NCLT Approved Silver Point Acquisition Over IVRCL Chengapalli Tollways

NCLT Approved Silver Point Acquisition Over IVRCL Chengapalli Tollways

The National Company Law Tribunal (NCLT), Hyderabad by its division member bench comprising of Telaprolu Rajani (Judicial Member) and Charan Singh (Technical Member), has approved the U.S. based hedge fund Silver Point Capital’s application to acquire IVRCL Chengapalli Tollways through the insolvency process. The fund had submitted its bid through its principal vehicle SPCP Luxembourg Strategies SARL (for short SPCP).

In 2022, the NCLT had admitted IVRCL Chengapalli Tollways under the insolvency resolution process in an application filed by Assets Care & Reconstruction Enterprise (ACRE) and had appointed Sutanu Sinha of BDO Restructuring & Advisory LLP as its resolution professional.

The company had originally borrowed from lenders including IDBI Bank, State Bank of India, Bank of Baroda, Union Bank of India, and Karur Vysya Bank. However, the lenders had assigned their debts to ACRE in 2021, after which they approached the tribunal.

In September 2010, the NHAI awarded IVRCL Chengapalli Tollways a contract to construct and strengthen the National Highway 47, which connects Chengapalli via Coimbatore to Walayar in the border area between Tamil Nadu and Kerala. The original cost of the 54.83 km project was estimated at Rs. 1,123 crores, which had increased to Rs. 1,235 crores after cost overruns.

After perusing the submissions, the NCLT observed that the Resolution Plan proposed to repay all stakeholders (as provided for under the Plan) in full, including secured financial creditors. The plan value proposed by the Successful Resolution Applicant was above the average fair value of the Corporate Debtor. Thus, the creditors gained sufficiently more than the said values by approval of SPCP’s Plan.

The bench further noted that the secured financial creditors were proposed to be repaid by way of issuance of an amount of up to Rs.5,00,00,000 compulsory convertible debentures (CCDs), of the Corporate Debtor. The Secured Financial Creditors would hold up to 25% of the New Equity Share capital of the Corporate Debtor on a Fully Diluted Basis of the aggregate number of CCDs issued upon their conversion, in accordance with the Plan.

The NCLT recorded that the Plan provided that the Unsecured Financial Creditors shall not be paid any amount, whether admitted or whose claim arises or is crystallized or judicially determined in each such case on the date of the Plan or later, since making payment to any such person may not serve the best interests of the other stakeholders. In any event, there were no unsecured financial creditors in the present Corporate Insolvency Resolution Process (CIRP).

The bench noted that in the event of any Dissenting Financial Creditors, the plan provided that in accordance with Section 30(2)(b) of the Insolvency and bankruptcy Code, 2016 (for short- Code) and Regulation 38(1) of the CIRP Regulations, the Liquidation Value attributable to the Dissenting Financial Creditors will be paid in priority to the assenting Financial Creditors by the Resolution Applicant through the Excess Cash (as defined in the Plan).

It was further submitted to the NCLT that the NHAI Other Dues and Unpaid Due Premium (as defined in the Plan) shall be paid by the Successful Resolution Applicant out of the Excess Cash to the NHAI on the Payment Date as upfront consideration towards the NHAI.

The successful bidder had proposed to pay over Rs. 1,464 crores to acquire the company through an insolvency process, against the total admitted liabilities of Rs. 1,513 crores.

In this context, the bench cited the decision passed in K. Sashidhar vs. Indian Overseas Bank & Others wherein the Hon’ble Apex Court held that, “the discretion of the adjudicating authority (NCLT) is circumscribed by Section 31 limited to scrutiny of the resolution plan ‘as approved’ by the requisite percent of voting share of financial creditors. Even in that enquiry, the grounds on which the adjudicating authority can reject the resolution plan is in reference to matters specified in Section 30(2), when the resolution plan does not conform to the stated requirements.”

The NCLT further relied on the decision passed by the Supreme Court in Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta & Ors, wherein it was held that the limited judicial review available to AA has to be within the four corners of section 30(2) of the Code. Such review can in no circumstance trespass upon a business decision of the majority of the CoC. As such the Adjudicating Authority would not have power to modify the Resolution Plan which the CoC in their commercial wisdom have approved.

Therefore, when the resolution plan was tested on the touch stone of the aforesaid facts and the rulings, satisfied the requirements of Section 30 (2) of the Code and Regulations 37, 38, 38 (1A) and 39 (4) of the Regulations, opined the NCLT.

The bench was satisfied that the Resolution Applicant was eligible to submit the Resolution Plan under Section 29A of the Code.

Therefore, it approved the revised Resolution Plan submitted by SPCP Luxembourg Strategies S.À.R.L.