National Company Law Appellate Tribunal Stays Resolution Plan For Videocon Industries

National Company Law Appellate Tribunal Stays Resolution Plan For Videocon Industries

Appellate Tribunal imposed status quo ante in the case till next hearing on Bank of Maharashtra's plea

The National Company Law Appellate Tribunal (NCLAT) stayed the order passed by the National Company Law Tribunal (NCLT) at the Mumbai Bench, which approved the Resolution Plan for the Corporate Debtors – 13 Videocon Group Companies.

The matter titled Bank of Maharashtra v Videocon Industries Ltd And Ors was heard by the Principal Bench of the National Company Law Appellate Tribunal at New Delhi, comprising of Justice A.I.S. Cheema and Dr Alok Srivastava.

The factual background of the matter is that the Appellant – Bank is the Dissenting Financial Creditor who as per law could not have been paid less than the Liquidation Value. The Appellant contended that the order of the NCLT approving the Resolution Plan did not comply with Section 30(2)(b) of Insolvency and Bankruptcy Code, 2016 (IBC). Various documents were referred to show as to how what was proposed to be paid was less than the Liquidation Value. The Appellant further contended that what was proposed to be paid was also only part in cash and a major part was in the form of Non-Convertible Debentures (NCDs). The question was raised whether instead of paying cash, NCDs could be issued. The Appellant also raised breaches in the confidentiality clause with regards to the Liquidation Value.

The Respondents are the Successful Resolution Applicant and the Resolution Professional who supported the order of the NCLT and pointed out that the Resolution Plan itself had provisions that the payments would be in compliance with Section 30(2)(b) of the IBC. The Respondent further stated that although the NCDs were stated in the Resolution Plan, as directed by the NCLT, the payment could be by way of cash.

The bench observed that the prima facie perusal of the record shows that Liquidation Value was stated to be ₹2568.13 crore and it further referred to the payment proposed under the Resolution Plan as well as the manner of payment proposed under the Resolution Plan by the Successful Resolution Applicant to the Financial Creditors. It further went through the order of the NCLT as well.

The bench noted the concern that the Corporate Debtors in the consolidated proceedings had cash of ₹200 crore and the Successful Resolution Applicant would bring in just ₹262 crore and from that also the first payment of ₹200 crore would be brought in 25 Months. The bench further noted that beyond ₹262 crore, the rest was being brought in only by way of NCDs, which were to be paid over six years.

The bench took these observations into account and stayed the order of the NCLT till the next date, which is 7 September 2021 and directed status quo ante as before passing of the NCLT order to be maintained.