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Fresh litigation around Videocon may be a hurdle for Vedanta

The lenders to Videocon Industries, consisting of public-sector banks, are staring at a huge loss after the Mumbai Bench of the NCLT ordered the attachment of assets of the Dhoot family (the former promoters), and other top officials. Bankers say Vedanta’s plans to buy Videocon’s India assets may be derailed by fresh litigation around the company.

The lenders had claimed Rs 62,000 crore from Videocon Industries, including from its oil and subsidiary. Of this, the lenders had agreed to sell the company’s domestic assets to Twin Star Holding, a holding company of Vedanta group for Rs 3,000 crore. The lenders had also sought bids for the company’s overseas oil and gas assets separately with an expected valuation of Rs 15,000 crore.

In its order, the NCLT said that it is surprised with the manner in which the financial institution has come forward to grant loans to a sinking ship and again come forward to file a petition under Section 7 of IBC and again supports the government petition for attachment of properties. “This certainly raises the eyebrows of the common man in the public,” it said.

Indian lenders are currently saddled with several bankruptcy cases which have not seen the light of the day due to a flurry of litigation including from other lenders like IFCI. Apart from VIL, the bankruptcy process of Reliance Communications, Lavasa Corporation and Jet Airways are also hanging fire.

VIL was referred to the National Company Law Tribunal (NCLT) in January 2018 for defaulting on loans worth Rs 62,000 crore. The loans included corporate guarantees given by VIL, the flagship company, under the obligor-co-obligor structure for the oil and gas business to the tune of Rs 20,000 crore. Once the company was sent to the NCLT, Indian banks filed their claims in respect of the guarantee while, at the same time, running the corporate insolvency resolution process of VOVL (formerly Videocon Oil Ventures), which held all the oil and gas assets.

At the NCLT, the bankers filed claims against both the borrower (VOVL) and the guarantor (VIL) simultaneously. While the VIL standalone debt worth Rs 30,000 crore was to be resolved with TwinStar winning the race for the Indian assets, the rest of VIL’s debt was to be resolved once the lenders were to select the highest bidder for the Brazilian assets. This process will now get delayed, say lenders.

The promoters of VIL — the Dhoot family — had submitted an application to the committee of creditors under Section 12A of the Insolvency and Bankruptcy Code last year, but failed to get the mandatory 90 per cent votes from the lenders. In December last year, the lenders cleared TwinStar’s offer.

The Videocon Group fell into a financial crisis after the Supreme Court cancelled its wireless telephony licence in 2012 and VIL’s investment in the telecommunications (telecom) arm turned bad. Later, the loans taken by the flagship company also turned bad. Business Standard

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