Venugopal Dhoot moves NCLAT against approval to Twin Star’s resolution plan – Mint

Dhoot has listed three respondents in his petition filed at the National Company Law Appellate Tribunal (NCLAT) on 31 July, a copy of which has been reviewed by Mint. The first respondent is Videocon Group resolution professional Abhijit Guhathakurta, second respondent is the committee of creditors (CoC) and the third is resolution applicant Twin Star Technologies.

At a December vote, over 95% of lenders backed Twin Star’s ₹2,900 crore plan for 13 Videocon firms which implies a 95% haircut—these companies owe ₹61,773 crore to financial creditors—while the rest dissented or abstained. State Bank of India (SBI) has the highest voting share of 18.05%, followed by IDBI Bank at 16.06% and Union Bank of India at 9.07%.

According to the petition, the process undertaken by resolution professional suffers material irregularity as all the assets have not been included in the information memorandum, and the resolution plan of Twin Star is against the objective of the Insolvency and Bankruptcy Code (IBC). Dhoot also alleged that the commercial wisdom exercised by lenders is “arbitrary and irrational and does not reflect any applicability of mind by rejecting a proposal which was 10 times higher and submitted at an early stage of the process.”

Dhoot has requested that the NCLAT set aside the June order of Mumbai National Company Law Tribunal (NCLT) and order calling of fresh resolution plans for all assets of the group, including all foreign oil and gas assets. The petition also requested that otherwise the NCLAT could also direct lenders to re-consider Dhoot’s proposal under Section 12A of the IBC and approve it.

In October last year, Dhoot had submitted a proposal to repay ₹31,789 crore but was rejected by the lenders. Section 29A of the IBC disallows defaulting promoters from gaining control of their companies. To consider a defaulting promoter’s offer, creditors would have had to seek withdrawal of the company from the IBC, under Section 12A of the code.

“Interestingly, the NCLT while approving the resolution plan has re-written the provisions of code by sending the resolution plan back to the CoC after approving the same. Such recourse is against the provisions and object of the code,” the petition said.

The resolution plan of Twin Star, it said, is a glaring example of a failed legislation by not setting any benchmark or test in exercise of arbitrary and irrational decision by the CoC.

“The CoC has not shown any commercial wisdom while approving the resolution plan. Rather, the approval of the resolution plan smacks of mala fide and done for oblique purpose as the proposal submitted by appellant (Dhoot) was ten times higher than the total amount offered by respondent number three (Twin Star) in its resolution plan,” it said.

Dhoot is not the only one unhappy with the resolution plan. Three dissenting lenders—Bank of Maharashtra, Small Industries Development Bank of India (Sidbi), and IFCI Ltd— have also moved the NCLAT against meagre recoveries from the resolution. The plan has already been stayed by the NCLAT on 19 July following Bank of Maharashtra’s appeal.

The 8 June NCLT order approving the Twin Star plan also directed Insolvency and Bankruptcy Board of India (IBBI) to probe whether Videocon’s liquidation value, a price-sensitive and confidential piece of information, was leaked to the potential bidders. This was prompted by the fact that Twin Star was offering ₹2,900 crore to financial creditors, close to the liquidation value of ₹2,568 crore and which no resolution applicant was supposed to know. This secrecy aims to ensure applicants do not bid as little as the minimum value attributed to the company’s assets.

Voicing similar concerns, Dhoot’s petition said it needs to be considered as to whether the resolution professional or any other person acting on his behalf has managed the liquidation value and whether the confidentiality has been maintained or it has been leaked to Twin Star.