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 judiciary of the National Company Law Court (NCLT) to the resolution plan submitted for the Videocon group besieged by Twinstar Technologies, an entity promoter of Vedanta Resources.
This came after an appeal from the Bank of Maharashtra, one of the dissenting creditors, and the case is expected to be heard on September 7.
“… the contested order is stayed until the next date and the status quo ante prior to the adoption of the contested order must be maintained,” NCLAT said in its order on Monday. He asked the Respondent to file affidavits in response within two weeks.
Bank of Maharashtra, in its appeal, alleged that the NCLT order approving the resolution plan is “ex-facie unlawful”, wrong in law and contrary to established provisions of the Insolvency and Bankruptcy Code (IBC ) from 2016. The bank has an exposure of Rs 1,216.88 crore to the Videocon group.
In its appeal, the appellant stated that at various meetings of the Creditors’ Committee (CoC), lenders have raised concerns about the mechanism for allocating dissenting financial creditors.
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.
In addition, the plan provides that dissenting financial creditors will be paid on liquidation in a phased manner. The appellant said that NCLAT ordered the CoC to make payments based on liquidation value to all dissenting creditors in cash in advance before any payments were made to willing financial creditors.
However, he ignored the fact that such directives amounted to a modification of the resolution plan, which the Supreme Court said is inadmissible.
The only option available to the contracting authority, if it finds that the plan is contrary to the provisions of the IBC, is to return the plan to the CoC for reconsideration of appropriate modifications.
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. However, he pointed out that there was some discrepancy in FORM H, which showed that the total amount payable to dissident financial creditors, including IFCI, was 105.23 crore rupees.
But, according to the SBI CAPS calculation, the amount payable to Bank of Maharashtra and IFCI was Rs 111.85 crore.
Last month, NCLT approved Twinstar Technologies’ resolution plan for the Videocon group, but expressed concerns that the successful resolution applicant would “pay next to nothing” as the proposed amount is only 4.15% of the total outstanding claims. He noted that the haircut for all creditors is 95.85 percent and suggested both the CoC and the successful claimant to increase the payment.
Out of the total claim amount of Rs 71,433.75 crore, admitted claims amounted to Rs 64,838.63 crore, and the resolution plan which was approved was only for an amount of 2,962. 02 crores from Rs.
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 subsequently NCD of a value of Rs 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.
The fair value of the Videocon group was Rs 4,069.95 crore, while the liquidation value was Rs 2,568.13 crore.