NCLT Approves Vedanta-Meenakshi Deal

NCLT Approves Vedanta-Meenakshi Deal

The National Company Law Tribunal's (in short NCLT) Hyderabad bench approved the Mumbai-based multinational mining company- Vedanta Limited to acquire the debt-laden power company Meenakshi Energy Limited, while dismissing the objections raised by the competing bidder Consortium of Prudent ARC Limited and Vizag Minerals and Logistics.

The division bench comprising of Justice Telaprolu Rajani (Judicial Member) and Charan Singh (Technical Member) was hearing an application filed by the applicant- M/s. Consortium of Prudent ARC Limited. against the respondent/Resolution Professional of M/s. Meenakshi Energy Ltd. and Others, seeking to restrain the Respondents from proceeding with the Challenge Process and to direct Respondent Nos.1 and 2 to accept the Resolution Plan as submitted on 28th October, 2022 and to restrain Respondent No.1 from considering all the Resolution Plans submitted after 28th October, 2022.

The Consortium of Prudent ARC moved the Tribunal seeking to retrain the Committee of Creditors (for short CoC) and the Resolution Professional from proceeding with the Challenge Process, wherein Vedanta emerged as the preferred resolution applicant.

Vedanta submitted a bid to buyout Meenakshi Energy for Rs. 1,440 crore, of which Rs. 312 crore was to be paid upfront and the balance Rs. 1,128 crore to be pumped in the form of secured, unlisted non-convertible debentures to be matured over five years.

Meenakshi Energy, which owns a 1,000-megawatt thermal power, went under the corporate insolvency resolution process (for short CIRP) in early 2019 and went on obtaining extensions for the CIRP period owing to Covid lockdowns and other reasons. The prospective resolution applicants with the consent of the CoC (for short Committee of Creditors) submitted revised offers to meet the needs of the lenders.

The Consortium of Prudent ARC submitted before the Tribunal that Vedanta had had twice revised its resolution plan by way of an addendum, which was contrary to the Code's provisions. Further, the Consortium also claimed that the resolution professional can either allow revision/modification of the resolution plans not more than once or can employ a challenge mechanism. The Consortium also challenged the decision of the CoC to extend the time period and go against the time-boundness of the Code.

The resolution professional informed to the Tribunal that it was the decision of the decision of the CoC with a majority of 99.18 per cent to undertake the challenge process for value maximization.

Meanwhile, Vedanta and Jindal submitted addendum and amended financial proposals, the Consortium of Prudent ARC emphasized on withdrawing the challenge.

Vedanta revised its bid amount during the challenge process to Rs. 1,440 crore, while Jindal revised its bid to Rs. 1,344 crore. The previous bid was taken up since, the Consortium of Prudent ARC did not submit its revised bid to participate in the challenge process.

Further, the resolution professional vehemently asserted that the onus behind the Insolvency and Bankruptcy Code, 2016 was the value maximization of the corporate debtor, which was also time and again upheld by the Apex Court that also upheld the commercial wisdom of the financial creditors.

The Tribunal after recording the submissions, rejected the objections raised by the Consortium of Prudent ARC against the challenge process, and concurred with the view point- 'wisdom of the CoC' and held, "the law is well settled that the maximization of the value of the assets of the Corporate Debtor must be given prime importance. Two philosophies run through the IB Code. One being the time boundedness and the other being the value maximization. The first one is to the benefit of the Creditors who are no other than primarily the CoC Members and the second is apparently for the benefit of the Corporate Debtor."

The next issue before the Tribunal was whether the orders of the NCLT and the National Company Law Appellate Tribunal (in short NCLAT) would bind this tribunal in permitting the challenge process undertaken by the resolution professional. The Tribunal noted the Orders of the NCLT and NCLAT passed in the earlier round of litigation between the same parties.

The Tribunal after examining the Orders noted that the issue that was dealt with by the NCLT was whether the CoC can extend the timelines without the approval of the Adjudicating Authority. Both the NCLT and NCLAT held that the CoC does not have power to extend the timelines without the approval of the Adjudicating Authority. However, the Tribunal opined, the ruling pointed on the authority of the CoC to extend the time period of CIRP without the sanction of the Adjudicating authority and not that the adjudicating authority cannot extend the timelines beyond 330 days. Hence, the said judgements cannot be applied to the facts of this case where, the time is already extended by the Adjudicating Authority till 23rd January, 2023.

In view of the aforesaid reasons, the Tribunal did not demur to dismiss the application and approved the acquisition deal.