NCLT permits inclusion of foreign oil & gas assets of Videocon in the ongoing insolvency proceeding

The National Company Law Tribunal (NCLT) has ruled that the foreign assets and properties of the Videocon Group, which are held through its foreign oil & gas subsidiaries, shall be deemed to be the property of Videocon Industries Ltd for the purpose of its ongoing insolvency resolution process..The order was passed by a two-member bench of Member (Judicial) Suchitra Kanuparthi and Member (Technical) Chandra Bhan Singh in an application by Videocon Promoter Venugopal Dhoot..In his application before the NCLT, Dhoot had prayed for a direction to the Resolution Professional of the Corporate Debtor, Videocon Industries Ltd to consider and treat all assets, properties (tangible and intangible), rights, claims, benefits of the foreign oil & gas subsidiaries ie. VOVL Ltd, Videocon Hydrocarbon Holdings Ltd, Videocon Energy Brasil Ltd and Videocon Indonesia Nunukan Inc as assets and properties of Videocon Industries Ltd. for the purpose of the CIRP. .Dhoot also sought to include the assets, liabilities, claims of the four foreign companies in the Information Memorandum (IM) of the Corporate Debtor, Videocon Industries Ltd (VIL)..Opposing the application, Financial Creditor, State Bank of India (SBI) contended that since these foreign oil and gas assets were not shown in the balance sheet of VIL, in view of Section 18 IBC, it could not be said to be VIL’s assets..SBI further submitted that under explanation (b) appended to Section 18, the assets of any Indian and foreign subsidiary of a Corporate Debtor could not be deemed to be assets of the Corporate Debtor..After perusing the corporate structure of the Videocon Group, the NCLT observed that there was cross creation of the security interest by all lenders in other business assets of Videocon Group, thus treating it as single economic entity..The NCLT stated that Section 18 dealt with the duties of the Resolution Professional and Section 18 (f) therein was just an indicator of what assets are to be taken over in the custody by the Resolution Professional..The NCLT opined that in cases like the present one, where the assets are acquired in name of the Corporate Debtor, Section 18(f) would have a limited role to play..In absence of any subsequent legal transfer of all rights, interests and ownership in the assets, the foreign oil & gas companies could not be said to be the owners of these assets in exclusion of VIL, the NCLT said. .It was thus concluded that Balance Sheet could not be sole criteria of deciding ownership of the assets when the other documents and evidences are in place..As far as the explanation was concerned, the NCLT stated that the explanation comes into play when it is established that the assets in question are undoubtedly held and purchased by the subsidiaries from its sources..It thus held,“..we have concluded the foreign oil and gas assets of Videocon Group held through Respondent No.2 to 5 is in fact, asset and property of Respondent No.1/ VIL on the count of being original acquirer or alternatively even for qualifying all tests to lift corporate veil in between Respondent No.1 / VIL and Respondent Nos. 2 to 5. Therefore, the assets held by them can be said to be “its” assets i.e. the assets of Respondent No.1/ VIL/ Present Corporate Debtor, which is under the CIRP.”.The NCLT further held that all the 13 parameters, namely, Common control, Common directors, Common assets, Common liabilities, Inter-dependence, Interlacing of finance, Co-existence for survival, Pooling of resources, Intricate link of subsidiaries, Intertwined accounts, Inter-looping of debts, Singleness of economics of units and Common Financial Creditors, which were enunciated in the Order permitting the consolidation of 13 Videocon Group Companies for the purpose of a consolidated CIRP, was fully met and satisfied in this case as well..Emphasizing on the importance to include the foreign assets in the CIRP, the NCLT observed that if the assets of the foreign entity were not considered to be assets of single economic entity and/or of VIL, then, by no stretch of imagination, the effective resolution of ongoing CIRP would meet to the objective envisaged under the IB Code and the companies shall be forced towards the liquidation despite having sufficient means and assets to resolve the debt of all corporate persons..“In other words, there shall be compromise rather the rights and interest of important stakeholders like Operational Creditors, employees etc. shall be jeopardized to the greater extent as looking at the cross creation of the security interest in relation to the assets of each of the VIL Group Companies would not be able to independently meet with the claims lodged by all the creditors.”NCLT.The NCLT thus concluded that to effectively find resolution, maximize the value of the assets and keep the corporate persons as a going concern, the foreign Oil and Gas assets could not be treated separately only for the benefit of the Financial Creditors..In view of above, the assets held by the foreign oil & gas business was deemed to be the assets of VIL and moratorium in terms of Section 14 IBC was imposed. .Venugopal Dhoot was represented by Senior Advocate Zal Andhyarjuna with Advocates Anurup Dasgupta, Ishani Khanwilkar, Karan Bhide, Sonam Ghiya, Jinal Vani and Jhangiani of Narula & Associates.SBI was represented by Senior Advocate Ravi Kadam with Advocates Madhav Kanoria, Anush Mathkar, Sanjana M of Cyril Amarchand Mangaldas. AVP Partners appeared for Exim Bank.BPCL was represented by Advocates Varghese Thomas, Aditi Deshpande, Jash Shah of J Sagar Associates (JSA)..Read the Order: