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Videocon insolvency: Creditors’ committee urges court to allow fresh bids

The commercial wisdom of the creditors’ committee under the Insolvency and Bankruptcy Code has complete immunity from court interference, Solicitor General of India Tushar Mehta told that the National Company Law Appellate Tribunal on Wednesday.

Mehta was arguing on behalf of the creditors’ committee of Videocon Industries Ltd., which is seeking to restart the bidding process for the insolvent company.

“It is up to the CoC to check the feasibility and viability of a resolution plan. If a plan is not viable, then the committee can reconsider its decision,” Mehta argued before the NCLAT.

The ask was first raised in September when the CoC filed an affidavit in the NCLAT seeking its permission to issue an expression of interest for the Videocon Group entities that have presence in oil and gas, consumer electronics, home appliances, telecom and real estate, among others.

This was two months after the Mumbai bench of the National Company Law Tribunal had approved Twin Star Technologies Ltd.’s plan that entailed a 95% haircut for the financial creditors. Twin Star is a a wholly owned subsidiary of U.K.-based Volcan Investments Ltd. Volcan is a parent company of India’s listed commodities major Vedanta Ltd. and owns other interests of the Vedanta Resources group founded by Anil Agarwal.

The tribunal’s decision was eventually stayed by the NCLAT on July 19, after the dissenting financial creditors — Bank of Maharashtra and IDBI — moved the appellate body.

On Wednesday, Mehta told the NCLAT that maximising the value of the corporate debtor’s assets is one of the key features of IBC. And so, the committee cannot shun away from this.

Mehta sought to restore the status quo ante — that is, to put lenders in the same position as they were on Dec. 11, 2020. That day, the CoC’s voting process was completed and Twin Star’s resolution plan was approved.

Mehta urged to allow for fresh bids for Videocon in the “larger public interest” and to ensure that public money is “secured in the best possible manner”.

“One thing is for sure — some mistake has happened in the assessment of value of properties and in the decision of the committee of creditors,” said Tushar Mehta, Counsel for Videocon’s CoC.

This was seconded by dissenting creditors Bank of Maharashtra and IDBI who contended that the sale price was very close to the liquidation value. And that the liquidation value of assets was not calculated correctly.

Even the 4% that was being paid was largely in the form of debentures with very little incoming cash as such, the banks said, while contending that the matter should be sent back to CoC for reconsideration.

Twin Star has offered Rs 2,962 crore for Videocon Industries, which is 4.15% of the admitted claims of Rs 64,938 crore of secured financial lenders.

This was countered by senior advocates Harish Salve and Gopal Jain, representing Twin Star, on grounds that lenders cannot call for bids again. Once the CoC approves a plan, there is no provision under the IBC which allows for sending back the matter to it, they argued.

“CoC’s demand is misconceived, non-justiciable and neither maintainable in fact nor in law. Once a resolution plan is approved by the adjudicating authority, the CoC becomes functus officio, as per the law,” saidHarish Salve, Counself for Twin Star.

Twin Star also criticised SBI, the lead lender, for approaching the NCLAT after a lapse of more than three months since the plan received the NCLT approval. No lender had questioned the calculation of the liquidation value during the insolvency process, counsels for Twin Star said.

The matter will be next heard on Nov. 30. BloombergQuint

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