NCLAT Sets Aside NCLT Order For Fresh Valuation Of EAPPL’s Shares In The Learning Internet Sold By SBI Singapore

Notes that the tribunal had no jurisdiction on the matter;

By: :  Suraj Sinha
Update: 2025-01-27 12:15 GMT
NCLAT
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NCLAT Sets Aside NCLT Order For Fresh Valuation Of EAPPL’s Shares In The Learning Internet Sold By SBI Singapore

Notes that the tribunal had no jurisdiction on the matter

The National Company Law Appellate Tribunal (NCLAT) has overturned the directions of the National Company Law Tribunal (NCLT) for a fresh valuation of shares held by Educomp Solutions' Singapore-based subsidiary Educomp Asia Pacific Pte Ltd (EAPPL) in the US-based firm The Learning Internet Inc and sold by State Bank of India (SBI) Singapore.

The appellate tribunal said EAPPL was being liquidated over the order passed by the High Court of Singapore and issues regarding the valuation of shares in The Learning Internet Inc could have been raised there in the proceedings.

A two-member bench of the appellate tribunal held, "On what basis the NCLT intervened in the matter directly connected with the liquidation process of EAPPL in Singapore, albeit the subsidiary of the corporate debtor, when it has no jurisdiction in the matter.”

It added that if Shantanu Prakash, the director of the suspended board of Educomp Solutions, was aggrieved due to "alleged undervaluation shares of The Learning,” he could have approached the liquidators or invoked the jurisdiction before the High Court of Singapore, which was not done.

The 40-page NCLAT order further read, “We hold that it does not give any right to Respondent No.1 (Shantanu Prakash) to approach the NCLT, which did not have any jurisdiction to give such directions.”

The NCLAT observed that SBI Singapore ‘categorically and transparently’ wrote to EAPPL’s liquidators about the offer. After confirming from the liquidators that they did not have better value, it went ahead with the share’s sale in The Learning Internet.

It noted that the NCLT referred to Regulation 21A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, while ordering a fresh valuation under Para 27 of the impugned 25 August 2023 order, in Educomp Solutions’ insolvency proceedings.

The appellate tribunal held, "We note that the case is regarding the Corporate Insolvency Resolution Process (CIRP) of the corporate debtor and not of the liquidation. Therefore, Regulation 21 A is not applicable.”

The order further said that Prakash alleged ‘connivance of the concerned parties’ in selling the shares of The Learning at ‘unrealistic low prices’. However, he could not furnish any evidence.

Thus, the tribunal said, “We find merits in the arguments of the appellant (SBI). The appeal succeeds and the impugned order in Para 27 (a) and (b) and second line of 27 (c) ‘The secured financial claim of the SBI Singapore qua the CD, is subject to the outcome of the valuation report’ is set aside.”

It, however, added that the "remaining order shall survive and stands applicable.”

The NCLAT ruled after a petition was filed by SBI Singapore, which provided a loan facility of USD 20 million to EAPPL. The funding was to acquire a 51 percent stake in The Learning.

To secure the loan, Educomp Solutions executed a deed of guarantee in favor of SBI Singapore. On 23 July 2008, EAPPL pledged 18,173 unlisted shares (representing a 51 percent stake) of The Learning as collateral with SBI Singapore. On 03 November 2014, it entered a loan restructuring, resulting in outstanding dues of USD 14.72 million.

Meanwhile, the Delhi bench of the NCLT admitted Educomp Solutions’ plea under Section 10 to initiate insolvency on 30 May 2017.

A month later, EAPPL was ordered into liquidation by the High Court of Singapore and appointed liquidators. During the proceedings, the liquidators provided The Learning with the option to repurchase its own shares by submitting a suitable offer.

However, being on the lower side, The Learning did not accept the offer. After negotiations with the purchaser, an increased offer was reached. Consequently, the shares were sold to the purchaser through a 03 September 2021 agreement of USD 7.10 million.

On 25 August 2023, after Prakash’s application, the NCLT held that the assets of a subsidiary company differ from those of its holding company. It ruled that the shares of The Learning did not constitute part of the assets of Educomp Solutions.

The NCLT directed the valuation of shares of The Learning owned by EAPPL pledged with SBI Singapore. It directed the Resolution Professional of Educomp to approach IBBI for the appointment of two registered valuers to assess the valuation of shares of The Learning.

The tribunal added that if the valuation conducted by any valuator exceeded USD 7.10 million, the price at which the shares were sold on 03 September 2021, the claim of SBI (Singapore) against Educomp Solutions would be reduced.

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By: - Suraj Sinha

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