NCLAT sets aside Vedanta firm Twinstar Technologies' Resolution Plan for Videocon, remits matter to CoC

The National Company Law Appellate Tribunal (NCLAT) on Wednesday set aside Vedanta Group's bid under the Insolvency and Bankruptcy Code (IBC) for Videocon Industries [Bank of Maharashtra v. Videocon Industries Ltd & Ors)]..A Bench of Judicial Member Justice Jarat Kumar Jain and Technical Member Dr Ashok Kumar Mishra pronounced the verdict allowing the appeals and remitted the matter back to the Committee of Creditors (CoC) for completion of the Corporate Insolvency Resolution Process (CIRP) in accordance with the provisions of the Code..In the 213-page order, the NCLAT observed that it was important for the CoC to review the assailed resolution plan that could possibly lead to a haircut of a high magnitude suffered by various classes of stakeholders including medium and small enterprises, which are backbone of the Indian economy. "The CoC, majority of which are public sector banks and financial institutions dealing with public money is acting as the custodian of public trust and discharging statutory role. The CoC is vested with a duty of trust and care," the order stated. .The Bench also observed that the fact that the level of haircut was unprecedented and involved thousands of crores of public money, required "deep thinking and cool calculation" by the CoC, owing to which it wished to review its own decision."The CoC is not functus officio on the approval of the Resolution plan and accordingly, the judicial precedents clearly established that the Adjudicating Authority and this Tribunal is competent to send back the Resolution plan to the CoC for reconsideration," the NCLAT held..The decision came in the appeals filed by Bank of Maharashtra (BoM) and IFCI Ltd, against the approval given by National Company Law Tribunal (NCLT) Mumbai to the resolution plan (RP) submitted by Vedanta's Twinstar Technologies..NCLT had initiated the CIRP against 13 group entities of Videocon in a plea filed by State Bank of India on behalf of the lenders. From the eleven resolution plans received from various applicants, the resolution plan by Twinstar Technologies was approved by the CoC with a vote of 95.09%.Aggrieved by the resolution plan and by the treatment meted out to the dissenting financial creditors, the appellants challenged the order..BoM, the dissenting financial creditor, submitted that it could not have been paid less than the liquidation value. It further stated that as per the RP, the payments were directed to be made in non-convertible debentures. However, by allowing part payment in cash, the NCLT had permitted change in the RP without sending it back to the CoC.IFCI supported the contentions of BoM. It added that the RP provided for a meagre amount of ₹2900 crore for admitting liability of ₹65,000 crore..The NCLAT held that Section 30(2)(b) of the Code, which requires the RP to confirm that the dissenting financial creditor will get an amount not less than the amount to be paid to such creditors in the event of liquidation under Section 53 of the Code, was not complied with. It further held,"Hence, it is very much clear that prior approval of the CCI has not been obtained as per proviso to section 31(4) of the Code. This reflects that the approved Resolution Plan requires review and reconsideration for the legal compliances. Statutory compliances does not fall under the commercial wisdom of the CoC. Hence, the statutory compliances as mandated by proviso to Section 31 (4), have to be ensured before the Resolution Plan is approved by CoC.".Senior Advocates Vikas Singh and Garima Prashad with Advocates Chaitanya Nikte, Ayush Negi, Rajiv Virmani, Abhinav Agrawal, Prakash Singh, Prasad Sarvankar, Sumedh Ruikar, Gaurav Jain, Atul Malhotra, Karan Valecha, Sneha Bhange represented BoM.Senior Advocates Abhinav Vasisht and Advocates Anoop Rawat, Meghna Rajadhyaksha, Zeeshan Khan, Vaijayant Paliwal, Radhika Indapurkar, Mohana Nijhawan, Chaitanya Safaya, Bryan Pillai, Moulshree Shukla, Ishani Mookherjee, Priya Singh and Ameya Gokhale appeared for Videocon and its subsidiaries.Solicitor General Tushar Mehta along with Advocates Bishwajit Dubey, Madhav Kanoria, Surabhi Khattar, Kanu Agarwal and Prafful Goyal represented the CoC.Senior Advocates Harish Salve and Gopal Jain along with Advocates Diwakar Maheshwari and Shreyas Edupuganti argued for Twinstar Technologies.Senior Advocate Nakul Dewan and Advocates Rajendra Barot, Neerja Balakrishnan and Apoorva Gupta appeared for Electrolux.Senior Advocates Arun Kathpalia and Krishnendu Datta, along with Advocates Sandeep S Ladda and Yashvardhan represented Videocon founder Venugopal Dhoot.Senior Advocate Vikas Singh with Advocates Tanuj Sud, Ajay Kumar and Harshita Ahluwalia from Gravitas Legal appeared for IFCI Ltd..[Read Order]