Law Appellate Tribunal disables Vedanta Group's bid

Law Appellate Tribunal disables Vedanta Group's bid

The decision came in the appeals filed by the Bank of Maharashtra and finance institution IFCI Limited

The National Company Law Appellate Tribunal (NCLAT) has set aside Vedanta Group's bid under the Insolvency and Bankruptcy Code (IBC) for Videocon Industries.

The decision came in the appeals filed by the Bank of Maharashtra and IFCI Limited, a financial institution, against the approval given by NCLT, Mumbai, to the resolution plan submitted by Vedanta's Twinstar Technologies.

A bench of judicial member Justice Jarat Kumar Jain and technical member Dr Ashok Kumar Mishra pronounced the verdict allowing the appeals. It 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.

The 213-page order of the NCLAT stated, "The CoC, majority of which are public sector banks and financial institutions dealing with public money, is acting as the custodian of the public trust and discharging a statutory role. The CoC is vested with a duty of trust and care."

The bench also observed, "The CoC is not functus officio on the approval of the resolution plan. Accordingly, the judicial precedents clearly establish that the adjudicating authority and the tribunal is competent to send back the resolution plan to the CoC for reconsideration."

NCLT had initiated the CIRP against 13 group entities of Videocon in a plea filed by the State Bank of India on behalf of the lenders. From the 11 resolution plans received from various applicants, the CoC with a vote of 95.09 percent approved the plan by Twinstar Technologies.

Aggrieved by the resolution plan and by the treatment meted out to the dissenting financial creditors, the appellants had challenged the order.

The financial creditor submitted that it could not have been paid less than the liquidation value. It stated that as per the resolution process, the payments were to be made in non-convertible debentures. However, by allowing part payment in cash, the NCLT had permitted change in the plans without sending it back to the CoC.

IFCI supported the contentions, adding that the resolution process provided for an amount of Rs.2900 crores for admitting the liability of Rs.65,000 crores.

The NCLAT held that the rules required the resolution plan to confirm that the dissenting financial creditor would get an amount not less than the amount to be paid to such creditors in the event of liquidation under the rules, which were not complied with.

It further held, "It is clear that prior approval of the CCI has not been obtained as per the provision of the Code. This reflects that the approved resolution plan requires review and reconsideration for the legal compliances. Statutory compliances do not fall under the commercial wisdom of the CoC."