court also suggested that the IBBI develop “appropriate regulations, guarantees” to maximize the value of the assets of debtor companies, which in turn will benefit all stakeholders.

“Since the IBC is a nascent code, we believe that” this type of contribution can be useful to the IBBI as well as to the government in developing regulations, rules, etc. appropriate, ”the NCLT said.

In its 47-page judgment, NCLT, while approving the crore offer of Rs 2,962.02 from Anil Agarwal’s Twin Star Technologies, observed that the creditors of debt-ridden Videocon Industries Ltd would take a close discount. 96% on their loans and the bidder is “paying next to nothing”.

Videocon Industries and its 12 group companies had a total of admitted claims of Rs 64,838.63 crore. He asked the Creditors Committee (CoC) and Twin Star Technologies to increase the payment amount to these operational creditors as they only receive 0.72% of their accepted claim amount.

Many operational creditors are also micro, small and medium-sized enterprises (MSMEs) and in the near future many of these operational creditors could face insolvency proceedings which may be unavoidable, the NCLT said.

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