Videocon promoter urges National Company Law Appellate Tribunal to set aside resolution plan

Videocon promoter urges National Company Law Appellate Tribunal to set aside resolution plan

Venugopal Dhoot seeks the Appellate Tribunal to admit his Zero Haircut Resolution Plan alleging the Resolution Professional withheld information in tender forms

Venugopal Dhoot, the former promoter of the Videocon Group has moved the National Company Law Appellate Tribunal (NCLAT) against the Resolution Plan approved by the National Company Law Tribunal (NCLT).

The Tribunal vide its order 8 June 2021 had approved the bid of Twinstar Technologies Ltd for Videocon Industries Ltd.

Dhoot has petitioned the National Company Law Appellate Tribunal to set aside the Resolution Plan as approved by the National Company Law Tribunal, Mumbai, and to direct the Committee of Creditors to consider the Resolution Plan submitted by him under Section 12A of the Insolvency and Bankruptcy Code that entails "Zero Haircut."

The Videocon promoter has said that the Resolution Professional has violated Sections 30(2) and 61(3)(ii) of the Insolvency and Bankruptcy Code.

Dhoot has mentioned the following in his petition with the National Company Law Appellate Tribunal:

i. NCLT Mumbai, by its order dated 15.12.20, held that foreign oil and gas assets of Videocon Group held through its foreign subsidiaries are purchased by Videocon Industries Ltd (VIL) and are to be treated as assets of VIL. The Liquidation Value of these oil assets is not less than ₹15,000 crore. As such the Resolution Professional/Company of Creditors has no authority to sell oil assets and consumer durables separately. If the Resolution Professional had sold oil and consumer durables together, he would have received a minimum of ₹25,000 crore against a loan of ₹49,000 crore (₹29,000 crore of VIL consumer durables and ₹20,000 crore of oil assets). Thus, recovery would have been around 50 per cent and not five per cent.

ii. In fact, the Resolution Professional should have mentioned these facts in the Information Memorandum (Tender Form) to all the bidders but he failed to do so, which is a violation of the IBC. Videocon has urged the National Company Law Appellate Tribunal in its appeal to cancel the Resolution Plan and issue a fresh Resolution Plan including the Oil and Consumer Durable assets.

iii. Dhoot in his 12A proposal submitted to the banks has offered to pay the entire loan of ₹30,000 crore to and take back the company. The restructure proposal was approved by CoC in October 2017. However, since the company went to the National Company Law Tribunal it was not considered and subsequently rejected by the CoC.

iv. The Resolution Professional has been responsible for diminishing the value of Videocon Group by closing it down and not running the factory. They are taking ₹1.5 crore per month from CoC as their fees for keeping the companies in CIRP. However, nothing was done to keep the group as a running concern. Dhoot has said in his application that this has resulted in erosion of Brand Value. He has contended that the business would have got a much better valuation because of its brand development, after-sales service and relation with retailers. Dhoot alleges that all of these were ruined and the valuation came down further due to the pandemic, resulting in the bidder not giving proper value and offering it for a mere ₹3,000 crore.

v. Dhoot has further raised a question and wants it to be considered as to whether the Resolution Professional or any other person acting on his behalf had 'managed' the liquidation value and whether the confidentiality had been maintained or it was leaked to the Respondent No.3?

vi. The appeal says that it cannot be forgotten that as firstly submitted by V.N. Dhoot for consolidation (for maximization of value of assets) and later the State Bank of India had apparently asked for consolidated CIRP and pooling of assets of Corporate Debtor at the same time also invited EoI for publication of sale of domestic and foreign oil and gas assets of Videocon Industries Limited situated in Brazil and Indonesia.

vii. The said action of State Bank of India was stayed by the National Company Law Tribunal and the issue of inclusion of oil and gas assets is sub-judice and pending before the Appellate Tribunal, whereas the claims qua these oil and gas assets to the tune of ₹23,120.90 crore have been admitted by the Resolution Professional and assets are being kept outside the purview of CIRP of Corporate Debtors despite the order of the National Company Law Tribunal treating oil and gas assets as assets of the Corporate Debtor.

Dhoot's appeal further points out that prior to being admitted for insolvency, Videocon Group, in accordance with the corrective action plan, decided to sell assets and ensure that the entire consideration is directly deposited with the consortium of lenders for repaying the debt facilities without bringing in the technical aspects, with a larger interest and intention to repay the entire amount. The aforesaid can be fortified from the following:

(a) It entered into a Trust and Retention Account (TRA) and obligor-co-obligor arrangement and the entire accounts, revenues and expenditure of the Group were/are being monitored by KPMG and any expenditure above ₹5 lakh was being done post-approval by KPMG. Seven per cent of the sale proceeds of the Petitioner and other Group Companies are deducted affront for debt serving. The Radhika Apartment properties at Dadar was sold and the amount was credited to the consortium of the lender for debt servicing.

(b) Videocon Group divested its stake in Mozambique Oil & Gas Asset to ONGC for around $2.5 billion (around ₹8,000 crore) and deposited the same with the Reserve Bank of India. The appeal claims that the Videocon Group sold its aforesaid interest to ONGC India instead of a Chinese Company, which was ready to pay the Videocon Group has sold its aforesaid interest to ONGC India instead of a Chinese Company, which was ready to pay Rs. 200 Crores more than ONGC India ₹200 crore more than ONGC in the national interest.

(c) In May 2016, Videocon sold its spectrum to Bharti Airtel for a gross consideration of ₹4,428 crores and deposited the entire amount with the consortium of the banks towards repayment of debts.

(d) Videocon Group arranged the necessary funds for serving critical dues of all lenders as of 31 March 2017 by raising bridge loans and selling Fort House. It also placed other properties in the market but CBRE informed the lenders that the market value was not conducive. Prabhadevi property was sold to the highest bidder State Bank of India at ₹94.85 crore.

viii. Besides the above, Videocon Group was ready and willing to sell all its remaining assets including the assets of the promoters to service the debts through the agencies appointed by the consortium of the lenders.

In his appeal, Venugopal Dhoot also submitted that prior to admission into CIRP and during the CIRP, the Appellant always worked in the interest of the stakeholders and is still willing to resolve the debt and provide better returns to the stakeholders. It further submitted that a similar proposal was given by Appellant in the CIRP of Corporate Debtor under Section 12A of the Insolvency and Bankruptcy Code. However, the "unbending" and "irrational" CoC rejected the proposal of Appellant to the tune of ₹31,789 crore and has accepted the Resolution Plan of Twinstar which provides payment of only ₹2,962 crore.